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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Paul Fain

Paul Fain, Contributing Editor, came to Inside Higher Ed in September 2011, after a six-year stint covering leadership and finance for The Chronicle of Higher Education. Paul has also worked in higher ed P.R., with Widmeyer Communications, but couldn't stay away from reporting. A former staff writer for C-VILLE Weekly, a newspaper in Charlottesville, Va., Paul has written for The New York Times, Washington City Paper and Mother Jones. He's won a few journalism awards, including one for beat reporting from the Education Writers Association and the Dick Schaap Excellence in Sports Journalism Award. Paul got hooked on journalism while working too many hours at The Review, the student newspaper at the University of Delaware, where he earned a degree in political science in 1996. A native of Dayton, Ohio, and a long-suffering fan of the Cincinnati Bengals, Fain plays guitar in a band with more possible names than polished songs.

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