Critics: New For-Profit College Regulation Not Enough

The U.S. Department of Education, responding to intense criticism by Sen. Tom Harkin (D-Iowa), has taken the first step in reining in abusive practices at for-profit colleges which pile deep debt onto their students in exchange for questionable credentials. 

It issued a new rule that sets a standard for these schools: their programs have to ensure graduates can earn enough to pay off the hefty student loans they must carry to pay for their enrollment.  But consumer advocates say the rule doesn't go far enough.

The activist group USPIRG said it was disappointed that the new standard “doesn’t go into effect soon enough, nor is it strong enough to adequately clean up the industry on behalf of student loan borrowers” and said it would continue pushing for further reform.

“The price tag for these colleges is so high that about half of all borrowers who default on their student loans attend for-profit colleges,” USPIRG said.  “The quality of the education is so weak that, in one survey, 57 percent of students departed without a diploma.”

Meanwhile, taxpayers are picking up the tab by underwriting billions in federal student loans and grant aid that pour into these colleges.  About one in ten college students attends a for-profit college, but these colleges absorb one in four federal loan and grant dollars.

Other groups responding to the new rule included:

• American Association of University Women (AAUW) “This final rule will benefit women, minority, low-income, and veteran students, in particular. Together, these groups constitute a disproportionately large number of students at for-profit schools, where students accrue almost double the median debt compared with their peers at nonprofit institutions,” said executive diirector Linda D. Hallman.

• American Federation of Teachers (AFT) “This regulation is a modest step to help protect students from inflated promises about job prospects and earnings by career education programs that often leave students with no gainful employment but a mountain of debt. This problem is particularly pernicious in the for-profit sector, where student debt and loan default rates are significantly higher than in the nonprofit sector,” said  AFT President Randi Weingarten.

• Campus Progress “Given the overwhelming evidence that the worst for-profit colleges are abusing students and taxpayers, the rule isn't strong enough, but it's still an important reform that could, over time, help millions of students. We believe that, collectively, the rules issued by the Administration, ongoing investigations by state attorneys general, and increasing scrutiny by Congress and the media will ultimately compel for-profit schools to clean up their act or else shut their doors,” said David Halperin, Director of Campus Progress, the youth arm of the Center for American Progress.

• National Education Association (NEA) “This rule advances the common-sense principle that federal financial aid should go to career education programs that consistently provide what they promise and don’t leave students buried in debt they cannot repay,” said Dennis Van Roekel, NEA president.

Harkin has said he will continue to investigate abuses in the private for-profit education sector despite vocal opposition from Republicans, including Republican members of the Health, Education, Labor and Pension Committee, who boycotted the most recent hearings on the issue.

Harkin was criticized for inviting noted Wall Street short seller Steven Eisman to testify on the issue despite Eisman’s financial conflicts of interest, and over allegations from an internal GAO document he pressured investigators to include numerous details in a report on for-profit schools. GAO later corrected a slew of errors in that report.