For-Profits Stay on Campaign Sidelines

Sector's spending on political campaigns has fallen off sharply during the 2018 midterm campaign cycle.

October 23, 2018

Just two years ago, Democratic candidates settled on for-profit colleges as a favorite political target on the campaign trail.

ITT Tech and Corinthian Colleges had recently collapsed, and regulators were pursuing high-profile investigations of other colleges, making the sector a compelling target for political barbs. And political donations from for-profit higher education made an attractive cudgel to swing at GOP opponents.

During this campaign season, though, for-profits have received little mention. And they’re mostly staying on the sidelines themselves.

For-profit chains that were once big-time spenders -- mostly on GOP campaigns -- have once again dropped their campaign spending in the midterm elections, a downward trend that has continued for multiple election cycles.

Bridgepoint Education Inc. steered more than $443,000 through its political action committee to candidates, parties and fund-raising committees two years ago. But the company, which owns Ashford University, has spent about $252,000 so far in the 2018 midterms, according to data analyzed by the Center for Responsive Politics.

A political action committee for the University of Phoenix's owner, Apollo Education Group, donated more than $195,000 through its PAC in the 2016 election, but has spent $47,500 in the current cycle.

And Education Management Corporation, which gave close to $147,000 through its PAC in the 2016 elections, filed for bankruptcy earlier this year.

Industry observers say the sliding numbers reflect both the changing political environment in Washington -- and the weakened position of the industry. While for-profit colleges have notched key regulatory wins, enrollment across the sector began declining long before the Trump administration started putting its stamp on higher ed.

“They are not swimming in cash the way they were in previous cycles,” said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities. “But there also may be a different political judgment and a different political dynamic at work. They are very active when they felt like they were under existential threat.”

Political spending by for-profits peaked in the 2012 election cycle, when the sector poured money into congressional campaigns and political action committees.

That year, a Senate investigation led by Iowa Democrat Tom Harkin wrapped up an investigation into for-profits. The Obama administration was crafting gainful-employment regulations that would sanction career education programs with poor rates of loan repayment among graduates. And the movement to seek loan forgiveness through the previously little-used borrower-defense process was well under way.

Enrollment in for-profit colleges peaked in 2012 as well and has been on the decline as the economy has continued to strengthen. For a sector already on its heels thanks to that trend and federal and state investigations, the 2016 election was seen as critical to deciding whether or not Obama-era regulations targeting the sector would go forward.

Under the Trump administration, for-profits have found the U.S. Department of Education to be much friendlier to their priorities. For example, among the first major steps taken by Education Secretary Betsy DeVos was rolling back the gainful-employment and borrower-defense regulations.

The department has also extended a second chance to ACICS, a national accreditor to many for-profit colleges, which the Obama administration sought to eliminate. That decision kept federal student aid money flowing to dozens of colleges that couldn’t find approval from other accreditors.

“The sense of urgency is definitely diminished,” said Trace Urdan, a managing director at Tyton Partners who follows the for-profit education industry.

After lawmakers failed to make serious progress on reauthorizing the Higher Education Act in the past year, there’s also little expectation that a new law with major implications for for-profits will be passed any time before 2020 at the earliest.

“Why spend money to influence something that’s just not going to happen?” Urdan said.

Even as officials in Washington have created a friendlier regulatory environment, though, the industry has undergone a major restructuring that has had implications for entities that once played a big role in funding campaigns. There is less regulatory pressure on colleges, said Jeff Silber, a managing director and senior research analyst at BMO Capital Markets, but at the same time Phoenix and many of the other largest for-profit entities are smaller, and others like Corinthian have gone out of business entirely.

Meanwhile, Grand Canyon University converted to nonprofit status earlier this year. Kaplan University stopped issuing credentials after it formed a new public-private venture with Purdue University. And the parent company of DeVry University has agreed to sell the chain of colleges to a California-based private equity investor.

The trend in the sector’s political activity also is reflected by trade association representing for-profit colleges, once a big-time spender but this cycle much less of a factor in campaigns.

Career Education Colleges and Universities’ political action committee spent close to $300,000 on campaigns in 2012. But CECU, which by 2016 had seen its membership decline, gave more than $87,000 to campaigns through its PAC in the last election cycle. So far for this year’s midterm elections, the PAC has spent $57,000, according to data from the Center for Responsive Politics. At the peak of the group's political spending, it gave more than $367,000 to candidates and political action committees.

But Steve Gunderson, CECU’s president and CEO, said those numbers shouldn’t be interpreted as the group declaring victory on its federal priorities.

“We have found our most successful political engagement today is organizing and hosting events for members rather than simply raising money for the PAC and sending checks,” he said. “Our members, like everyone else in America, want to have some personal control over where their dollars go. The PAC is not as popular as a political vehicle,” he said.

Gunderson said the organization now goes as far as asking candidates and officeholders to visit a member college before CECU will send donations to campaigns -- a requirement he said he cleared with the Federal Elections Commission.

CECU has been as engaged as any group on federal higher ed policy in the Trump administration -- it backed the department’s overhaul of Obama-era student loan rules and lobbied hard for ACICS to keep federal recognition. And the PROSPER Act, House Republicans’ bid to reauthorize the Higher Education Act, reflected many of the group’s priorities.

But Gunderson said CECU is focusing more on engaging its member colleges than contacts in D.C.

“This is really about the future of your constituents, not about the politic of Washington,” he said.


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