Muted GOP Defense of For-Profits

As the Obama administration pushes tougher regulation, the sector is receiving little public backing from traditional allies.

September 15, 2016

When ITT Tech announced last week that it was closing its doors, blaming aggressive regulations by the federal government, it was more evidence to many in the for-profit college sector that the Obama administration aims to regulate their sector out of existence.

Even if that claim is debatable, many observers with views across the ideological spectrum see the administration taking a harder line on for-profit colleges. But the GOP -- which attacked the Obama as antibusiness for executive actions on issues like EPA regulations and has in the past been a public champion of the for-profit sector -- has been fairly muted in its response.

Republican consultants and education policy experts say there are a number of reasons for that dynamic, chief among them the lack of upside in taking a public stand for a sector -- or specific institutions -- surrounded by such negative perceptions. And some speculate that the lawsuits against Trump University -- while about an institution that has little in common with most of for-profit higher education and that wasn’t really a university -- make this a bad time to be associated with the sector.

The very public collapses of Corinthian Colleges and ITT Tech come in the midst of new rule making and other actions aimed at wide swaths of the for-profit sector. The Department of Education in the final months of the Obama administration has pushed through defense to repayment and gainful employment regulations that have been decried by the industry.

The accrediting arm of the department recommended the closure of ACICS, the accrediting body responsible for scores of for-profit institutions. And last month the department denied a for-profit chain’s application to convert to nonprofit status, billing the decision as a signal to other institutions looking to dodge oversight by changing tax status.

Taken together, many in the industry see a target effort by the department. And progressives are cheering the moves and the appointments of student and consumer advocates Rohit Chopra and Bob Shireman as advisers to the Hillary Clinton campaign. It’s a significant reversal from just two years ago, when the administration was seen to be beating a retreat from a crackdown on for-profit colleges.

In the interim, the department has pushed through new regulations and provided the final blow for several for-profit operators. ITT’s closure is fueling debate even outside the for-profit sector about whether the feds are aiming to shut down the industry.

But the event and others preceding it this year have barely generated a press release in response from Republicans in Congress.

“The Tea Partiers don’t really care and the moderate Republicans feel embarrassed,” said Trace Urdan, a for-profit-sector analyst for Credit Suisse. “They feel like they lost this one and can’t get the public behind them on this.”

Whereas Corinthian’s failure and the subsequent discharge of millions in student debt was seen as an embarrassment for the department as well as evidence of flaws in the sector, the unraveling of ITT Tech is being cheered by many for-profit opponents. And Republicans in Congress appear resigned to losing this fight, Urdan and other observers said.

The lesson from Corinthian and ITT’s failures was that these were bad actors doing bad things, he said. Whereas even a few years ago members of both parties would defend the for-profit industry as a whole, no such counterargument is being offered by traditional allies of for-profits in Congress.

Debating the administration’s higher ed policies is impaired when the Republicans’ own presidential candidate has been uninterested in the issue and has yet to offer any real proposals of his own, said Rick Hess, a resident scholar and director of education policy studies at the American Enterprise Institute, a conservative think tank. “It’s a lot easier if you can say, ‘These are our solutions’ …. When you can’t do that it’s tough,” he said.

He said that the for-profit industry has also done a poor job telling its own story to Congress and the American public.

“Republicans don’t want to be out there feeling like they’re spokespeople for a community that’s not making its own case,” Hess said.

That’s hurt the for-profits’ cause not just with mainstream Republicans but also the Tea Party ideologues that have become prominent within the GOP ranks. The final blow to ITT was the department’s announcement that it would lose access to Title IV funds for new enrolling students -- money from federal programs like Pell Grants and Federal Direct Student Loans. Although they are private businesses, most for-profits rely on that federal student aid for revenues. Tea Party Republicans are unlikely to concern themselves with whether a company continues to receive federal dollars to survive, Hess said.

“They’re as frustrated with what they see as handouts and coddling of big business as with anything else, and these guys have no desire to stand up on behalf of large enterprises that seem to be making a lot of money off of federal taxpayers,” he said.

Also looming in the for-profit debate this year, the ongoing legal issues plaguing Donald Trump’s defunct Trump University. Urdan said comparing the real estate seminars to other for-profits is talking “apples and oranges,” but if the lawsuit starts to generate more headlines, it will make things that much more difficult for the sector.

“It certainly doesn’t help anything,” he said.

Critics of for-profit higher education -- without necessarily saying Trump University is the same as an ITT or a Corinthian -- have repeatedly referenced Trump University in their attacks on the Republican candidate.

And some of those critics don’t even need to mention Trump University for people to make a link.

Some opponents of Hillary Clinton -- who has been outspoken in criticizing the for-profit sector in this election year -- note Bill Clinton’s ties to Laureate, another for-profit. But as a USA Today editorial noted, Trump University may be insulating the Clintons in that regard: “In any other election, the Clintons’ ties to Laureate Education would get more attention. In this contest, though, the Democratic presidential nominee is fortunate that her Republican opponent happens to be the founder of Trump University, an operation that makes Laureate look like Harvard.”

The Congressional Response

Jeff Andrade, a Republican consultant who has worked in the Department of Education and on Capitol Hill, said congressional oversight of the Department of Education has been lacking even as Secretary John King takes an increasingly aggressive public tack on for-profits and other higher ed actors like student loan servicers.

“When I worked both as a career person and as a political appointee, we would frequently have to go … and essentially explain a particular policy initiative or direction we were taking,” Andrade said. “That’s par for the course, and I don’t see that going on. I don’t see a lot of hearings being done on any of these.”

Republicans have issued statements criticizing the administration’s recent enforcement actions and filed bills to curtail regulations. But much of the heavy lifting on the committee level has involved raising questions about issues affecting higher ed across the board.

Sheridan Watson, a spokeswoman for Republican Representative Virginia Foxx, said the North Carolina congresswoman has been “very vocal about her belief that the Department of Education has intentionally targeted and sought to dismantle the for-profit college industry with unnecessary regulations that threaten student choice, innovative schools and an American economy that stands to benefit from responsive higher learning institutions.”

Foxx is in line to replace the outgoing Representative John Kline as chair of the House Education and the Workforce committee if Republicans retain control of the lower chamber. Last year she introduced legislation that would eliminate gainful employment and other administrative rules affecting higher ed institutions.

A spokeswoman for Senator Lamar Alexander, the chair of the Health, Education, Labor and Pensions committee, said the Tennessee Republican believes reforms should be made for all higher ed institutions, not just in the for-profit sector.

“This has been exactly the focus of the Senate education committee, which has been working on a bipartisan basis for more than a year to reauthorize the Higher Education Act in a way that helps students at all of our 6,000 colleges and universities,” the aide said.

The HELP committee held a series of hearings on the reauthorization of the Higher Education Act last year focusing on issues like accreditation and college affordability. But Steve Gunderson, the president and CEO of Career Education Colleges and Universities, the largest for-profit advocacy group, said the sector had been left to its own defenses by its traditional allies in Congress.

“My real disappointment is that the Republicans, who are our friends, have refused to draw the line anywhere,” he said. “There has been no attempt to push back on what we view as significant overreach.”

He said the for-profits are all collectively blamed for Corinthian and ITT’s woes and that critics such as Illinois Senator Dick Durbin blame the costs to taxpayers of shutting down the schools on for-profits, too.

“People are not willing to stand up to that,” Gunderson said.

The omnibus budget bill negotiations are often the only way for members of Congress to negotiate on issues relating to for-profits, he said. And the Republican members in a position to do that negotiating typically are not experts on for-profit issues. Democrats, however, often are, he said.

Andrade, though, placed some of the blame at the feet of Gunderson and CECU for not focusing on its members’ bread and butter -- providing students with marketable skills and placing them with employers -- and wasting energy constantly rebranding. The association has admittedly been diminished as a lobbying force in D.C. by the financial struggles of its members, if not by poor strategic decisions.

While the for-profit industry sees an existential threat from the Obama administration, some critics of the sector see much more work to be done by the next White House. Barmak Nassirian, a frequent for-profit critic and director of federal relations and policy analysis at the American Association of State Colleges and Universities, said the narrative of the Department of Education serving as executioner for the sector is convenient for both the industry’s spokespeople and the Obama administration.

“When you have virtually the entire ideological spectrum adopt that kind of convenient narrative, you run the risk of not fully grasping what actually happened,” he said.

Nassirian said ITT Tech had an unsustainable student-to-teacher ratio and that market forces had as much to do with the chain’s failure as aggressive oversight by the department. Under the next administration, he said regulations like gainful employment rules introduced by King must be further strengthened.

There’s no question for-profits are in a diminished position politically. Multiple observers working on Capitol Hill and elsewhere attribute a good deal of that shift to the Obama administration’s decision to focus more oversight on the industry. It’s also become a consensus priority for government action in the Democratic caucus as voices like Durbin and Massachusetts Senator Elizabeth Warren have become more influential. Progressive activists who helped put higher education policies at the forefront of the party’s priorities in recent years have also driven the focus on for-profits.

“The dynamic and the debate on for-profits are in a different place now than they were a few years ago,” said Ben Miller, a policy analyst at the Center for American Progress. “You’ve got way more people weighing in on it, generating evidence and raising concerns. I think that has made it harder to push back on criticisms and defend the sector.”

At the same time, Miller said, Republicans have a conflict between separate commitments to advocate for the private sector and keep government spending low.

“You sometimes get weird results from those two things meshing in the education space,” he said. “It’s hard to figure out how to chart that path from a conservative standpoint.”


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