Hey, Arne Duncan, Why Only Go After "For Profit" Colleges?
At Chronicle, Andy Thomason writes about the U.S. Education Department's gainful-employment rule "to Protect Students from Poor-Performing Career College Programs," as a government press release puts it:
To protect students at career colleges from becoming burdened by student loan debt they cannot repay, today the U.S. Department of Education is announcing regulations to ensure that these institutions improve their outcomes for students--or risk losing access to federal student aid. These regulations will hold career training programs accountable for putting their students on the path to success, and they complement action across the Administration to protect consumers and prevent and investigate fraud, waste and abuse, particularly at for-profit colleges."Career colleges must be a stepping stone to the middle class. But too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable," U.S. Secretary of Education Arne Duncan said. "These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes. We will continue to take action as needed."
To qualify for federal student aid, the law requires that most for-profit programs and certificate programs at private non-profit and public institutions prepare students for "gainful employment in a recognized occupation." Under the regulations finalized today, a program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings. Programs that exceed these levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.
They throw in the bit about public institutions, but I'm guessing this is meant to be an attack on for-profit colleges -- which nobody is being herded into at gunpoint, as far as I know.
Are they really going to tell a girl who's going to the State U and majoring in Tibetan Feminist Social Justice that it's a no-go for loans? Or tell the funder they can't give her a loan? (Countless college programs would disappear.)
Thomason reports that a judge just rejected a challenge to this rule by the Association of Private Sector Colleges and Universities:
The lobbying group's lawsuit was the highest hurdle remaining for the proposed rule, which will judge career-oriented programs on their graduates' ability to repay their student loans. The rule is slated to take effect on July 1....The group's second challenge, to a revised rule, used many of the same arguments, asserting that the department had exceeded its authority in issuing the rule and that the rule was capricious and arbitrary.
...The final rule, which was released last fall, is expected to cause 1,400 programs, 99 percent of them at for-profit colleges, to be put at risk of losing eligibility for federal student aid.
Also from Thomason's piece:
Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, said the court's ruling "was not a great surprise" because after the first rule was thrown out on legal grounds, "the department went to great lengths to make its regulation legally bulletproof."Mr. Hartle, whose organization has endorsed proposals to eliminate a number of Education Department regulations, including this one and the proposed college-ratings system, said he was not sure if the regulation would achieve the results its backers want. "No one really knows what the impact will be," he said.
"It will create burdens for institutions," he said, referring to the extra administrative and reporting requirements for many community colleges that offer career-focused certificate programs. Few such programs were predicted to fail any of the gainful-employment tests because those colleges don't charge as much as for-profit colleges do. But community colleges are still required to administer the rule. And he said, "it may or may not provide information that will influence student decision making."
Now, let's play a fun game: Predict The Unintended Consequences!
via @NealMcCluskey
My best guess is that universities will eliminate programs that don't lead to lucrative positions, and double down on those that do. Do the regulations count for students who drop out? If so, colleges will have to tighten admission standards. If not, engineering, accounting and math departments will grow, and art departments will be dropped. The technical programs at community colleges will continue to be a great deal, but for-profit schools will go under, as well they should. Nobody forces the students to go there, but they do take advantage of people who don't know better, which is almost by definition someone who signs up for hair school at $20,000 a year. Giving someone a loan for a program like that is bad business. My bet is that for technical and job skills programs, the for profits will collapse and the community colleges will pick up the slack. Which is as it should be.
Allison at June 24, 2015 6:57 AM
I forsee a dozen lawsuits back and forth, lawyers making a fortune.
I see heavy financing of candidates by both kinds of colleges split on party lines to both push it through or repeal it.
I see may arguments as to how to measure future jobs and payback, and since one of the main pushes is debt forgiveness and delaying payback, it may be a decade before anything can be measured.
The one thing that won't be suggested is that it applies to non-profit colleges
Joe j at June 24, 2015 9:12 AM
"My best guess is that universities will eliminate programs that don't lead to lucrative positions, and double down on those that do."
Not a chance. 75 percent or more of current college students can't possibly handle the academics required for the stem fields.
The colleges will ride the federal gravy train into Oblivion, and then cry for a bailout, so they can continue to graduate gender studies majors.
Isab at June 24, 2015 11:37 AM
"My bet is that for technical and job skills programs, the for profits will collapse and the community colleges will pick up the slack. Which is as it should be."
Do you have a problem with "for-profit" schools, and if so, why?
I am amazed at the idea that any institution can or should operate without earnings. It is OUR, not just MY tax money that bulwarks the salary of the "Outreach Diversity Program Deputy Administrator", etc.
Radwaste at June 24, 2015 11:48 AM
The engineering students who washed out at the university where I worked tended to move to accounting, business admin or economics, as long as they were college material, they probably did just fine. Those fields are lucrative, too. Maybe the universities need to tighten admissions standards and maybe the rest of us need to ratchet the STEM pressure down a few notches. Not everyone has an aptitude for it, or for college at all. The pressuring of every last student to go to college is a bigger driver of unpayable debt than the loans or choice of major.
Allison at June 24, 2015 11:57 AM
@radawaste it isn't the profit per se that is the problem with FP schools, it is that many to all of them are scammy. They're radically overpriced, teach outdated skills (see google) lie about their graduate job rates, and structure classes such that they can't be transferred to legitimate schools. They aim their sales pitches directly at first generation, low SES students
those students don't know the difference and come with government funds. Even if you don't mind the predation, don't you mind the fraudulent expense?
Allison at June 24, 2015 12:04 PM
They're radically overpriced
Like "not for profit" schools arent?
They're radically overpriced
Easy to do with "free" federal loans
They're radically overpriced
Says who?
Want to fix this problem right away? Make schools responsible for giving out loans, and holding the debt.
Make it so student loans, no longer "guaranteed" by the fed, can be discharged in bankruptcy.
Change tax laws so no one who charges a single cent for anything can claim non profit status.
Get rid of the not for profit tax tier. Tax profits from "for" and "not for" profit organizations at the same rate
Its great if your business isnt in the business of making money - but if it does it should be taxed
After all why should a school that rakes in NET PROFITS not have to pay as much as a store
lujlp at June 24, 2015 1:17 PM
Radically overpriced.
Jeez, luljip, google it. He'll, google what's wrong with for profit schools or something. It's easier than me typing it all into a little text box, to which you would respond as if you hadn't read anyway. I'm pretty sure you can also google for the distinction between profit and non profit.
Allison at June 24, 2015 1:31 PM
"Even if you don't mind the predation, don't you mind the fraudulent expense?"
It seems like the problem is correctable by the market there - exactly the same force being called to get colleges to stop offering degrees with no return. All that has to happen is the government backing to disappear!
Radwaste at June 24, 2015 1:32 PM
What the hell: this report found that a FP associate degree came at 4X the tuition than a degree at a public institution. Many of the students are recipients of the GI Bill, and that's a lot of wasted tax money.
http://money.cnn.com/2012/07/30/news/companies/for-profit-private-schools/index.htm
Allison at June 24, 2015 1:36 PM
"The engineering students who washed out at the university where I worked tended to move to accounting, business admin or economics, as long as they were college material, they probably did just fine."
Yes, these are the top 25 percent. The ones who were qualified for college in the first place.
However you are wrong about a business degree being lucrative. A CPA maybe, until there are too many of them, in this computer age.
Most business majors I know who graduated in the last five years, are working as hotel desk clerks, in a restaurant, or as a sales clerk.
Jobs that were for those without degrees 40 years ago.
Isab at June 24, 2015 2:10 PM
"The report also noted that for-profit schools charge tuition that is much higher than their public counterparts. Bachelor's programs at for-profits costs 20% more than public schools, while an associate's degree at a for-profit institution is four times the cost."
Yes, most these journalists can't do the math.
Tuition is only the beginning of your expenses at a public *in residence* university.
Community colleges can be a great deal, but the four year state universities often are not.
Room/board, and living expenses can easily quadruple the bills.
So essentially these journalists are comparing apples to oranges, since many of the for profit colleges offer classes that allow you to keep your job, and not have to move to a place where you compete with all the other college students for those minimum wage jobs and have to pay a thousand a month or more for a shoe box room, and dorm food.
Isab at June 24, 2015 2:19 PM
My nephew, who is not - never will be, never should have been - college material, went, on the GI bill after being in the military 4 years. He washed out of a real (public, state) college, the first semester. But the GI Bill money was still there. He got a 3-semester degree in graphic arts. I saw his homework - he took existing ads, and used photoshop to color them differently, blur lines, etc. Stupidest thing I ever saw. I asked him about placement after graduation, and he said oh most of them are freelancers. I asked him if he knew what that meant. He was entirely 100% clueless - he honestly thought they chose to freelance because of the artistic freedom or something. He's now back in the national guard. I hope he stays there - it's a good fit for him.
He doesn't hold any bitterness about that. Why would he? He was fed and housed without having to work for two years. Sweet. He's not gonna complain.
I have nothing against for-profit versus public schools. But as Allison says, many of them are simply scams. I just don't know how the government can weed those out fast enough - it's like the do-not-call list; the scammers move way faster than any regulatory agency could.
The GI Bill used to be a hand up - a good thing. At this point, it's just another way to fleece the government.
flbeachmom at June 24, 2015 2:30 PM
"Room/board, and living expenses can easily quadruple the bills. "
Yep, and the ever-popular add-on fees: admission fees registration fees, loan carrying fees (many universities take a percentage off the top of student loans as a sort of bank fee), lab fees, library usage fees, student activity fees, meal plans (often mandatory for dorm students, even if they never eat a meal in the cafeteria), parking stickers, campus driving stickers, recreation fees, maintenance fees, and network/comm fees. Not to mention overpriced books.
"My best guess is that universities will eliminate programs that don't lead to lucrative positions, and double down on those that do. "
Nah. It won't make a bit of difference to traditional public or private universities. At worst, they'll have some new paperwork requirements and therefore an excuse to hire several more Assistants to the Vice President of Political Correctness. It's very transparently an attempt to put for-profit higher education out of business, and put the boot heel down on the growing education-by-Internet sector.
"but for-profit schools will go under, as well they should."
Why? What is the moral or legal justification? All lines of business have scammers. If a product should be banned because a few scammers are involved in the market, then all commerce will be illegal.
Cousin Dave at June 24, 2015 3:18 PM
Bill used to be a hand up - a good thing. At this point, it's just another way to fleece the government.
Posted by: flbeachmom at June 24, 2015 2:30 PM
And a lot of the public schools, who enroll their athletes and minorities in non existent classes, so they can bill the government and the alumni doners without giving the student any education are doing the exact same thing.
Tutored for a division I athletic program once. Most those *students* did not belong in college. They were there to play sports, period.
http://www.usatoday.com/story/sports/college/2014/10/22/north-carolina-academic-fraud/17717243/
Isab at June 24, 2015 3:43 PM
Flbeachmom,
You can't eliminate all the scammers. You may as well try and empty the ocean with a teaspoon. But as CD points out, all financial transactions have scammers. The only way to eliminate them is to have one big scammer (the government) who runs everything.
The correct way to limit scammers is not with bureaucrats (i.e. regulators). A better solution is to limit the amount of stupid money involved. As you point out, your nephew doesn't really care he was wasting someone else's money. It didn't matter to him. That is the real issue. He had a use it or lose it situation. It didn't really matter to him if he used it wisely. Limit those use it or lose it/OPM situations and the scammers will vanish all on their own.
Ben at June 24, 2015 3:47 PM
The federal government has no constitutional authority to even be involved in education outside of DC and military bases.
That said, I know people who've gone to some of these "career colleges" and I'm convinced that the majority of them are frauds, mostly because the ads show you good jobs that the degree won't get you.
So forget cutting federal aid -- let's see a few suits for fraud against these places, including the public universities. Maybe a few 8-figure damage awards will chill their enthusiasm for tax money.
jdgalt at June 24, 2015 6:21 PM
The problem with the student loan program is that it floods the system with "free" money. That started to be an issue because of the for-profit schools, but it has trickled down to the non-profit schools now.
The for-profit "colleges" set up with student loans as a major part of their business model. The application for admission often includes a student loan application with the "disperse funds to the school" box prechecked.
That's so the school gets all the loan money. (There are three options for student loan dispersment: all to the applicant, all to the school, and some percentage to the school). The schools' one-semester tuition charges are often exactly the same amount as the maximum student loan amount available per semester.
And if the student drops out, the school is allowed to keep a "processing fee" or a pro-rated tuition amount - so the student is often on the hook for a student loan even if tehy didn't complete the course of study.
Public and private non-profit schools took note of how the for-profit schools were gaming the system and raised their own tuition to get some of that free money.
The for-profit schools were often run by companies that would operate for a few years and then declare bankruptcy to avoid scrutiny (or fraud charges). The operators would then form a new company and open a new "college."
In my five years working for a student loan servicing company, I came across many examples of fraudulent career "colleges" - truck driving schools that had no trucks, hair cutting schools where the training consisted of looking at magazine pictures and discussing the models' hair cuts, etc.
I had borrower after borrower tell me that when they went to apply for a job, they were told "we don't hire graduates of that school." Why they didn't do that research beforehand, I can't say.
Take the "free" money out of the system and you'll get rid of the majority of the fraudsters. And you'll get more careful tuition payers. Make students (or parents) pay up front with their own money and they'll be more careful with what they sign up for.
Conan the Grammarian at June 25, 2015 8:43 AM
Hold schools responsible for the defaults on loans issued to attend them. For those that are run by private companies, demand a surety bond before giving lending approval to ensure repayment of defaulted loans.
When it's money out of the school's pocket, they'll make sure their graduates are leaving with the skills to get and keep a job.
Ban the practice of dispersing the money directly to the schools.
Conan the Grammarian at June 25, 2015 8:49 AM
"Public and private non-profit schools took note of how the for-profit schools were gaming the system and raised their own tuition to get some of that free money."
I think you've got the order of events wrong. Public universities were already grubbing for student loans when I started in 1980, back before there were very many for-profit schools around. It was mandatory that the funds be disbursed to the school in order to register for classes, and as I said, they took some off the top for the "privilege" of keeping you away from your money. And they had "preferences" for the poor and indigent. How did you prove that you were poor and indigent? You brought in a Pell Grant check. They rolled out the red carpet for those.
Cousin Dave at June 26, 2015 7:20 AM
They were always grubbing for student loan money (actually, any money), but they didn't design their business models around the loan amount. Tuition was set by the trustees and the board of regents, not by the student loan maximum.
Public (and private universities) have many more ways of making money than for-profit schools: alumni, endowments, government funding, athletic departments, research grants, etc.
I don't know where you went, Cousin Dave, but I had my student loans disbursed entirely to myself.
Others must have as well, given the rich vein of stories about start-ups funded with student loans:
http://blog.credit.com/2013/04/how-to-finance-your-start-up-debt-vs-cash/
Conan the Grammarian at June 26, 2015 8:54 AM
When I was working in student loan servicing, the majority of default cases I saw were for-profit proprietary trades schools: truck driving schools, cosmetology schools, business colleges, etc. All of the delinquent borrowers told the same story: the loan application was part of the school's application process, the money went entirely to the school, etc. Many of them had no idea they were filling out a loan application (many said they were told it was to be a grant with no repayment obligation). There was no money left over after the tuition was paid to cover living expenses (like the original intent of the student loan program). Most of the non-profit school students did not tell that story.
I did get a doctor from the University of Michigan once who outright refused to repay his loan. He defiantly told me, when I told him default could affect this credit rating, that he already had two houses, three cars, and he didn't need a credit rating. When I told him the government could seize his tax refund for repayment, he got very upset and threatened to get his lawyer to sue the company (and me) for harassment. I then told him no matter how good his lawyer was, we had the US Attorney General and the DOJ on our side. He finally realized that we were going to hold him to his signed promise to repay the loan.
Years later, I had a friend who went to a local business college to learn computer networking (qualifying as an MCSE upon graduation). He had earned enough as an oil field roughneck and turbine mechanic that he could pay for his education with cash. The school made him fill out a student loan application anyway - without it, they would not even consider his application for admittance.
Conan the Grammarian at June 26, 2015 9:13 AM
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