Colleges Seek Waivers to Experiment With Federal Aid

Scores of colleges and universities are taking the Obama administration up on its offer to waive certain federal rules for institutions that want to test out competency-based education and other new models of higher education.

More than 75 institutions told the U.S. Department of Education before last week’s deadline that they want to participate in its “experimental sites” program, according to spokeswoman Denise Horn. Some of the colleges indicated interest in more than one type of experiment, which include prior learning assessment, competency-based education, high school counseling, and Pell Grant distribution.

Horn said the department would be approving colleges to participate in the program “over the coming weeks.”

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Court Victory for For-Profits on Recruiter Bonus Ban

A federal court on Thursday ruled that the Obama administration had again failed to adequately justify its ban on colleges paying recruiters bonuses that are tied to students' graduation. The court also faulted the Department of Education for not properly addressing the effect the rule may have on minority students.

The judge, Rosemary M. Collyer of the U.S. District Court for the District of Columbia, sided with the for-profit college association challenging the rule, but she denied its request to block the regulations, which remain in effect. Collyer told the department to come up with a better explanation for the rule and address the impact it has on diversity initiatives.

An appeals court in 2012 largely upheld the administration’s package of stricter incentive compensation rules that were aimed at cracking down on abusive practices in the for-profit industry. But that court singled out the specific ban on compensation tied to the number of students graduating a program, ruling that the department had not offered a legally sufficient basis for it.

The department argued that colleges were doling out bonuses to recruiters based on graduation rates in order to make an end run around the clear federal prohibition on compensation based on enrollment numbers.

But the judge wasn’t swayed by that argument, writing in Thursday's opinion that the department used faulty logic and failed to provide sufficient evidence for its position.

The Association of Private Sector Colleges and Universities, the for-profit group that sued, said it was pleased with the judge’s ruling. Sally Stroup, the group’s executive vice president of government relations and general counsel, said in a statement that the department “should correct its errors by suspending the flawed regulations and engaging in a new rulemaking.” 

The department on Thursday did not say how it planned to proceed in light of the court's decision.  “We are studying the ruling and discussing our options for addressing it," said Dorie Nolt, the department's press secretary. 

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As Pell Grant loses access potency, new paper calls for bolder federal college affordability guarantee

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A trio of think tanks and advocacy groups, lamenting the declining purchasing power of the Pell Grant, call for bold federal and state guarantee for low-income college students.

Oversight of Loan Guarantors Is Lacking, Audit Says

The U.S. Department of Education is not properly overseeing the entities it pays to administer and insure federally guaranteed student loans, according to an audit released this week by the agency's inspector general.

The department has been overestimating the financial strength of those entities, called guaranty agencies, which are required by federal law to meet certain financial standards, according to the report. In some cases, the department's improper calculations allowed guaranty agencies to meet the standard when they should have otherwise been identified as under possible financial stress.

Even though the federal government no longer guarantees private student loans -- it only lends directly to students -- the guaranty agencies are still responsible for the existing, albeit shrinking, portfolio of federally guaranteed student loans.

In response to the report, the Education Department admitted that it has not been complying with federal regulations in assessing the guaranty agency's financial strength and pledged to change that process starting this year. However, the department defended its oversight of the guaranty agencies in general, noting that it wasn't aware of any cases in which a guaranty agency's insolvency deprived loan borrowers of the services to which they are entitled.

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U.S. Audit Faults Education Dept. on Direct Assessment

Degree programs that award students credit by assessing their skills – rather than making them pass courses – have been touted by the Obama administration, members of Congress and many in higher education as a promising new innovation. But the U.S. Department of Education’s Inspector General this week threw some cold water on the enthusiasm for that model, known as direct assessment, criticizing how officials have allowed the first handful of programs of that type to become eligible for federal funding.  

The agency’s independent watchdog said in an audit that the department has not done enough to make sure that the direct assessment programs meet federal requirements before approving them.

Department staff should have more specific “risk areas” in mind when assessing the programs, the report says. For instance, the department should be on the lookout for programs allowing students to use federal aid to achieve credits that are awarded based merely on the skills students learn through life experiences; federal rules require students to actually have some sort of engagement with the learning resources a program offers.

The report also faults the department for not having created records that document the decision-making process for approving or denying direct assessment programs. But the report says the department has since begun maintain such records. In addition, the inspector general recommends that the department should do a better job of communicating with accreditors as it decides whether a direct assessment program has sufficient student-faculty involvement. Some accreditors have expressed frustration with how the department is approving new competency-based education programs, like direct assessment.

In responding to the report, the department agreed with most of the recommendations and pledged to reassess the risks that should be considered in approving direct assessment programs. It also said it would be soon issuing new formal guidance on direct assessment programs.  

The audit comes as the Obama administration and members of Congress are increasingly interested in allowing federal aid to flow to direct assessment programs – and, more generally, all types of programs that are structured around students’ knowledge rather than classroom time. The administration will soon grant regulatory waivers to a select number of colleges that want to experiment with competency-based education. 

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Corinthian Facing Another Federal Investigation

Corinthian Colleges said Friday that the U.S. Department of Justice is investigating whether the company defrauded the federal government.

The investigation, under the False Claims Act, concerns “allegations related to student attendance and grade record manipulation, graduate job placement rate inflation and non-Title IV funding source misrepresentations,” the company told investors. The disclosure comes as Corinthian is also facing three criminal probes by the Department of Justice. Federal prosecutors in California, Florida, and Georgia have all issued grand jury subpoenas to the company. Corinthian is also in search of sources of liquidity as it seeks to sell off and close its campuses as part of an agreement with the U.S. Department of Education. 

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Student Advocacy Group Calls for Changes to Work-Study

The Federal Work-Study Program needs to be revamped to help serve more low-income students, says a report released Monday by Young Invincibles, a student advocacy group.

The group calls on Congress to replace the existing formula for distributing federal work-study money to campuses with a methodology that rewards institutions that enroll and graduate large numbers of low-income students. Under the current program, the group said, the most expensive private institutions that have been in the program the longest receive the most funding at the expense of many public institutions that serve larger populations of low-income students.

The report also said that the work-study program should require that colleges place students in jobs that are better aligned with their career interests and academic programs.

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Federal regulators accuse Corinthian Colleges of predatory lending scheme, strong-arm debt collection tactics

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The Consumer Financial Protection Bureau's lawsuit accuses the troubled for-profit college operator of luring students into predatory private loans and illegally harassing them to repay the debt.

Comic Targets GOP House Member Over For-Profits

Liberal comedian Bill Maher announced on his show last week that he would work to unseat Representative John Kline, the Minnesota Republican who chairs the House education committee. 

The host of the HBO series "Real Time with Bill Maher" cited Kline's support of for-profit colleges -- and the industry's donations to his campaign -- as one of the reasons why he chose to target Kline as part of his "Flip a District" campaign. Maher said he would travel to Kline's Minnesota district and perform a stand-up comedy show in an attempt to swing the seat from Republican to Democratic. 

Kline, after heading off a tough primary challenge earlier this year, is facing Democratic candidate Mike Obermueller, a former state lawmaker whom he defeated in 2012. 

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Education Finance Lobbying Group Names New Head

One of the main lobbying organizations that represnts loan servicers and other student loan entities has named its new president.

The Education Finance Council on Monday said that Debra J. Chromy would lead the group. Chromy was most recently a vice president at American Student Assistance. She replaces Vince Sampson, who left the council earlier this year to join a law firm.

The group represents nonprofit and state entities that provide student loans, as well as loan servicers, which have increasingly faced scrutiny in Washington over how well they help struggling borrowers avoid default.

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