Obama targets for-profit education with new proposed regulations

The Obama administration proposed new regulations Friday that would limit access to federal student aid for many vocational programs at for-profit colleges and universities.

“The proposed regulations address growing concerns about unaffordable levels of loan debt for students enrolled in these programs by targeting the lowest-performing programs, while shining a light on best practices and giving all programs an opportunity to improve,” said U.S. Education Secretary Arne Duncan.

Under the rules, programs would have to meet two metrics in order to qualify for federal student aid: a program cohort default rate standard and an annual debt-to-earnings standard. While the law would regulate non-profit vocational programs as well, the administration made clear that for-profit education was the prime target.

The announcement of the new guidelines comes just two weeks after Obama’s Consumer Financial Protection Bureau filed a lawsuit against ITT Educational Services Inc., operator of the for-profit college chain ITT Technical Institute, for what it calls “predatory lending.”

That lawsuit is part of a larger crackdown on for-profit colleges and universities, a controversial sector of higher education known for high costs and low graduation rates. Attorney generals in Illinois, Iowa, Kentucky, and New Mexico have also set their sights on the industry.

Students at for-profit colleges only represent 13 percent of all students in the U.S but account for more than 30 percent of all student loans and nearly half of all loan defaults, according to the U.S. Department of Education.

“Some of these programs, whether public, private, or for-profit, empower students to succeed by providing high-quality education and career training,” the department stated. “But many of these programs, particularly those at for-profit colleges, are failing to do so — at taxpayers’ expense and the cost of students’ futures.”

The guidelines, which will be open for public comment for six months, are the administration’s second serious attempt at tightening control of for-profit education with “gainful employment” standards. In 2012, a federal judge blocked similar regulations, saying that the federal government had the authority to impose the rules but that specifics of the standards seemed “arbitrary and capricious.”

“The department has set out to address a serious policy problem, regulating pursuant to a reasonable interpretation of its statutory authority,” U.S. District Judge Rudolph Contreras wrote in his decision. “But it has failed to provide a reasoned explanation for a core element of its central regulation.”

Friday’s announcement is likely to rankle Republicans, as for-profit universities are a major part of the GOP conversation surrounding the reauthorization of the Higher Education Act.

“Once again, the Obama administration is making substantive changes in law without consulting Congress,” Rep. Virginia Foxx, R-N.C told Politico. “We all agree that substandard schools, whether public, private or for-profit, should face consequences if they fail to provide the education and opportunities they promise, but we are in the middle of re-authorizing the Higher Education Act, and this is a perfect opportunity for the president to work with Congress to find a solution on this complex issue.”

In the past, however, Foxx has shown little inclination toward regulating for-profit colleges and has been an outspoken opponent of the federal government making rules about the sector. “It is not the role of the Congress to make college affordable and accessible,” she said last July.

On the other end of the spectrum, Sen. Tom Harkin, D-Iowa, who has positioned himself as the Senate’s watchdog of the for-profit industry, said that the new regulations don’t go far enough in protecting students.

Harkin once lead a two year investigation into the sector, releasing a report in 2012 that accused many for-profit institutions of misleading “prospective students with regard to the cost of the program, the graduation rates of other students, the job placement of other students, and the transferability of the credit.”

The Association of Private Sector Colleges and Universities blasted the proposed regulations on Friday. Steve Gunderson, the APSCU’s president and CEO, said the negotiated rulemaking process that led to the new rules was a “sham.”

“The department has never been interested in constructive input or ensuring that student access is protected,” Gunderson said. “As a result, millions of new traditional students will lose access to postsecondary education and hundreds of thousands of dollars in lifetime earning potential.”

If the rules were applied to programs outside of for-profit colleges and vocational programs, he said, then programs at Northwestern University, George Washington University, and Virginia Commonwealth University would also be penalized.

“The logic behind singling out our students and institutions despite this fact is discriminatory, punitive, and will lead to a higher education system that fails countless students,” Gunderon said.

Photo courtesy of the Wisconsin National Guard. Read more education news on Beacon Reader.

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