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Back to the Future
July 24, 2013
By Paul Fain

WASHINGTON – The debate over for-profit higher education is heating up again. And while much of the criticism revived here by Democratic politicians is unlikely to lead to policy changes, at least some action appears likely in two areas in coming months.

President Obama’s Education Department has announced it will begin crafting new “gainful employment” regulations in September. The rule-making session will be a second attempt to set standards for measuring how recent graduates of vocational programs, mostly at for-profits, fare in the job market.

In addition, Senate Democrats have in recent months held hearings on how to improve the federal government’s return on investment for tuition assistance programs that benefit student veterans and active-duty members of the military.

On Tuesday, members of the U.S. Senate Committee on Homeland Security and Government Affairs questioned whether military tuition assistance should count as federal funding under a requirement that colleges get less than 90 percent of their revenue from federal sources.

Currently the Post-9/11 G.I. Bill and U.S. Department of Defense tuition assistance programs are factored into the 10 percent side of the so-called “90/10 rule” (meaning they don't count as federal sources of funds). Some for-profits are close to the 90 percent limit or would struggle to stay under it if the military money was reclassified.

Holly Petraeus, assistant director for servicemember affairs at the Consumer Financial Protection Bureau, suggested a compromise to the 90/10 debate during the hearing. Petraeus suggested dropping the military and veteran student benefit money from the equation entirely.

Some Democrats have been critical of for-profits during the recent string of Senate hearings, suggesting that the pursuit of the sector will continue even after Sen. Tom Harkin, the Iowa Democrat and a primary for-profit antagonist, leaves office next year. Harkin last year released a voluminous and deeply critical report about for-profits.

“We’ve got to get better results for the money,” Sen. Tom Carper, a Democrat from Delaware who chairs the committee, said during Tuesday's hearing.

Carper was talking about the $29.4 billion spent so far on the Post-9/11 G.I. Bill. He said in a written statement that he was concerned about reports of veterans being subject to "highly questionable recruitment practices, deceptive marketing and substandard education instruction" at some for-profits.

A bipartisan desire to protect veterans adds extra heft to these policy debates, which could have ramifications well beyond for-profits. For example, nascent efforts to collect more data and track how well colleges serve military and veteran students could be applied to all students. They are also likely to inform future debates on college prices and federal performance measures.

Meanwhile, Republicans in the U.S. House of Representatives are leading a push for legislation that would strike down several federal rules that for-profit institutions dislike. The “regulatory relief” bill would repeal both gainful employment and state authorization regulations, and would block efforts to rewrite them until after the Higher Education Act is renewed. It would also repeal the recently enacted federal credit hour regulation.

The renewal of Higher Education Act, which is the umbrella legislation for federal financial aid programs, is likely to be a protracted battle. It won’t begin in earnest until next year.

That’s when for-profits and the Republican-led House want major policy questions that affect the industry to be taken up. But, as is common in Washington, House Republicans don’t often agree with President Obama and the Democrat-led Senate.

Less Regulation for All?

For-profits aren’t the only ones to complain about excessive red tape. The American Council on Education and other major trade groups representing traditional higher education have also pushed hard for the feds to at least not create new regulatory burdens.

Rep. Virginia Foxx, a North Carolina Republican, and John Kline, a Republican from Minnesota who leads the House Education and the Workforce Committee, in April introduced the Supporting Academic Freedom through Regulatory Relief Act.

“These regulations are stifling pioneering institutions at a time when forward-thinking solutions are desperately needed,” Foxx said in a written statement.

A fairly large group of higher education and consumer protection organizations oppose the bill. But the Council for Higher Education Accreditation (CHEA) has written a letter in support of it. In particular, the council said it opposes the credit hour and state authorization rules.

“These regulations alter the traditional role of the federal government and its relationship with accreditation and with the states,” according to the council.

Kline’s committee also held a recent hearing with experts on how to serve nontraditional students. The topic was innovation and its potential to help make college affordable. A large number of Congressmen showed up, many of whom took notes during the hearing.

Focus on Veterans

Federal oversight of higher education is almost certain to increase in two areas: oversight of tuition assistance funds from the U.S. Department of Veterans Affairs and Defense Department.

Representatives from both agencies have answered tough questions from lawmakers this year about their efforts to ensure that military and veteran students are being well-served.

On Tuesday Curtis L. Coy, deputy under secretary for economic opportunity at the veterans affairs agency, testified about the increasing number of compliance reviews his staff has been conducting. The department plans to conduct 6,300 inquiries this year, up from 4,700 last year and 1,900 in 2011.

Yet only nine institutions have lost approval to receive G.I. Bill money during that period, Coy said, after reviews uncovered deceptive or misleading practices.

In a June hearing, Sen. Dick Durbin, a Democrat from Illinois, grilled a Defense Department official over the agency's auditing of colleges that receive military tuition assistance funds. The Pentagon audits only 20 to 30 institutions per year, said Frederick Vollrath, assistant secretary of defense for readiness and force management.

“We will have to ramp it up, clearly,” said Vollrath.

“We sure do,” Durbin answered.

Durbin was withering in his criticism of for-profits during the hearing. He even took on some institutions that have been praised for being top performers, even by Harkin, with pointed comments about DeVry University and the American Public University System, among others.

Other Senate Democrats, however, have said they believe not all for-profits are created equal.

“This is not an issue solely at for-profit schools,” Carper said Tuesday. “There are too many public and private nonprofit colleges and universities that experience similar issues with extremely low degree completion rates, high default rates and a poor record of serving our veterans.”

When it comes to higher education regulation, however, the harshest words on Capitol Hill usually are aimed at for-profits. And Steve Gunderson has been on the hot seat a couple times this year.

Gunderson, a former Republican congressman from Wisconsin, is president and CEO of the Association of Private Sector Colleges and Universities, which is the for-profit sector’s primary trade group.

On Tuesday Gunderson squared off with Sen. Claire McCaskill, a Missouri Democrat.

“What are the metrics that your association would endorse today as a requirement that you must achieve before you can receive VA benefits?” McCaskill asked, during a pointed round of questions.

Gunderson said for-profits stand ready to be judged by federal performance standards. But he said those "risk-based" measures -- weighted to account for the types of students institutions serve and their likelihood of college success -- should apply to all of higher education.

McCaskill, however, was not swayed. She said that for-profits typically charge much more than traditional colleges and that the sector has pushed back hard against previous efforts to set standards.