Nonprofit Colleges Have Their Own Concerns About New Federal Rules

July 08, 2010

For-profit colleges have been at the center of heated debate over new federal rules that the Education Department recently proposed, with the goal of cracking down on institutions that overcharge and underdeliver in training students for jobs right after graduation.

But the set of 13 proposed regulations the department unveiled last month would also apply to nonprofit private and public colleges, which are worried that some of the rules would undermine their autonomy, unnecessarily limit states' flexibility in overseeing their programs, and introduce burdensome reporting requirements that would not yield better information for students.

Leaders of those institutions are not as concerned as for-profit colleges are about a 14th proposed rule, which the department is expected to unveil later this summer, that would withhold federal aid from programs whose graduates are likely to carry high debt-to-income loads. For-profit institutions have said previous versions of that rule, known as the "gainful employment" rule, would force thousands of programs to close

The gainful-employment proposal would also apply to community colleges and any other nonprofit institution that offers vocational programs, but those institutions aren't worried about the issue because their students don't usually carry high debt-to-income loads.

Of the regulations put forth by the department, two are of special concern to the colleges. One would require states to take a more-active role in monitoring the quality of postsecondary programs, and a second would spell out a new definition of a credit hour.

College officials are calling the proposed rules too prescriptive and warning that their long-term effects are unknown, and possibly counterproductive. And some nonprofit-college leaders say the rules contribute to what they see as a growing federalization of higher education that could threaten the relative autonomy prized by nonprofit colleges, particularly private ones.

"There is concern that some of these regulations targeting the for-profit sector will have a spillover effect," said Mollie Benz Flounlacker, associate vice president for federal relations at the Association of American Universities. "This one-size-fits-all approach doesn't work in higher education, which has such a diverse set of institutions."

Cracking Down on Diploma Mills

College officials say the department's failure to take into account the diversity of states' approaches to overseeing higher education could also be problematic because the department could require states to create completely new oversight bureaucracies, putting a financial burden on states. The department has proposed specific guidelines that states must meet for the federal government to consider institutions as being authorized to operate.

No federal regulation now specifies how states must approve or monitor postsecondary-education programs.

Under the proposed rule, the department would consider an institution to be legally authorized by the state if three criteria are met. The state must give an institution the authorization specifically to offer programs beyond secondary education, make the authorization subject to adverse action by the state, and have a process to review and act on complaints about an institution and enforce applicable state laws.

Opponents of the proposed rule are concerned with the department's one-size fits-all approach. How state governments authorize postsecondary institutions to operate in their state now differs.

As many as 30 states would have to change their licensing laws for higher-education institutions under the proposed rule, according to a report from the Western Association of Schools and Colleges, said Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education.

"We can't believe this is what the department intended," Mr. Hartle said.

The Education Department wants states to take a more-active approval and oversight role rather than leaving the responsibility mainly to accrediting agencies. Federal officials especially want states to monitor public complaints about an institution's operations and respond appropriately.

Weak state oversight also opens the door for institutions of poor quality and diploma mills to move from state to state in response to changing requirements, the department said.

C. Todd Jones, president and general counsel of the Association of Independent Colleges and Universities of Ohio, is concerned about the unintended consequences of the regulation in his state and others.

He said some states with little oversight power now would probably have to create a new state agency to comply with the regulation, taking time away from other more-pressing state issues lawmakers could be dealing with.

It would also be exceedingly expensive for states to create a new bureaucracy that is probably not needed in the first place, Mr. Jones said.

"The department has created a new regulatory regime to fix a problem that they have not fully articulated with a solution whose impact they don't fully understand," he said.

What is a credit hour?

Reports of institutions awarding more credits, and drawing down more federal funds, than are deserved is the department's reason for choosing to propose a standard definition of a credit hour. No such definition currently exists.

The department's proposed regulation defines a credit hour as a unit measuring the amount of work consisting of one hour of classroom or direct faculty instruction and at least two hours of student work outside the classroom over a set period of time. The rule also establishes procedures for accrediting agencies to determine whether an institution's assignment of a credit hour is acceptable. The department's proposal says that simply counting how long students are in a classroom is not its goal and has allowed for colleges to put in place other ways to measure learning outcomes to determine how many credit hours a student has earned.

Nevertheless, college officials have argued that the credit-hour rule would impinge upon an institution's ability to encourage innovative courses and teaching methods. They also argued that the proposed definition was too restrictive and inhibited the academic freedom of colleges.

"For the first time, the federal government is defining what a credit hour is," Mr. Hartle said. "That decision is best left to individual colleges and accrediting agencies."

Ms. Benz Flounlacker said she is concerned about a provision that would allow institutions to establish an equivalent measurement for a credit hour that is "represented by learning outcomes and verified achievement." She considers that an intrusion into academic matters.

She said that it is unclear what the definition of a learning outcome or verified achievement would be and whether the institution or the accrediting agency would have final authority over that definition.

She also opposes the rule's new requirements of accrediting agencies, saying the department "is giving accreditors a new burden of responsibility that I don't think they are even comfortable with."

The department said that more-direct accrediting-agency oversight in colleges' assignment of credits to course work is needed to ward off abuses. Its proposal requires accrediting agencies to review and evaluate an institution's policies and procedures for the assignment of a credit hour and the institution's application of its policies and procedures in assigning credit hours to its programs and courses.

Accrediting agencies would also be required to notify the department of any noncompliance with the agency's policies or significant noncompliance regarding one or more programs at an institution.

Defining Gainful Employment

The most-controversial rule the department is weighing, on the gainful-employment issue, could have an effect on community colleges, in addition to the for-profit colleges that are at the center of that debate.

To qualify for federal aid, most career colleges and training programs must show they are preparing students for "gainful employment in a recognized occupation."

The proposal the department released last month requires proprietary colleges and any postsecondary vocational institution that offers a training program of at least one academic year to disclose to prospective students their programs' graduation and job-placement rates. That means all community colleges as well as public and private nonprofit, four-year universities with short-term vocational programs would be subject to the regulation.

Colleges would also have to provide the Education Department with information that will allow it to determine student debt levels and incomes after program completion. The department is still developing the measurements it would use to hold programs accountable for meeting the gainful-employment standard. That part of the regulation is expected to be released later this summer.

The department has previously suggested cutting off federal student aid to programs whose graduates carry high student-loan debt relative to their incomes. Specifically, the proposal the department had floated would bar aid for programs in which a majority of students' loan payments would exceed 8 percent of the lowest quarter of graduates' expected earnings, based on a 10-year repayment plan.

Unlike for-profit colleges, community colleges are not too worried about the measurements the department is considering to enforce the gainful-employment rule. That's because community-college students don't tend to carry high student-loan debt, given that annual tuition averages $2,544 at community colleges compared with $14,174 at for-profit institutions.

Community-college officials say they are worried, though, about how institutions would be able to get some of the information the rule would require them to report to the government.

David S. Baime, senior vice president for government relations and research at the American Association of Community Colleges, said there is concern, for instance, about how the job-placement rate would be calculated under the department's proposal for measuring gainful employment because it is unclear how the data needed for the calculation would be obtained. He said the department assumes that colleges can get the information through their states' data systems, but that can't be done in all places. He also doesn't know what the department means by specifically asking colleges to disclose "on-time graduation rates" of students rather than the basic graduation rate. He said that was an "absolutely new concept."

The disclosure requirements in the gainful-employment rule "are drafted in a way that creates and raises many questions," he said.

Those requirements need to be refined as they are incorporated into a final rule, Mr. Baime said.