What’s Holding Up For-Profit Schools Regulation?

Schools aren't happy with newly enforced industry rules. So they're re-writing them.

By Julianne Hing Feb 02, 2011

What’s holding up for-profit schools regulation? Easy. The for-profit schools themselves, who’ve used their considerable lobbying power and behind-the-scenes political pull to water down the most controversial regulation. The higher education world is still waiting for the "gainful employment" regulation, which could make for-profit schools ineligible to access their students’ federal student aid if they sent students off with too much debt they were unable to pay. The rest of the regulations were delivered last October, but folks are still waiting on the last "gainful employment" rule to be released.

It of course doesn’t hurt that they’ve got powerful allies in Congress, like newly appointed chair of the House Higher Education Subcommittee Rep. Virginia Foxx, who last week reiterated her concerns about the gainful employment regulation of for-profit schools.

Bloomberg reports that for-profit school corporations like the University of Phoenix, DeVry University and Kaplan University received a quarter of the country’s Pell Grants, the federal aid for low-income students. Yet, for-profit students account for 43 percent of those who eventually default on their loans. Part of this is due to the fact that for-profit schools’ consumer base are disproportionately poor students and students of color who are the first in their families to go to college.

But for-profit schools have been accused of abuse. An investigation by the Governmental Accountability Office last year found that for-profit schools encouraged students to lie on their federal aid forms, claiming more dependents or failing to mention savings, so students–and then the for-profit schools–could qualify for more financial aid. That report was criticized this year by researchers who conducted a review commissioned by the industry.

The for-profit schools industry is a huge operation. The rest of the country may be suffering under the weight of the recession, but it’s been a boon to the industry, which has seen enrollment, and executive compensation, skyrocket. Two weeks ago a coalition of for-profit school corporations filed a lawsuit to try to block the Department of Education regulations for the industry that had already been announced last year.

Foxx is not alone in opposing regulation of the industry. Republicans in Congress have backed for-profit schools against regulation that would protect students from debt they cannot repay. Foxx made her remarks at the Council for Higher Education Accreditation, where Eduardo Ochoa, the assistant secretary for postsecondary education at the U.S. Education Department, said that people could expect a more "nuanced" rule when it finally arrived.

"It’s a little bit frustrating for me to watch some of the for-profits’ advertising because many of the things that they’re most concerned about and are trying to fight against are things that we’ve heard about in the hearings, and we’ve listened and really taken a lot of it to heart," Ochoa said, Diverse Education reported. "The regulations as they come out are going to be significantly different. I think they’re going to be better, more nuanced."

All Education Matters breaks his language down:

When someone like Ochoa uses words like ‘nuanced,’ that is code for the following: "we’ve been lobbied and pressured so hard, that we’re going to cave to the demands of the for-profit industry." Well, we can all rest easy, knowing that the very schools that ought to be regulated are drafting the new rules. After all, that is the way things work these days in Washington.

EduBabble writes that the rest of the higher ed world may not escape the regulations that are currently targeted at the for-profit industry alone:

[Ochoa]’s no doubt trying to pick winners by coming up with rules that seem to hurt the bad guys (for-profits) while protecting the so-called good guys (community colleges serving the poor) but I’m afraid that the numbers aren’t going to help him at all. We’ve already seen some for-profits sell themselves to a non-profit to skirt one layer of rules. I think the only way he’s going to be able to come up with anything is by targeting the non-profits too.

The fight is not going away anytime soon. On Tuesday Democratic Sen. Dick Durbin weighed in, urging all education institutions to back regulation of the for-profit school industry, Inside Higher Ed reported. Sen. Tom Harkin who has led the charge against for-profit schools last week announced he’s scheduled his next Senate hearing on the matter for February 17.