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For-profit Higher Education
These are hard days for most for-profit colleges. Declining revenues and an ongoing regulatory crackdown has led to speculation that some in the sector -- including one of the major, publicly traded companies -- will go nonprofit to get out of the crosshairs.
In the years before the mortgage crisis, financial regulators often looked the other way as banks and other lenders pursued reckless activities that cost investors, taxpayers and borrowers billions of dollars. When trouble hit, these regulators had to scramble to fix the mess that their inertia had helped create. This same dismal pattern is now playing out in the for-profit education arena.
Senate Minority Leader Mitch McConnell (R-Ky.) seemed to have little sympathy for students who have accumulated massive amounts of student debt during a town hall with constituents last week. Instead of looking to the government to forgive their debt, he said, they should start looking at schools that are cheaper.
The US Department of Education wants to improve the chances that students at for-profit colleges come away with a reasonable likelihood of “gainful employment in a recognized occupation.” But the department’s proposed regulatory changes that would strip federal student loan aid from millions of students are more likely to invite lawsuits than to prompt serious changes in how people with limited access to mainstream colleges and universities prepare for careers.
The U.S. Department of Education has a special unit to track the finances of for-profit colleges at risk of suddenly closing, and it even trained staff members this year to use a new service that provides real-time information on publicly traded education companies. Yet despite all that, the department has said it didn’t know how shaky the financial ground was under Corinthian Colleges Inc. when it temporarily turned off the spigot of federal financial aid to the company in mid-June.
For-profit colleges are lobbying hard to weaken rules proposed by the Obama administration that would deny federal aid to career training programs that burden students with crippling debt and worthless credentials. But a recent spate of state and federal investigations into potentially predatory behavior by the for-profit sector — combined with the collapse of Corinthian Colleges, one of the country’s largest operators of for-profit colleges and trade schools — makes clear that the rules need to be strengthened and that federal oversight generally needs to be broadened.
For four years, the U.S. Education Department has threatened to rein in for-profit colleges and their soaring student debt. Now it has found a way. The department has taken its toughest regulatory action ever against a for-profit college: putting Corinthian Colleges Inc., with more than 70,000 students, on the path to going out of business.
Over the last five years, more than $600 million in college assistance for Iraq and Afghanistan veterans has been spent on California schools so substandard that they have failed to qualify for state financial aid. As a result, the GI Bill — designed to help veterans live the American dream — is supporting for-profit companies that spend lavishly on marketing but can leave veterans with worthless degrees and few job prospects, The Center for Investigative Reporting found.
Senate Democrats formally unveiled on Wednesday their plan to reauthorize the Higher Education Act, introducing a 785-page bill that aims to make college more affordable, programs more accountable, and student debt more manageable.
The Senate proposal focuses on easing the burden of student loan debt, plus holding for-profit colleges accountable. The House proposal adopts some of the recommendations that outside groups have urged to help students complete college, mostly the less controversial ones, and calls for rolling back most of the Obama administration's regulatory agenda on higher education.