After months of deliberation, the Obama administration issued a proposed gainful employment regulation in an effort to protect students from programs at for-profit colleges that leave them with unmanageable debt and worthless degrees. The proposed rule includes provisions requiring career education programs to meet certain standards related to the debt-to-earnings ratio and default rate of graduates. While I would have liked to see a stronger rule – one that includes, for example, loan repayment rates as a metric and a new program approval process – it is a step forward.
Too often, for-profit colleges get away with using predatory and deceptive tactics to bully our most vulnerable students – including minority, veteran, and low-income students – into “career” programs that fail to make them career-ready. As a teacher of predominantly low-income and minority students for more than 20 years, I know what these students need from postsecondary education. They need access to affordable degree and certificate programs that lead directly to good jobs.
In Congress, I have led multiple efforts to support the administration’s rulemaking process for gainful employment and to educate my colleagues. Unfortunately, I have found that the issue is little understood here on Capitol Hill. And the powerful for-profit lobby is relentless – both in its portrayal of for-profits as victims in this debate and in its campaign contributions.
For-profits like to claim that they are student-centered and dedicated to serving, educating, and preparing underrepresented and underserved populations for the workforce, but the numbers tell a different story. The Department of Education reports that for-profit programs account for just 13 percent of postsecondary students, but nearly half of all student loan defaults. And a little over a quarter of for-profit colleges produce graduates who earn more than high school dropouts. Meanwhile, most for-profits receive between 80-90 percent of their revenues from federal student aid.
Perhaps even more telling than these statistics is the fact that the very organizations dedicated to advocating for and protecting minority, veteran, and low-income populations are skeptical of for-profit programs and support strong gainful employment regulations. These groups include the AFL-CIO, NAACP, League of United Latin American Citizens (LULAC), Iraq and Afghanistan Veterans of America (IAVA), Student Veterans of America, and many others. In fact, at a gainful employment briefing that I organized on the Hill for Members of Congress and their staff, representatives from several of these groups spoke passionately about the harmful effects many of these programs have had on these populations.
Despite massive efforts by the Association of Private Sector Colleges and Universities (APSCU) – the linchpin of the for-profit lobby – I know that there is strong support in the House of Representatives for gainful employment regulations. Last year, I was joined by 34 of my colleagues in sending letters to the Administration in support of a gainful employment regulation. And I know that there is broad public support for cracking down on for-profits. A petition I launched with the organization CREDO in opposition to HR 2637, which would prevent the Department of Education from issuing gainful employment regulations, garnered over 101,000 signatures.
My staff and I have met with for-profit college representatives numerous times. In each of these meetings, we hear the same rhetoric – our programs are doing their job, they are all properly accredited, our graduation and job-placement rates are great. Some of them even tell us that they would support a version of a gainful employment regulation and that bad actors should be penalized.
If that is the case, if their programs are high-quality and meet certain standards, then why wouldn’t they support the administration’s gainful employment regulation? Wouldn’t this rule weed out those bad actors and drive more business to the industry’s super stars? It all seems a bit disingenuous. Especially considering the fact that more than 30 state attorneys general, the Consumer Financial Protection Bureau, the Securities Exchange Commission, Federal Deposit Insurance Corporation, and the Education Department are all involved in investigating the practices of for-profit colleges.
Again, the administration’s proposed rule is a solid move toward protecting our students. I hope that as the rulemaking process continues to move forward, there are opportunities to make the rule even stronger. And to all the students who have suffered as a result of poor career-education programs, I hope you speak up and tell your story.
U.S. Representative Mark Takano is a Democrat who represents California's 41st district.
Last week, for the first time in the gainful employment regulatory process, the U.S. Department of Education revealed its true motivation and bias against private-sector education and the students who attend our institutions.
While defending a regulation that limits access to higher education and obstructs a pathway to the middle class for new traditional students, Education Secretary Arne Duncan and Deputy Director of the Domestic Policy Council James Kvaal hid behind the assertion that the gainful employment policy is designed to grow the middle class and protect students.
Nothing could be further from the truth.
The regulation does not apply to all of higher education, therefore it cannot protect all students, and it will limit access to the very postsecondary institutions that serve lower-income students trying to join the middle class through new career skills.
What this boils down to is the unfortunate reality that the Education Department engaged in a sham negotiated rulemaking process with the sole goal of reaching a predetermined conclusion that will severely limit access to higher education and opportunity for millions of students based on the type of institution they attend.
In addition to the students denied access to critical career training programs, the economic reality is that others will be harmed when reduced numbers of students enrolled make the programs or possibly the entire institution no longer viable.
The department’s regulation will result in the new traditional student -- working adults, minorities and people with scarce financial resources -- seeing their access to higher education and prospects for better employment dramatically reduced.
Individuals interested in careers with lower starting salaries, such as communications, psychology, visual and performing arts, and social work will be barred from receiving the same federal aid as their classmates choosing more lucrative fields.
All of this because of an institutional bias by the current Education Department against the private sector’s involvement in the delivery of postsecondary education -- something that has been a key element of America for generations.
At the heart of this sits the department overreaching its statutory authority to interpret the “gainful employment” language in the Higher Education Act, the federal law that governs financial aid, as authorizing it to evaluate program eligibility on the basis of complicated debt calculations.
As Senator Lamar Alexander noted last week, the fact that it took the Department 841 pages to define two words in the Higher Education Act – longer than the law itself – “shows exactly what is wrong with Washington and its desire to overregulate institutions of higher education.”
Even with all those pages, the department uses an arbitrary one-size-fits-all approach by not taking into consideration the level of preparation and the characteristics of entering students.. As a result the department has created the perverse incentive for institutions to avoid enrolling low-income and minority students.
America’s private sector institutions strongly support accountability that applies to all programs recognizing the diversity of students and institutions, as President Obama has promised in creating a rating system. We would support measuring outcomes and performance for all programs across higher education based on quantitative indicators like: retention and progression rates, completion, employment of graduates, earnings and graduate satisfaction.
What we object to is a regulation imposing an arbitrary debt-to-earnings metric as the definition of what is or is not academic quality.
We cannot stand silently by as a regulation is promulgated that would fail programs (if it were applied to them) like a bachelor’s degree in journalism from Northwestern University, a law degree from George Washington University Law School and a bachelor’s degree in social work from Virginia Commonwealth University. These programs get a pass since the department has chosen to focus on a narrow band of programs that serve the new traditional student.
The purpose of the federal financial aid programs has always been to help provide disadvantaged students access to higher education. It is incredible that this administration is on the verge of promulgating a regulation that limits access to education for disadvantaged students based on the very factors that caused them to be disadvantaged in the first place.
Steve Gunderson is president and CEO of the Association of Private Sector Colleges and Universities.
In the fall of 2011, Career Education Corporation (CECO) revealed that a significant number of its schools had cooked the books on the job placement rates they were disclosing to prospective students and regulators. Now investors in the giant for-profit higher education company are about to earn a nice profit for these misdeeds.
A federal judge has given his preliminary approval to a $27.5 million settlement that CECO has reached with shareholders to put an end to a lawsuit they brought accusing the company of deceiving them about its record of placing graduates into jobs. In contrast, most of the students who were the direct victims of this deception – with the exception of students from New York State who attended CECO’s campuses – are unlikely to receive any relief for these abuses. Instead, students who enrolled in these schools based on false promises will be stuck paying off loans they took out to pay for these programs for years.
What accounts for this disparity? The answer is that investors in for-profit colleges have access to the courts for filing their grievances, while most of the sector’s students do not.
Mandatory arbitration agreements – which have become increasingly common in all sorts of consumer contracts, including those for credit cards and private student loans – put students with legitimate grievances at an extreme disadvantage compared with pursuing their cases in court.
For one thing, for-profit colleges select the third-party arbitration company that is going to hear the case, creating an incentive for arbiters to go easy on companies in order to get repeat business. Binding arbitration clauses tend to bar class actions, forcing each student who has been harmed to bring his or her individual case against the schools. Industry officials know that many students are unlikely to pursue their cases because of the cost of doing so. In addition, discovery is often limited in arbitration cases, making it difficult for students to gather evidence of wrongdoing. And arbitration decisions generally cannot be appealed.
Although many for-profit college companies have included mandatory arbitration requirements in enrollment agreements for years, these clauses were not always ironclad. Some states, like California, have long had consumer protection laws that frown on the use of binding arbitration requirements banning class actions and jury trials. Courts in those states have previously allowed students scammed by unscrupulous schools to move ahead with legal challenges.
However, in 2011, the Supreme Court changed the rules of the game. In the case AT&T Mobility LLC v. Concepcion, the nation’s highest court ruled that states can’t reject arbitration clauses as “unconscionable” solely because they bar class action lawsuits and jury trials. That decision has shut down access to the courts for most for-profit college students, as well as for consumers of most financial products.
Even judges sympathetic to students’ complaints say their hands are tied as a result of the Supreme Court’s ruling. In his opinion in a case that students brought against Westwood College accusing the company of major recruiting abuses, Judge William J. Martinez of the U.S. District Court in Denver wrote in 2011 that he regretted having to require the plaintiffs to settle their dispute through arbitration. “There is no doubt that Concepcion was a serious blow to consumer class actions and likely foreclosed the possibility of any recovery for many wronged individuals,” he stated.
Students aren’t entirely out of luck. The U.S. Department of Education will, under very limited circumstances, discharge the loans of students who have been defrauded. Students may also benefit from settlements that the U.S. Department of Justice or state attorneys general reach with for-profit college companies, although the restitution provided in these cases is seldom sufficient to cover students’ full debt loads. For instance, students from New York who attended Career Education Corporation campuses in recent years and have not found employment in their fields of study will receive some compensation, as a result of a settlement that the New York Attorney General reached this summer with the company over its faulty job placement rate claims. Students in other states who were similarly misled, however, are out of luck.
Congress should eliminate this injustice by barring colleges that participate in the federal student aid programs from including binding arbitration clauses in enrollment agreements, just as Democratic Senators Tom Harkin of Iowa and Al Franken of Minnesota proposed last year. As they wrote, “Colleges and universities should not be able to insulate themselves from liability by forcing students to preemptively give up their right to be protected by our nation’s laws.”
Students who have been harmed by institutions should not have fewer legal rights than investors in these companies. The real victims of abuse deserve to have their day in court too.
Stephen Burd is senior policy analyst at the New America Foundation.