Why Republicans Are Rebooting the For-Profit College Industry

Jeff Bryant

Jeff Bryant Fellow, Campaign for America's Future

A controversial rewrite of the Higher Education Act that just passed out of committee in the House of Representatives in a strict party-line vote will likely reboot floundering for-profit colleges and revive the scandals associated with this industry should it clear intact the full House and Senate.

The Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act aims to, according to a report in The New York Times, “dismantle landmark Obama administration regulations designed to protect students from predatory for-profit colleges and to repay the loans of those who earned worthless degrees from scam universities.”

During the House committee markup, Democratic Representative Mark Takano proposed an amendment to “hold for-profit colleges accountable,” he reported to his Twitter followers, with a graphic showing that of the 98,868 complaints filed against colleges that have “defrauded or misled” students, 97,506 were complaints leveled against for-profit colleges versus 789 against non-profit colleges. His amendment was overturned by a solid Republican block of opposition. “This should not be a partisan issue,” he tweeted after the defeat.

But support for the for-profit college industry is “partisan,” and here’s why: big money.

Trump, DeVos Feed the For-Profit Beast

The morning after the 2016 general election ushered in the Donald Trump presidency and Republican majorities in both houses of Congress, stocks of for-profit education companies spiked, and mere days later, investors on Wall Street declared “the cloud has lifted” on the prospects for investments in the for-profit college industry.

Concerns that these schools pushed desperate students into useless degree programs that led to massive debts and few prospects for jobs –all at taxpayer expense – had prompted the Obama administration to crackdown on for-profit colleges.

But by December, before Trump had uttered a single word of support for these schools, investors had already “poured hundreds of millions of dollars,” according to The Wall Street Journal, into large for-profits such as DeVry Education Group, Strayer Education, Bridgepoint Education, and Grand Canyon Education.

Much of the speculation was doubtlessly driven by the fact Trump had lent his name to a scam school of his own – Trump University, which became the subject of three lawsuits that he settled for a $25 million payout shortly after his election. His appointment of billionaire heiress and Republican mega-donor Betsy DeVos to be his education Secretary also seemed a strong enough indicator for investors to open the sluices.

DeVos seemed to respond according to investors’ plans. First, she delayed implementation of the gainful employment rule, an Obama reform that penalizes career-oriented for-profit programs from letting students run up huge debts while they pursue careers that are low paying or have few job prospects. She also withdrew key federal student loan servicing reforms that make it easier for college students to have loans discharged when they’ve been defrauded by schools. And she gave strong signs her department would ease the regulatory environment for the taxpayer-financed career education sector, which for-profit colleges dominate.

Encouraged by these signs, reported the Chicago Tribune, investors sent stock price increases for for-profit colleges significantly beyond the rest of the market, with Grand Canyon University up 55 percent, DeVry up 52 percent, Strayer University up 37 percent, and Career Education up 34 percent, while the broader Standard & Poor’s 500 index was up 10 percent over the same period.

More recently, DeVos picked to head a unit that investigates fraud in higher education a former dean of for-profit college, Julian Schmoke Jr., who worked at DeVry University from late 2008 to 2012. For the senior counselor and regulatory reform officer for her department, DeVos pcked Robert Eitel, a former top executive at Bridgepoint. Bridgdepoint is a for-profit higher ed provider that has had numerous violations involving mistaken financial information given to government agencies and students and is currently under investigation by the department.

She also “stopped cancelling the student-loan debt of people defrauded by failed for-profit schools,” according to a report by Reuters, “and those borrowers face mounting interest and other burdens.”

The Secretary’s actions are a repudiation of Obama’s efforts to rein in irresponsible for-profit colleges, in this case, by canceling debts of people who attended Corinthian Colleges, which collapsed in 2015 when Obama’s department of education fined the schools $30 million for misrepresenting their job placement rates.

The favors Trump and DeVos are granting to the for-profit college industry reflect the generosity of campaign contributions the sector has generally showered on Republicans, especially since the advent of the regulatory constrains issued in the Obama years.

History of Scandal

After 2008, negative news reports about the for-profit college industry increased significantly when those schools ratcheted up recruitment efforts to take advantage of workers who lost their jobs during the Great Recession and recruit from veterans returning from the Iraq War.

Education policy observers began to notice that between 2001-2009, students attending for-profit versus nonprofit colleges were way more often needing to borrow money –nearly double the rate in 4-year for-profits and quadruple the rate of less-than-4-year institutions. Meanwhile, the dropout rates at the for-profit institutions was rising sharply, by 20 percent for for-profit 4-year institutions and 9 percent for for-profit less-than-4-year institutions –  compared to a 6 percent increase in the overall higher ed market.

By 2010, only 22 percent of first- and full-time students pursuing bachelor’s degrees at for-profit institutions in 2008 graduated, compared with 55 percent and 65 percent of students at public and private nonprofit universities, respectively.

The bad publicity included a 2010 report by the Senate Committee on Health, Education, Labor and Pension that found while for-profit colleges were rapidly gobbling up larger shares of federal college student loan funds and swelling the ranks of dropouts, the businesses themselves were reaping much higher profits. According to the Senate committee’s findings, 16 companies generated profits of $2.7 billion in 2009 alone, and between FY2009 and 2010, one company had more than doubled its profits – from $119 million to $241 million – while a second went from $235 million to $411 million.

Buying Up Legislators

The for-profit college industry responded to these negative reports not by instituting an industry overhaul, but by ramping up their political donations.

“Campaign contributions from the for-profit education industry have been steadily increasing nearly every year since 1990,” reports OpenSecrets, a watchdog on political donors and their recipients.

But from 2008 to 2010, PACs and individuals associated with for-profits increased contributions to federal political campaigns from $850,000 to over $2.4 million 2010.

Money spent on lobbying by for-profits intensified too, rising to nearly a million dollars by 2011.

By 2014, campaign contributions from the for-profit college industry had exceeded four million, according to OpenSecrets, with much of it going “to members of Congress who oppose greater regulation of the industry, including proposed curbs on aggressive recruiting of veterans with G.I. Bill benefits,” The Hechinger Report found.

While political giving from for-profit colleges was growing, the partisan nature of it was changing. Since the Bill Clinton presidential administration, political donations from the for-profits had been generally bipartisan. But by 2010, contributions swung decidedly to the Republican side. In 2017, of the top 20 recipients of for-profit education donations, only five are Democrats.

There are reasons for the swing.

First, the scathing Senate report on for-profit colleges that came out in 2010 was authored by a Democrat, committee chair Senator Tom Harkin of Iowa. Senate Republicans accused Harkin of conducting a “witch hunt” and walked out of the committee hearing where he presented his findings. Ever since, Republicans have conducted a campaign repudiating the findings and defending for-profits. Then, new regulatory reforms rolled out by Obama to address those problems further distanced the two parties’ stances on the industry.

That turn of events, as well as the decidedly strong shift in Republican wins at all levels of government, likely influenced for-profit college political giving to favor Republicans.

Who Really Prospers

The PROSPER legislation approved by the House committee was authored by Republican Representatives Virginia Foxx of North Carolina and Rep. Brett Guthrie of Kentucky.

Foxx and Guthrie are among the five most generous recipients of for-profit college industry money in 2017, with Foxx ranking at the top with $45,450 and Guthrie fourth at $17,500.

Foxx and Guthrie both serve on the House Education and Workforce Committee that approves education-related legislation. Foxx chairs that committee.

Other current members of that committee getting for-profit college industry cash include Republicans Duncan Hunter of California, Todd Rokita of Indiana, and  Lou Barletta of Pennsylvania. Ranking Member Bobby Scott, a Democrat from Virginia, has also gotten donations.

Foxx, who has a background in higher ed, has claimed for-profit colleges are “more efficient.” She once compared attempts to regulate the industry to the Holocaust and said in an interview with the Chronicle of Higher Education in 2016 that the Obama administration cracked down on for-profit colleges “arbitrarily,” and that, “We don’t have evidence that [students in these institutions] were defrauded.”

Foxx has long maintained that government should not be funding education, although she is obviously okay with for-profit education funding her.

For her 2008 re-election campaign, Foxx received $3,000 in donations from the political-action committee of The Association of Private Sector Colleges and Universities, which represents for-profit colleges, and employees of Keiser University, a for-profit institution headquartered in Florida – far her district in North Carolina – gave $2,300 to her campaign.

As of 2012, OpenSecrets counted 22 companies or trade associations in the for-profit college industry that are Foxx’s top contributors, including: Bridgepoint and the Apollo Group (which owns the University of Phoenix). The education sector is the second largest donor to her campaigns, according to campaign donation site VoteSmart, with her largest donor being Full Sail. Full Sail, you may recall, is the for-profit college praised by Mitt Romney when he ran for president in 2008.

Reason for the Reboot

What PROSPER calls for is to undo regulations that have shown some evidence of working, argues Kevin Carey of New America foundation in The New York Times.

The evidence Carey cites is that among the 500 programs that ran afoul of the Obama administration’s gainful employment rule, at least 300 shut down before they were required to do so.

Despite the progress, the need to rein in these schools and rescue their students remains acute. In 2015-16, federal government reports show 3.9 million undergraduates with federal student loan debt dropped out. More than 900,000 of these students left for-profit universities, making up 23 percent of all indebted dropouts, although only 10 percent of all undergraduates attend for-profits. In a ranking of colleges by their numbers of indebted dropouts, for-profits comprise the top five.

Republican efforts to reboot the for-profit college industry, including the PROSPER bill, are the result of the industry’s abilities to purchase government officials and political appointees with their donations in order to turn the clock back to the days when it had a free hand to do whatever it wanted.

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Reposted from Our Future

Posted In: Allied Approaches

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