Uniting to Regulate For-Profits

Some analysts see an interagency task force to oversee for-profit colleges as the force behind the latest federal investigations into the sector's practices.

October 12, 2015

Every few weeks, it seems, a new investigation is launched into one of the larger for-profit colleges in the country.

Or there's a new sanction or inquiry into past behavior, such as the U.S. Department of Defense's suspension of the University of Phoenix's participation in the federal tuition assistance program last week. For many who work within the for-profit sector, or advocate for consumers who attend for-profit colleges, these investigations, inquiries and sanctions are connected to an interagency task force created to oversee the institutions.

Last year, after receiving support from Democratic Senators Dick Durbin of Illinois and Tom Harkin of Iowa (who has since retired) and several state attorneys general, the Department of Education announced the creation of an interagency task force that would formalize a partnership between federal agencies to oversee for-profit colleges. The senators, along with Representative Elijah Cummings, a Maryland Democrat, had already proposed legislation for a new federal oversight committee of for-profit colleges.

The task force, led by Under Secretary Ted Mitchell of the Education Department, was created to build on the existing work already taking place by the department, the Federal Trade Commission, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and the Departments of Justice, Treasury and Veterans Affairs. State attorneys generals have also been invited to collaborate with the task force.

"It's serving the purpose of creating a space where they can talk about cross-cutting issues, technical and legal challenges and information sharing and coordination of issues," said Maura Dundon, senior policy counsel at the Center for Responsible Lending.

Dundon admits that it's hard to tell exactly what the task force has been doing, but at the least she's aware they've been exchanging information on the institutions.

"There is a risk that a task force like this can be window dressing and just kind of look like they're doing something, but I don't get that sense at all. There are regulators at each of these agencies that care about this issue and they can sit down and multiply their efforts," Dundon said.

Elizabeth Baylor, the director of postsecondary education at the Center for American Progress, served as a senior investigator on the Senate's Health, Education, Labor and Pensions Committee -- or HELP -- under Senator Harkin. One of the recommendations that committee made was for an interagency task force to oversee for-profit colleges.

"A lot of the issues we identified were related to other issues outside of the Education Department, like the share of money flowing from the GI Bill to for-profit colleges and how the regulatory 90/10 rule is set up as an incentive for them to go after [GI] money," Baylor said.

The 90/10 rule prevents for-profits from receiving more than 90 percent of their revenue from federal resources. But money from the Post-9/11 GI Bill and the active-duty military tuition benefit does not count as federal funding under the rule.

"Veterans Administration doesn't really have an apparatus set up to look at those colleges and figure out if they're operating properly. When we had those conversations with [the Department of Defense] and VA to set that up, they said they relied on the Education Department. All of these things went to the need for a more concerted effort, governmentwide, to make sure students were treated fairly," she said.

The FTC has certainly stepped up the work it does in examining how for-profit companies market and advertise their products and so we're seeing them conduct more in-depth investigations, as well as a lot of work coming out of the CFPB, she said. Most recently Career Education Corporation announced in a corporate filing that the FTC was looking into the company's marketing and advertising practices.

A year ago, when the task force was first announced, many for-profit higher education advocates feared that the agencies were simply getting together to launch regular attacks on the sector. That feeling, for the most part, hasn't gone away.

"At the end of the day they're going to have to justify the existence of the task force and that's through indictments and subpoenas," said Noah Black, vice president of public affairs for the Association of Private Sector Colleges and Universities.

Black said he can't attribute any of the investigations directly to the task force, but there has certainly been a concerted and ideological effort against the sector.

"If you're going to convene seven or eight different agencies and tell them to find things, they're going to find things and issue subpoenas," he said. "It's questionable if this is the right and proper use of time and resources."

The circumstances that took down Corinthian Colleges were different and also more subtle, Dundon said, adding that the Education Department took a huge step in restricting that college's funds, which led to its toppling. It's uncertain whether the department would repeat those steps with any of the schools under investigation.

"These students were being ripped off with the help of the federal government and they can't discharge in bankruptcies," Dundon said. "It's distressing. With the foreclosure crisis, you could always walk away from that home. You could foreclose and not be liable. You can never walk away from a student loan."


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