Taking Action Against For-Profit College Abuses

Business man hiding money in pocket on grey backgroundSad stories of student debt aren’t unusual these days — more than 40 million Americans still owe something for their post-secondary studies. But, even on the crowded stage of student debt, the tales told by students of for-profit colleges stand out.

There’s the NEA member who borrowed more than $100,000 to pay for a master’s degree in counseling — and never has been able to put it to use. “The stress is overwhelming,” she said. Or there’s the Olive Garden waiter who told NEA that he owed $225,000 for a nearly worthless master’s degree in “entertainment business.” “I hope something can be done,” he said.

Well, finally, something has been done. In October, new federal regulations aimed at reining in the abuses of some for-profit colleges were released. They are a “welcome first step,” said NEA President Lily Eskelsen García.

“We need to prevent institutions that do not provide quality education from continuing to prey on students and taxpayers, particularly those that fail to prepare students for productive careers, cost more than public institutions, and leave student buried in debt that they cannot repay,” said NEA President Lily Eskelsen García.

For-Profit Colleges: A Growing Industry

Too much debt and too little income is the common refrain of graduates from for-profit colleges. Indeed, the U.S. Department of Education has estimated that 74 percent of the for-profit programs at 7,000 colleges produce graduates who earn less, on average, than high school dropouts.

Meanwhile, nearly nine out of 10 must borrow to pay for those expensive for-profit degrees, and their rate of loan default is four times higher than borrowers from community colleges.

Kristi Ericson, a NEA member from Utah and the mother of seven children, owes more than $100,000 after getting a master’s degree in counseling. She had hoped to help abused children, she said, and earn enough to pay her bills. But, after being told by admissions counselors at her for-profit university that she could earn $70,000 a year in her new career, she found the reality was $12 an hour.

“So I have remained a teacher, and my education has helped me understand these children better,” she said. But the debt means she can’t get a new car or help her own children attend college. “I don’t regret my education. I learned a lot… but it is frustrating that I struggle to make ends meet.”

Of course, she’s not alone. Audra Norwood owes more than $100,000 for an accounting degree from a for-profit university, and earns just $34,000 a year. “My credit is ruined. And, at this rate, I doubt I’ll ever be able to buy a house or have kids,” she said.

Investigations by the U.S. Senate Committee on Health, Education, Labor, and Pensions (HELP), the Government Accountability Office (GAO), and advocacy groups all pointed to the same problems. While U.S. taxpayers provide $22 billion a year to the for-profit college industry, mostly in the form of federal student loans and Pell Grants, it’s not an investment that pays off for many.

“Our nation’s public 2- and 4-year colleges lead in providing access to quality and affordable education, and we do not need to subsidize institutions that do not meet that standard,” said Eskelsen García. “Federal student aid is intended to give students hope of a brighter future, not to saddle them with excessive debt.”

Making the Rule

In October, the federal government took an important step toward protecting future students at for-profit colleges. After multiple sessions of “rulemaking,” which NEA participated in, and receiving 95,000 comments from members of the public, including many NEA Higher Ed members, the DOE announced new regulations that should force institutions to elicit better outcomes for students — or risk losing federal funds.

Known as “gainful employment” regulations, the rules say institutions and programs will be considered failing if their graduates have annual student loan payments that exceed 12 percent of their total earnings or 30 percent of their discretionary earnings. They will be considered in the danger zone if graduates have loan payments between 8 and 12 percent of total earnings or between 20 and 30 percent of discretionary earnings.

About 1,400 programs serving about 840,000 students would fail to meet these standards with their current performance — and 99 percent of them are for-profit colleges, said DOE Secretary Arne Duncan. But the rules don’t go into effect until July 1, 2015. And, to actually be considered ineligible for access to federal money, the schools or programs must fail two out of three years or be “in the zone” for four consecutive years.

Now advocates say the new rules don’t go far enough. U.S. Sen. Tom Harkin, a leading voice on this issue, called them “a first step” and said, “While I commend the Administration for finalizing this rule… it does nothing to stop schools from offering, and our most at-risk students from enrolling in, programs where most students fail and default.” More action from Congress also is needed, he said.

“We would have liked the Department to go father,” agreed Mark F. Smith, NEA’s senior policy analyst for higher education, “however the rule does represent an important first step in regulating these institutions in order to provide real educational benefits to students, and protect taxpayers against waste.” NEA will continue to support efforts to establish a strong, enforceable gainful employment rule, he said.

Of course, not everybody else will: In November, an association of well-funded for-profit colleges sued again to stop implementation of the rules, calling them “arbitrary and irrational.”

Photo: Associated Press