Black and Latino Lawmakers Hold Up Student Loan Fixes!

Sketchy for-profit schools have found allies in Washington.

By Julianne Hing Oct 06, 2010

The Department of Education has been trying to institute stricter regulations of for-profit schools all summer long, but has run into unexpected roadblocks from members of Congress’ black and Latino caucuses*, as well as other black political leaders. Politico‘s Kendra Marr did a round-up this week of the push back the DOE has gotten from black and Latino lawmakers since they’ve been recruited by for-profit schools to stave off regulation.

The proposed regulations would set new standards for accessing Pell Grants meant for students from low-income families. For-profit schools could lose their Pell Grant eligibility if they send graduates out into the world with crushing debt they’re unable to repay, or if graduates cannot find gainful employment with the degrees they’ve obtained from for-profit schools. Under the proposed rule, at least 35 percent of for-profit students, both graduates and dropouts, have to be paying down their loans, and be making enough money so that their loans amount to no more than 12 percent of their income.

According to the Career College Association, which represents for-profit schools, 43 percent of students are people of color; in the United States, 23 percent of blacks and 18 percent of Latinos with associate degrees went to for-profit schools. 

Most notably, for-profit schools teach 12 percent of the nation’s post-secondary students–and counting–but receive 23 percent of the nation’s federal student aid money. This alone is not a bad thing–students deserve an education and help to make their education affordable. But 40 percent of students from for-profit schools eventually default on their loans; the national average for all higher education institutions is 20 percent. And the dropout rate from for-profit schools is also alarmingly high–a whopping 57 percent never graduate.

You could argue that these statistics are symptoms of the depressed circumstances of the underserved populations for-profit schools reach. Except that this summer the Government Accountability Office sent investigators to for-profit schools to pose as prospective students and found schools engaging in fraud to lure students in the door and even helping them falsify financial aid forms to get federal money. In 2008, for-profit schools raked in $3.2 billion in Pell Grants.

What many don’t know is that once students are enrolled in for-profit school programs for at least 14 days, the schools get to keep their students’ loan money, even if students eventually leave. The money is neither transferrable nor open for cancellation. And student loan debt is a financial trap that’s notoriously impossible to get out of. People who default on their student loans have to die to get rid of their outstanding debt. Loan companies can even dip into people’s Social Security decades down the line.

None of this appears to matter to the black and Latino politicians who’ve gotten mighty cozy with for-profit schools lately. Marr reports:

The colleges – schools with on-line campuses, such as Strayer University, and the University of Phoenix, as well as programs that train in forensics, truck driving or computer repair – have recruited African American leaders like Jesse Jackson, hired lobbying firms, and set up an aggressive letter-writing campaign to make their case

"If you have a school whose clientele is basically low-income minority – first generation going to college – the economic reality is that their opportunities after college are not going to be as good as someone who comes from upper-income family with a lot of social contacts and not subject to discrimination as a minority," said Rep. Bobby Scott (D-Va.), who signed one of the letters. If Duncan’s proposal goes through, they will be less likely to enroll students from disadvantaged backgrounds, said Scott, who questioned why other nonprofit and state colleges aren’t held to the same standard.

Scott joined with 11 other voting members of the Congressional Black Caucus (there are 42 total*), including Democratic Reps. Donald Payne of New Jersey and Yvette Clarke of New York, to sign a letter to Secretary of Education Arne Duncan opposing regulation. Four of the 23 voting members of the Congressional Hispanic Caucus signed on too, including Ed Pastor of Arizona and Ileana Ros-Lehtinen of Florida.

This summer, National Black Chamber of Commerce president Harry Alford penned an op-ed in The Root calling for-profit schools a "success story when it comes to minority students," because of their high enrollment of people of color, and dismissed corruption in the for-profit industry is a matter of "bad apples."

Alford wrote:

However, because minority students as a group tend to need more student aid to meet their college expenses, they are far more likely to fall short of the "gainful employment" guidelines. This rule is aimed at career-oriented schools, but if the same test were run on students at traditionally not-for-profit black colleges and universities, 93 percent would fail the "gainful employment" test because of unacceptable repayment rates.

According to figures from the Bureau of Labor Statistics, black unemployment in August was 16.3 percent, compared with 9.6 percent for the general population. Worse yet, the unemployment rate for black males was 17.3 percent, and the unemployment rate for black teens ages 16 to 19 was 45.4 percent.

We should be looking for every conceivable pathway to get black teens off the unemployment line and into a classroom. Obviously, not every teenager is a candidate for post-secondary education. But for those who are, the Department of Education is throwing up roadblocks at the worst possible time.

Alford, it should be noted, also opposes the Employee Free Choice Act, climate change legislation and net neutrality. Unsurprisingly, his outfit has been bankrolled by both oil and telecom corporations. Alford–and the political leaders who’ve sent angry letters to Duncan opposing for-profit school regulation–may represent a black and Latino constituency, but unfortunately not their interests.

People who criticize regulation of an industry that preys on people of color and the poor as "elitist, if not racist," are abusing the charge. Blocking regulation of the for-profit schools industry is like opposing regulation of the subprime mortgage industry, which also preyed on communities of color. Black and Latino students make up a hefty percentage of for-profit schools’ customer base because they’re disproportionately blocked out of other higher education opportunities. In many cases students have been targeted by false ads and bloated promises of future income and job prospects.

And it’s inaccurate to blame the economy on for-profit schools graduates’ job woes. The real issue is that many for-profit schools lack the accreditation to allow their graduates to transfer to other schools or to even be employed in the industries they’ve supposedly been trained in. And yet schools continue to print diplomas and issue degrees in the medical and engineering fields for jobs their graduates will not be able to access. Congressional leaders make the mistake of conflating access with affordability and quality; for-profit schools’ admissions officers are really just sales representatives.

The differences between being locked into student loan debt from a non-profit school or a for-profit one start to pale when the checks end up being written to the same place every month, but taxpayers and students both should not be funneling money into publicly traded school-corporations that produce so little for the populations they serve.

The for-profit schools industry is not a system that needs protection. It’s a system that needs oversight and regulation. Instead of defending the for-profit schools industry, the CHC and CBC’s energies would be better spent defending and strengthening community colleges and other public institutions of higher education, and helping students gain access to those schools.

*An earlier version of this article implied that the Congressional Black Caucus and Congressional Hispanic Caucus had taken organizational positions on the DOE regulations. They have not. Individual members have opposed the regulations.