Representatives of the for-profit higher-education sector packed a lecture hall here on Monday for the final of three hearings on the U.S. Education Department’s plans to revise several rules affecting proprietary institutions.
Some 30 people signed up to testify at the six-hour hearing, which drew industry analysts from New York and lobbyists from Washington, along with consumer advocates and a trio of representatives of foreign universities.
But those who came to the hearing looking for clues into the department’s intentions got few. Agency officials asked only a handful of questions and did not comment on any of the recommendations, opting to listen, rather than opine. During breaks in the testimony, industry analysts swarmed around the department’s acting assistant secretary for postsecondary education, Daniel T. Madzelan, in a mostly fruitless quest for information.
As expected, much of the discussion centered on the department’s plan to revisit rules governing compensation for student recruiters and employment outcomes for graduates of for-profit institutions. Consumer advocates and admissions officers from traditional colleges urged the department to do away with 12 “safe harbors” that it added to a ban on incentive compensation for recruiters in 2002. They argued that the exemptions, which allow colleges to pay enrollment-based commissions under certain circumstances, encourage recruiters to sign up unqualified students.
“Competitive team environments encourage recruiters to think of students as points to be earned,” said Jillian L. Estes, a lawyer who is representing students in a case against Westwood College, which has campuses in six states. “They toe the line of propriety while ignoring the impact on students.”
Lobbyists and for-profit college officials countered that the 2002 rules provided much-needed clarity to the ban, which was enacted a decade earlier.
“We urge the department not to take any steps back to the uncertainty that existed before 2002,” said Mark L. Pelesh, an executive vice president for Corinthian Colleges, adding that colleges need more federal guidance, not less.
Consumer advocates also urged the department to standardize the rules that require for-profit institutions to show that a percentage of their graduates find “gainful employment,”.
For-profit college officials countered that many students attend their colleges for career advancement, not job attainment, and asked the department to go easy when revising the rules.
A Defense of Practices
Officials from two for-profit institutions used the hearing as an opportunity to defend their institutions against allegations of impropriety. M. Lauck Walton, a regional vice president of Westwood College, said he was deeply offended by Ms. Estes’s “frivolous” claims and vowed to disprove them “in the appropriate forum.”
Later, Robert Collins, vice president for student financial aid for the Apollo Group, accused short-sale investors, who would profit if the share price of the company’s stock fell, of spreading misinformation about his company to deflate the value of its stock.
“It’s unfortunate that many short-sellers make their living by shorting Apollo stock,” he said, before addressing issues raised in a 2004 Education Department program review and an inspector general’s report.
Several for-profit colleges asked the Education Department to tackle an issue not on its regulatory agenda: overborrowing by students. They asked for more discretion to limit student borrowing, saying high debt loads were contributing to rising default rates.
Under the existing rules, colleges can counsel students not to overborrow, but they cannot prohibit them from doing so.
“Schools are trying to limit borrowing,” said Richard Dumaresq of the Pennsylvania Association of Private School Administrators. “But it’s not enough to stem the tide of overborrowing, especially in a down economy.”
He suggested that the department permit colleges to limit loans to the cost of attendance or determine “reasonable” living expenses. Other speakers proposed that colleges be allowed to set the cost of living for working students at zero—on the assumption that their living expenses would have been the same if they hadn’t enrolled.
For-profit colleges also urged the department to create a list of high-school diploma mills, to help them distinguish between legitimate diplomas and purchased ones.
But the conversation was not limited to issues important to for-profit colleges. Three representatives of foreign universities also spoke, urging the department to allow American students attending their institutions to receive federally supported loans through direct lending. Such students are currently eligible for loans only through the guaranteed-student-loan program, and if Congress adopts President Obama’s plan to do away with the bank-based program, they will have no access to federal loans, unless the rules change.
Monday’s hearing was the last of three. The Education Department will now turn to naming negotiators for panels that will craft the new rules. The first of three rule-making sessions is expected in September.
