For-Profits Fear a Biden Presidency

If Steve Gunderson didn’t know what awaits for-profit colleges should Democrats capture the White House, he thought it became clear when he heard vice presidential nominee Kamala Harris at the Democratic National Convention lump the colleges he represents with rapists and the mob.

“I’ve fought for children and survivors of sexual assault. I've fought against transnational criminal organizations. I took on the biggest banks,” Harris said, “and helped take down one of the biggest for-profit colleges.

“I know a predator when I see one,” Harris said.

“It’s alarming. Concerning,” Gunderson said of the prospect of Democratic nominee Joe Biden taking office, or if Democrats capture the three seats they need to control the Senate should Democrats win the White House, allowing Harris to break any tie. “The future of the sector is at stake if there’s a totally Democratic government,” said Gunderson, a former Republican congressman who is now president and CEO of the industry group for the for-profits, Career Education Colleges and Universities.

Those on both sides of the debate say a Biden administration would restore a number of regulations on for-profit colleges passed by the Obama administration and repealed by Education Secretary Betsy DeVos under the Trump administration.

Among them would be a restoration of the so-called gainful-employment rule, which penalizes programs that produce too many graduates with unmanageable student debt. The Obama administration passed the rule in response to for-profit institutions, in particular, providing education that did not lead to high-enough-paying jobs, leaving graduates unable to repay the loans they took out. But it was repealed by DeVos, who said it was unfair to for-profits. Biden has also pledged to restore another rule undone by the Trump administration, which had made it easier for those defrauded by for-profits to have their student loans forgiven.

However, Gunderson said he worried a Biden administration or a Democratic Congress could go even further, even barring students from using federal student loans at for-profits. “Some Democrats believe in defunding the whole sector,” he said.

Indeed, last October, Democratic Congresswoman Pramila Jayapal, of Washington, and Senator Sherrod Brown, of Ohio, introduced bills barring for-profit colleges from being able to get federal grants or student loans. “Thousands of students, a disproportionate number of whom are low-income and students of color, have been left with nearly worthless degrees and credits, limited job prospects, and tens of thousands of dollars in loan debt because these companies defrauded them,” Brown said in a statement at the time. “Taxpayers shouldn’t be footing the bill for these institutions.”

Bob Shireman, director of higher education excellence and senior fellow at the Century Foundation, who served as deputy under secretary of education in the Obama administration, said he doesn’t believe a Biden administration would go that far.

But Shireman said he thinks the administration should require for-profits, in order to receive federal funds, to acknowledge they should be subjected to greater regulation than nonprofits. That would be a significant concession for for-profits that have opposed greater regulations, saying they should be treated the same as other colleges and universities.

“They need to be willing to acknowledge they have different incentives that are more dangerous and there needs to be additional protections for their students,“ Shireman said. “Instead of pretending to be discriminated against, they need to acknowledge they have a right to pocket every penny, which nonprofits are prohibited from doing. If they pretend that is immaterial to their behavior, I do worry they are either in denial about it or being dishonest.”

A Biden administration could have an immediate impact on the University of Arizona’s plans to acquire Ashford University. Both critics and supporters of the for-profit industry say the deal would face far greater scrutiny under a Biden administration than by the Trump administration.

Under the plan, Arizona would create a new nonprofit, the University of Arizona Global Campus, which would buy Ashford University for $1. Zovio, the publicly traded parent company of Ashford University, would be deeply involved in running the new institution's online programs, including managing marketing and student recruitment.

University of Arizona faculty and consumer groups like the left-of-center New America have raised concerns citing past allegations against Ashford of deceiving prospective students.

Clare McCann, New America’s deputy director for federal higher education policy, said it’s too early to say what conditions critics of the deal will ask the Education Department to place on it. But she said, “There’s great reason to believe [the Biden administration] would look much more closely at the nature of the institutions and what it would look like and how it would be structured.”

Asked if control of the Education Department could impact the deal, Gunderson said, “Based on history, the answer is yes.”

It’s unclear whether the Education Department would approve the deal before there is a change of administrations, should Biden win. The University of Arizona did not respond to press inquiries. Vickie Schray, Zovio’s executive vice president and chief external affairs officer, declined to say whether she is concerned about how a Biden administration would view the deal. She said in a statement the deal is expected to close by the end of the year. “We have been in conversations with the Department of Education, but their review and determination will come sometime after the close of the transaction,” Schray said.

Though some denied they are spurred by fear of Democrats taking control, some top executives at for-profit institutions are making large campaign contributions to Republicans in key Senate races.

Take Arthur Keiser, the chancellor and CEO of Keiser University, and his wife, Belinda, who is the university’s vice chancellor of community relations and student advancement. According to Federal Election Commission records, Arthur Keiser has given $1,517 each to Republican senators Susan Collins, of Maine; Cory Gardner, of Colorado; Martha McSally, of Arizona; Thom Tillis, of North Carolina; and Joni Erst, of Iowa. Each are in neck-and-neck races, critical to Republican hopes of keeping control of the Senate. Keiser has also given $1,517 to Senate Majority Leader Mitch McConnell, $6,200 to Florida Republican senator Rick Scott and $16,200 to WinRed, a platform that collects money for conservative candidates. Belinda Keiser gave the same amount to the same candidates and WinRed, as well as $1,065 to President Trump’s campaign.

Career Education Colleges and Universities’ political action committee in May gave $15,000 to the National Republican Campaign Committee. Richard Luebke, chairman of the Pima Medical Institute, gave McSally’s PAC, Defend America, $25,000.

Mark Dreyfus, president of ECPI University, gave $4,600 to Tillis and $5,600 to WinRed, although he also contributed $1,000 each to Senate Democrats Robert Menendez, of New Jersey, and Bob Casey Jr., of Pennsylvania. Zovio’s PAC in October gave $15,000 to the National Republican Campaign Committee, though it also gave $2,500 to Senator Patty Murray of Washington, the top Democrat on the education committee.

Keiser noted he also gave $5,000 in April 2019 to Alcee Hastings, a Democratic congressman from Florida, where Keiser University is based. “We’re always concerned about changes in administration,” he said, though he said the money he has donated likely would not make a major difference given all that is being spent on the races. Rather, he said his donations could help him get time with lawmakers to make his case that for-profit institutions are important in helping people get good jobs, particularly during periods of unemployment. But policies aimed at for-profits are unfair, he said, when many community colleges have poor graduation rates but get large amounts of public dollars.

Dreyfus, meanwhile, said his donations to candidates of both parties are due to supporting lawmakers in areas where ECPI has campuses. He is less concerned about changes to the policies like the so-called 90-10 rule, which limits the amount of federal student aid for-profits can get to 90 percent of its revenue.

Democrats and consumer groups want to further limit the amount of federal dollars going to for-profits to 85 percent. In addition, consumer groups say that a loophole in which veterans' education benefits are not counted as student aid increases the incentive on for-profits to aggressively recruit service members and veterans, sometimes by exaggerating the kinds of jobs they could get by attending the institutions. But Dreyfus said universities have been trying to get more money from nonfederal aid sources, like encouraging employers to pay for their students’ tuition, anyway.

However, Peter Mikhail, president and CEO of Mikhail Education Corp., a Las Vegas for-profit that runs Advanced Training Institute, the Institute for Business & Technology, Las Vegas College, the Lamson Institute, and National Career Education, said greater regulations will hurt schools like his. And Mikhail said his schools, started by his father, an immigrant from Cairo, have policies like allowing students who fail a class to be able to retake it for free. “These aren’t the stories you hear with the for-profit sector,” he said.

Limiting for-profits to getting no more than 85 percent of their revenue from federal student aid, he said, would push him to increase tuition to raise more money beyond what’s covered by aid. That would mean his students would have to come up with more money or take out greater loans. But that in turn would make it more likely the school would fail the gainful-employment test. If the rule is restored, colleges would be faced with having federal student aid cut off because their students have too much debt.

But Shireman said a better way for colleges to rely less on student aid, if the cap is reduced to 85 percent, is to offer a quality education. That would make it more likely they could get other sources of money, including getting employers to pick up the cost of their employees’ tuition.