Opponents of the U.S. Education Department’s (ED) proposed “gainful employment” rules said the regulations unfairly target for-profit colleges, and at least one career college advocate said at a Nov. 5 public hearing that the department should scrap its plan entirely.
ED officials listened to testimony for and against the proposed rule last week at the department’s headquarters in Washington, D.C., where most speakers suggested tweaking certain statutes – with at least one political ally of the Obama administration suggesting that the regulations would put higher education out of reach for many low-income and minority students.
About 10 percent of U.S. college students attend for-profit institutions, some of the largest online education programs in the country.
If enacted, ED’s “gainful employment” regulations would cut off federal aid to colleges – the lifeblood of many for-profit schools like the University of Phoenix and Kaplan University – if 65 percent of students default or are unable to pay back their loans after graduation.
The rules were crafted after ED officials heard from many for-profit college students who said they were misled about their job prospects after graduation.
There also have been consistent charges that for-profit schools provide incentives for recruiters who convince prospective students to take out hefty loans, even if the student’s financial records show they won’t be able to pay the loans back.
Harris Miller, president of the Association of Private Colleges and Universities (APCU), said at the Nov. 5 public hearing that several provisions are unrealistic and should be changed before the rules go into effect in 2012.
Miller said the ED rules should allow 15 or 20 years for for-profit students to pay back their loans, rather than 10 years.
“But we would prefer the department not do this at all,” he said.
Lanny Davis, former White House counsel for the Clinton administration, admonished ED for the “gainful employment” rules, reminding ED officials repeatedly that he was ideologically aligned with the White House, but couldn’t support the current proposal.
If a Republican administration had proposed rules that targeted colleges where many minorities receive an education, Democrats would “be on our feet asking why we are going after minority students,” he said.
“This will shut out students in the underclass of society,” Davis said. “What Democratic administration would want this?”
ED’s “gainful employment” proposal should be scaled back, using “a scalpel approach and not a hatchet.”
ED Secretary Arne Duncan said last month that the “gainful employment” rules were meant to ensure responsibility and honesty in recruiting students to attend popular for-profit programs.
Eleven percent of U.S. college students attend for-profit schools, and those students represent 43 percent of all student loan defaults, according to government statistics. The median loan debt of a for-profit student is $14,000, while most community college students don’t borrow any money for their education.
“These new rules will help ensure that students are getting from schools what they pay for: solid preparation for a good job,” Duncan said.
Officials from colleges with low student loan default rates also spoke at ED’s public hearing. Charles Modica, chancellor of St. George’s University in U.S. territory Grenada, said his school could be in violation of the proposed ED rules if students are expected to get a job in their profession soon after graduation.
A medical degree “doesn’t lead to gainful employment a day later.” Instead, students begin residency training after graduation, he said, and pay back interest only on their student loans until they get a full-time, well-paying job.
For-profit colleges took a public relations hit in August when investigators from the Government Accountability Office (GAO) posed as college students and found that four out of 15 institutions they examined “encouraged fraudulent practices” to secure federal student loans, and representatives from all 15 colleges “made deceptive or otherwise questionable statements” to the undercover students, according to a report published on the GAO’s web site.
Four of the GAO investigators who went undercover and applied to for-profit schools were encouraged by college personnel “to falsify their financial aid forms to qualify for federal aid,” according to the report. In one case, a college recruiter encouraged the undercover applicant to hide $250,000 in savings so he would be eligible for federal student aid.
In an undercover video posted alongside the GAO report, a recruiter in Texas tells a pretend applicant that the government doesn’t “need to know how much cash you have” after the applicant said he received a $250,000 inheritance from a deceased aunt.
The GAO video also catches a California recruiter for a for-profit school urging an applicant to increase the number of dependents in his household so he can qualify for Pell Grants.
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