In its campaign to block the adoption of a new federal rule measuring how colleges prepare students for “gainful employment,” the for-profit-college industry and its allies have attacked the credibility of the Department of Education, questioning the processes it has followed in developing the new regulation and its competency in managing the kind of data that could eventually be used to cut off vital federal aid.
But despite the well-heeled opposition and recent evidence that the message is taking root—fueled in part by notable missteps by the Education Department in calculating data on default rates and by the yet-to-be explained errors of the Government Accountability Office in its widely publicized undercover investigation of several for-profit colleges—a retreat on the rule isn’t looking likely.
That became clearer last week when the department confirmed that it had made final revisions to the proposed gainful-employment rule and sent it on to the White House Office of Management and Budget, the final stop before it is made public in the Federal Register.
“This is going to happen,” says Anthony P. Carnevale, director of the Georgetown University Center on Education and the Workforce, who has followed the politicking over the measure as an ad hoc adviser to both the government and some of the companies. The for-profit-college industry spent more than $8-million on lobbying in 2010 and millions more in campaign donations, according to a recent analysis by The Huffington Post. But at this point, says Mr. Carnevale, the many charges and countercharges now being lodged probably won’t matter. “It’s a sideshow.”
Noise or legitimate criticism, there’s little sign that it’s letting up.
Critics of the regulation include the Coalition for Educational Success, a group formed by owners of several for-profit-college chains to oppose “harsh and unnecessary regulations on career colleges,” and an organization called Citizens for Responsibility and Ethics in Washington, or CREW. They say e-mail correspondence they have obtained from the department through the Freedom of Information Act shows instances of inappropriate collaboration between high-ranking department officials and certain short sellers, as well as with officials of consumer groups that have collaborated with the short sellers. Short sellers are investors who make money when stock prices fall, and several of them, including Steven Eisman, have become vocal critics of the for-profit-college industry.
As it expressed in indignant tones in one of its many news releases over the past six months, the coalition says the e-mails show “the department followed the short sellers’ game plan” and accuses the department of stonewalling the group’s demands for additional documents. (Twice the coalition has gone to court seeking release of the material.)
The coalition has even produced a handsome, color-coded, interactive “connect the dots” chart to assist journalists and others in seeing what it describes as the ties among the department, several short sellers, and other interested parties.
CREW, citing many of the same e-mails, has made similar charges.
To be sure, the critics have gained some high-profile traction for their claims. Some came in February when an amendment that would have barred the department from pursuing the gainful-employment rule was approved 289 to 136 by the House of Representatives (backed by the former speaker, Rep. Nancy Pelosi of California, and several dozen other Democrats), although the measure was dropped from the budget that was adopted to avert a federal government shutdown.
Problems With Data
Late last month, critics trumpeted several other developments. One was a news report saying that the department’s inspector general was “investigating” the short-seller connection, an inquiry that may in fact be the same one as the “audit” that had been publicly mentioned in March, but to little notice, by Inspector General Kathleen Tighe and Education Secretary Arne Duncan. The audit, which the inspector general’s office says is different from an investigation, relates to questions raised by two senators who have questioned whether the department violated any protocols in developing the gainful-employment regulation.
Around the same time last month, a bipartisan group of 118 senators and representatives wrote to President Obama, urging him to withdraw the proposed rule, saying it could deprive students of educational opportunities. Days later, Sen. Mike Enzi of Wyoming, the ranking minority member of the Senate’s education committee, asked the Securities and Exchange Commission and the U.S. attorney in New York to investigate the department over the rule, citing those same e-mails.
Justin Hamilton, the department’s spokesman, said it had done nothing wrong and was proud of the process it had used to develop the regulation. “We went out of our way to meet with as many people as possible, including members of the for-profit-college industry,” he said. Neither he nor a spokeswoman for the inspector general would comment on the probe.
Mr. Hamilton also defended the department’s actions in handling the default data. For rates the department made public in February, it improperly counted defaults that occurred after the three-year measurement period, inflating the rates for most colleges. Last month it disclosed the error through a low-key posting to the informational system used by financial-aid administrators, and it issued revised figures.
The move prompted a rebuke from the Association of Private Sector Colleges and Universities, the main trade association for the industry, which said the errors had done “incalculable” damage to the colleges’ reputations and showed that the department couldn’t be trusted to manage data of such consequence. Privately, representatives of other associations also criticized the error, with one calling it “a big screw-up” that could undercut the department’s credibility at a critical time politically.
But Mr. Hamilton said that the data were for informational purposes only, and that the department had noted when it first published the data that they were unaudited and could contain errors. Even after the recalculation, he said, the data showed that default rates at for-profit colleges were still more than twice as high as at all other institutions.
The most controversial parts of the gainful-employment rule—which would bar federal student aid for programs where students’ ratios of income to student-loan indebtedness were too high, or numbers of students repaying their loans were too low—is slated to go into effect in July 2012. Thirteen other regulations dealing with recruiting and other matters, along with a portion of the gainful-employment regulation that requires colleges to notify students about programs’ costs and job prospects for graduates, are due to take effect this July.
