For-Profit Colleges Intensify Lobbying on Proposed Rules

A year of congressional hearings, bad publicity, falling enrollments and federal rule modifications has led to major changes in the for-profit private college industry, and even more upheaval is likely very soon.

The Department of Education is readying a revamped “gainful employment” rule, to come out within the next few weeks, and key lawmakers on Capitol Hill say if the rule is not to their liking they are prepared to introduce legislation to change it.

A modification of the so-called 90-10 rule – which requires career colleges to get no more than 90 percent of their funding from the federal government – that exempts up to$2,000 in certain loans from counting against that ceiling, expires in July. The for-profit sector is lobbying hard to change the 90-10 rule, which they argue makes it harder for poor students to attend their institutions. And all is occurring against a backdrop of falling enrollments and profitability at the schools.

Some colleges – in the wake a Government Accountability Office report that found nefarious recruiting practices at some schools – are modifying their conduct. Others are challenging the validity of the GAO report.

“We have seen a number of changes at for-profit colleges,” said James Kvaal, deputy undersecretary at the U.S. Department of Education. “Some are adopting free trial periods to help determine if courses are suitable for students. We’ve seen some colleges close down or overhaul how they pay their recruiters… to help students make better choices.”

“Progress is being made,” he said.

Tightening regulation

Schools like the University of Phoenix, for example, are changing their recruiting practices, including allowing prospective students to attend a three-week orientation period, to see if the school looks like a good fit, and financial literacy training so students don’t take on too much debt.

But Kvaal cautioned that the department is still tightly regulating the schools.

The department’s most recent yearly evaluation of for-profit schools operating under the 90-10 rule and it showed that 209 of the institutions are getting very close to the threshold, getting between 85 and 90 percent of their funds from the government.

The 90-10 rule is “important,” Kvaal said. “We’re always watching it carefully. There are no proposals at the moment to change it.”

Kent Jenkins Jr., vice president for public affairs for Corinthian Colleges Inc., one of the larger for-profit college companies, said the government’s approach to helping students pay for college is contradictory. While federal financial aid for colleges and universities aid was increased by 40 percent over the past four years the government has imposed a separate standard for for-profits. “The government says ‘we think a reasonable way to measure (their) success is whether the students can afford to pay’ ” off their loans “They directly contradict each other.”

Jenkins said Corinthian Colleges may have to institute a tuition increase to comply with the 90-10 rule.

As part of its strict oversight of the for-profit colleges, DOE has proposed tying the proprietary colleges’ eligibility for federal student loans to a so called gainful employment rule, which would measures whether graduates can earn enough to pay back their student loans and whether the students are repaying them. If repayment rates fall to certain levels, the college’s eligibility for student loan problems would be limited or ended.

The proposal sparked an outcry from the for-profit schools, and well-known colleges, such as the University of Phoenix, DeVry University and Corinthian Colleges, mounted an extensive lobbying campaign, hiring high-powered lobbying firms to plead their case. They also orchestrated student rallies on Capitol Hill. The Department of Education was reported to have received 90,000 comments on the proposed rule, many from students. The rule, which originally was to be finalized by the fall, was pushed into this year.

Representatives of the career colleges industry took issue with the methodology of the GAO report, and the GAO modified the report last fall, but stood by its conclusions that all 15 for-profit colleges visited by undercover student applicants engaged in deceptive practices, including encouraging applicants to falsify their financial aid forms to qualify for federal aid.

Harkin digs deep

Stirrings about tightening up on the for-profit colleges predate the Obama administration, but they gathered considerable steam when Sen. Tom Harkin, D-Iowa., took over the chairmanship of the Senate Health, Education, Labor and Pensions Committee, a post previously held by the late Sen. Edward Kennedy, D-Mass. Harkin held hearings into the practices of the for-profit institutions and asked for the GAO study that recruiting problems at all of the 15 colleges agents visisted.

Harkin has been an outspoken critic of the for-profit education sector, especially its treatment of veterans, and advocates the new regulations from the Department of Education. Though some revisions were made to the report in November by the GAO, Harkin’s spokeswoman Justine Sessions said the report’s conclusions still stand. She also said there are concerns beyond those uncovered by the GAO.

“Yes, the GAO report was significant, but the deceptive recruiting practices it uncovered are by no means the end all and be all on the problems of the industry,” Sessions said. “Despite the industry’s attempts to discredit the GAO, recruiting practices are just the tip of the iceberg.”

She said Harkin has concerns about the dropout rate at these schools. “For one cohort of students it is 57 percent,” she said. “Some of these schools are spending more on marketing than on students.”

Also, she said Harkin has concerns about the amount of debt these students incur. “Ninety-five percent of these students leave with debt, compared with 16 percent of community college students.”

An aide to Rep. John Kline (R-Minn.), new head of the House Education and Labor Committee, said Kline is concerned about the students who are benefitting from the for-profit colleges and does not want to do anything that would hurt their chances of an education.

“Chairman Kline welcomes accountability and transparency in higher education, but continues to be concerned with a concerted effort to undercut an entire sector of institutions in an effort to root out a few bad actors,” the aide said.

The career college industry’s defenders are not just Republicans.

Some Democrats and members of the Congressional Black Caucus have quietly opposed imposing the gainful employment rule, saying that to do so might hurt low-income or minority students disproportionately. The black and Hispanic caucuses sent letters to Education Secretary Arne Duncan, opposing the rules.


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