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Advocates Urge Quick Action on Rules Governing For-profits

WASHINGTON – For-profit, postsecondary institutions face intense scrutiny as the U.S. Department of Education examines responses to proposed regulations designed to ensure students receive valuable educational experiences that will enable them to enter and compete in the nation’s work force.

DOE last month issued more than a dozen proposed rules for comment but held back the most controversial one, which beefs up requirements that for-profit institutions prepare students for gainful employment. The agency is still in the process of developing additional metrics to hold programs accountable and will issue a rule defining “gainful employment” separately.

Such a delay troubles education advocacy groups like the Institute for College Access & Success (ICAS), Rainbow PUSH Coalition, the National Education Association and others. In a letter to Education Secretary Arne Duncan and Office of Management and Budget Director Peter Orszag, they urged swift action on the gainful employment rule so that it can be finalized and in effect by July 2011 with the others.

“In the next year alone, taxpayers will likely underwrite more than $30 billion in loans to students attending programs that are required to prepare them for employment,” the letter reads. “Students and taxpayers shouldn’t have to wait another year to be protected from career education programs that overcharge and under-deliver.”

Ninety-eight percent of students at for-profit schools graduate with debt. For-profit colleges account for only 10 percent of enrolled students but 44 percent of student loan defaults. A recent report produced by the Senate Health, Education, Labor and Pensions (HELP) Committee, titled “Emerging Risk? An Overview of Growth, Spending, Student Debt and Unanswered Questions in For-Profit Higher Education,” found that persistent high default rates suggest students are not receiving educational value sufficient to allow them to afford the debt they incur.

“The goal seems to be to bring in as many students as possible—regardless of their ability to succeed or graduate—load them up with loans and leave taxpayers on the hook if students default,” said Sen. Dick Durbin (D-Ill.) in a speech at the National Press Club.

According to ICAS communications director Edie Irons, the stakes are really high for career education students, a significant proportion of whom are minority and low-income. The coalition of organizations that signed on to the letter to Duncan and Orszag also created an action alert website at that people can use to send a similar message to the two administration officials and to their congressional representatives.

The rules were crafted by a negotiating team that included representatives from student groups, consumer advocacy groups, postsecondary institutions, accreditors and lenders. Consumer law attorney Margaret Reiter, one of the negotiators, agrees that it would be a mistake to not implement the gainful employment rule with the others.

“There are a fair number of programs out there where schools really are not preparing people for gainful employment, and they ought to be held accountable to that standard,” Reiter said.

The negotiated gainful employment rule would make a for-profit institution ineligible for federal financial aid program participation if students’ annual student loan repayments account for more than 8 percent of their earnings.

The Career College Association opposes DOE’s initial gainful employment proposal, which association President Harris Miller says would have used an “unanalyzed and untested” metric to define gainful employment and resulted in the elimination of programs serving 300,000 students.

“We believe that a better informed prospective student is a much wiser way to proceed, and so we have proposed stronger disclosures, accompanied by tangible, employer-based measures, as the best way forward,” Miller says. “We hope that the Department of Education will continue along this path.

Lawmakers on Capitol Hill are also scrutinizing proprietary institutions. Alarmed by their rapid growth rate, Sen. Tom Harkin (D-Iowa), chairman of the Senate HELP committee, has begun to hold a series of hearings to determine whether the federal government’s recent significant increase in federal aid is being wisely invested in these institutions.

The committee plans to examine such issues as graduation rates, debt and default rates, how much money is spent on education versus advertising and marketing, and how that compares to other institutions.

Among several proposed rules to be finalized Nov. 1 and go into effect July 2011, the Department of Education would:

• Strengthen DOE’s authority to penalize institutions engaging in deceptive advertising, marketing and sales practices.

• Clarify states’ responsibility to establish how they approve and monitor postsecondary programs.

• Define a credit hour and establish procedures for accrediting agencies to determine whether an institution’s assignment of a credit hour is acceptable.

• Limit the amount of a program that can be provided by a school in an arrangement with another institution.

• Require that proprietary and vocational postsecondary institutions provide prospective students with program graduation and job placement rates and that colleges provide the department with information that will allow determination of student debt levels and incomes after program completion.

A rules summary can be found at

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