For-Profits Step Up Gainful Criticism

As a federal panel reconvenes to negotiate "gainful employment" regulations, representatives of for-profit colleges -- backed by a surprise visit from a key Congresswoman -- step up their criticism.

November 19, 2013

Representatives of for-profit colleges stepped up their criticism Monday of the Education Department’s efforts to rewrite the “gainful employment” rules that would apply to their institutions and vocational programs at community colleges.

As a federally appointed panel kicked off a second round of negotiations over the regulations, the for-profit-college members of the committee lamented a lack of information and questioned the department’s rationale for putting forth a stricter, more sweeping proposal than the department originally suggested in its first draft.

The department is now proposing standards that include a debt-to-income measure, a program-level cohort default rate, and a loan repayment rate. With that more aggressive proposal on the table, the negotiators Monday appeared even further apart than they did during the first round of discussions.

It’s not yet clear how many current programs would pass or fail under the latest proposal because the department has not yet released such an analysis. Negotiators from for-profit institutions and community colleges lamented the lack of availability of that data, which department officials said Monday would be provided soon.

Raymond Testa, the vice president of government affairs and compliance, at Empire Education Group, said that it was “ludicrous” for the panel to negotiate over the department’s latest proposal without having data on how the rules would affect institutions.

His view appeared to be echoed by Rep. Virginia Foxx of North Carolina, a Republican, who showed up for the negotiating session Monday.

“One of the things that I’m interested in is that the department is so ill-prepared in terms of answering questions,” Foxx said as she left the session after watching for about an hour and a half.

The presence of a member of Congress at the rule making session was unusual; the audience for such negotiations is typically limited to lobbyists, policy analysts and department staffers. Foxx has been a vocal supporter of for-profit colleges and is leading a legislative effort to block the Education Department from creating and enforcing “gainful employment regulations” until the Higher Education Act is reauthorized. The bill passed out of committee over the summer but hasn’t yet come up for a vote in the full House.

Previewing possible legal challenges that may lie ahead for the regulations, for-profit representatives on Monday repeatedly questioned the department’s rationale behind each of the specific metrics. A federal judge earlier this year halted the department’s first attempt at implementing gainful employment regulations on the grounds that its repayment rate threshold was arbitrary and lacked an appropriate basis.

The for-profit and community college negotiators took issue with where the department had set its new standards, arguing that the metrics would not appropriately capture the quality of a program.

“You may have to defend this at some point, legally,” Marc Jerome, the executive vice president of Monroe College, told one of the department’s lawyers, in pressing for an explanation of how the department justified some of its thresholds.

Department officials said that the metrics are intended to be a floor -- the minimum standards an institution has to meet in order to receive federal funding -- and are not aimed at measuring quality.

Proponents of tougher gainful employment regulations, too, said that they were also concerned about the department’s rationale for setting some of the metrics. But they were largely worried that the agency was setting the floor too low.

For instance, Barmak Nassirian, the director of federal relations and policy analysis at the American Association of State Colleges and Universities, criticized the repayment rate metric -- which requires a program’s borrowers, in aggregate, to be making positive progress on repaying their loans -- as indefensible to taxpayers. He said that setting a minimum repayment rate as making interest-only payments was far too low.

The panel is scheduled to meet again Tuesday and Wednesday. If negotiators do not reach a consensus, the Education Department can still move forward with its own proposal. 

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Michael Stratford

Michael Stratford, Reporter, covers federal policy for Inside Higher Ed. He joined the publication in August 2013 after a stint covering the Arkansas state legislature for The Associated Press. He previously worked and interned at Kiplinger’s Personal Finance magazine and The Chronicle of Higher Education. At The Chronicle, he wrote about federal policy and covered higher education issues in the 2012 elections. Michael grew up in Belmont, Mass. and graduated from Cornell University, where he was managing editor of The Cornell Daily Sun.

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