For-Profit Colleges and Stimulus Funds

April 9, 2020
 

Four powerful Democratic senators, led by Elizabeth Warren of Massachusetts, yesterday wrote to the U.S. Department of Education requesting clarification on whether it will allow federal stimulus funds to be allocated to for-profit colleges and universities.

And today the University of Phoenix pledged that any federal stimulus money it receives will go directly to students. Making a similar commitment today was Strategic Education, Inc., the parent company of Strayer and Capella Universities.

The Democratic senators argued that the “most legally sound interpretation” of the CARES Act, which includes $14 billion for higher education, would entirely exclude for-profits. They encouraged the department to target the money to public and nonprofit institutions.

“If the department determines that for-profit colleges are eligible for this funding, we urge the department to include in such a determination strong accountability policies to support students and protect taxpayers,” the Senate Democrats wrote, “including policies to prohibit for-profit colleges from using such funding for any purposes beyond those which directly support student instruction, emergency financial aid to students and student support services central to schools’ educational missions.”

The announcement from the University of Phoenix described how the large for-profit will use every dollar from the CARES Act as direct financial assistance for students who were not exclusively studying online before the COVID-19 pandemic. The university said it made this decision weeks ago, and said in communication before the CARES Act was enacted that it supported a requirement for the money to go to students.

The stimulus requires colleges to use at least 50 percent of their funds to directly assist students. Phoenix said it would exceed that requirement to help relieve students’ financial burdens.

“University of Phoenix is unequivocally committed to using every penny of CARES Act funding for direct financial assistance to our students -- many of whom are nurses, members of the military and veterans who have stepped up on the front lines fighting COVID-19 -- to help them navigate these difficult times,” a spokeswoman for the university said in a statement. “We strongly believe that every higher education institution should devote the majority of these federal funds to direct financial assistance to students and that the federal government should provide close and careful oversight to ensure that happens.”

Karl McDonnell, Strategic Education's CEO, said the company would direct all of its share of stimulus funds to students.

“Any funds we receive as a result of the CARES Act will go completely to our students to address any challenges they face as a result of this pandemic, and to support the continuation of their educational journey. We don’t intend to retain any funds from this stimulus package to support our universities or other operations," McDonnell said in a statement.

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