For-profit regulations, Pell Grants survive budget compromise

Experts expect lawmakers to keep Pell Grant funding at its current level.

Washington’s last-minute budget deal did not include a provision that would have killed a stringent for-profit college regulation, and Pell Grants remained intact despite deep cuts in education spending over the next six months.

The for-profit regulations pushed by the Obama administration for more than two years would affect some of the nation’s largest online colleges, such as the University of Phoenix and Kaplan University, by stripping schools of federal loan money if too many of their students maintain high loan debt-to-income ratios, among other provisions.

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Although the anti-regulation provision was pushed primarily by Congressional Republicans, a bipartisan letter was submitted April 4 that would have barred the U.S. Department of Education (ED) from implementing the new regulations on for-profit programs.

The provision – or “rider” – to the budget compromise was left out of the final agreement, however, paving the way for gainful employment rules to take effect July 1, 2012, as ED outlined last fall.

The letter supporting the end of gainful employment rules – signed by 12 House members — charged that regulating for-profit colleges would “harm job creation” and prevent 400,000 people annually from entering the workforce with “new skills.”

“These regulations are a clear example of federal overreach into the affairs of American institutions of higher education,” the letter said.

For-profit college advocates, including lobbyists who have pushed hard against any new regulations targeting for-profit schools that have employed unscrupulous student recruiting tactics, haven’t given up the legislative fight, according to the New America Foundation (NAF), a nonprofit policy group.

An organization once known as the Career College Association (CCA) sent an eMail to its members April 9 asking them to contact their Congressional representatives and urge their support for the provision to stop gainful employment rules.

“Given the fact that the for-profit higher education industry has spent millions of dollars lobbying Congress to stop the Department from moving forward with this regulation, it’s hardly surprising that career college lobbyists are not conceding defeat yet,” the NAF blog said.

Many of the largest and fastest growing for-profit institutions rely on federal grant and loan money for up to 90 percent of their funding, so losing that money under gainful employment regulations would be devastating for those programs, many of which operate online.

Education Secretary Arne Duncan said last fall that the department would forge ahead with gainful employment rules.

Duncan’s announcement came a month after the Government Accountability Office (GAO) released the results of a sting operation on for-profit institutions, showing the schools’ dishonest practices.

“Let me be clear: we’re moving forward on gainful employment regulations,” Duncan said. “While a majority of career colleges play a vital role in training our workforce to be globally competitive, some bad actors are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use.”

The austere federal budget also left Pell Grants at the current maximum of $5,550 per student. Pell Grants are awarded to college students based on their financial need, and are not paid back to the government.

Mark Kantrowitz, publisher of the student loan website and author of two books on student aid, said he doesn’t expect Pell Grant funding to change in the final version of a bill to fund the federal government until September.

“The agreement as described was in terms of broad brush strokes, but the spreadsheets they use for such negotiations are generally pretty accurate, and historically there haven’t been changes in the final drafted legislation,” Kantrowitz said.

As President Obama and Congressional leaders piece together a long-term compromise, the fate of year-round Pell Grants remains unclear.

“The president’s blog is silent on this issue,” Kantrowitz said.

Some Congressional Republicans continue to push for changes to the Pell Grant program. Rep. Denny Rehberg (R-Mont.) said in an April 5 interview with Blog Talk Radio that Pell Grants constituted the “welfare of the 21st century.”

“You can go to school, collect your Pell Grants, get food stamps, low-income energy assistance, Section 8 housing, and all of a sudden we find ourselves subsidizing people that don’t have to graduate from college,” Rehberg told Blog Talk Radio.

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