Robert M. Shireman, deputy under secretary of education, is leaving Washington this summer, having achieved a goal he set almost 20 years ago: moving the bank-based federal student-loan program to direct lending by the government.
Mr. Shireman, who confirmed his departure in a conversation on Monday, hails from California and had made it clear from the start that he would be in Washington only briefly.
His departure after a year and a half on the job comes as a disappointment, but not a surprise, to the consumer advocates and student groups who were his biggest allies during the fight to end the bank-based program and redirect the savings to student aid and colleges.
But for-profit colleges, which have lately been the target of the Education Department’s increased scrutiny (see related article), aren’t sad to see him go. Stocks of for-profit companies soared Monday on news that Mr. Shireman was stepping down, with some analysts speculating that his departure could make it easier for for-profit colleges to beat back an Education Department proposal that would cut off federal student aid to for-profit programs whose graduates carry high debt-to-income loads. The controversial “gainful employment” proposal would require that a program’s students do not take on loan payments that exceed 8 percent of graduates’ expected earnings based on a 10-year repayment plan.
Data provided to The Chronicle by analysts with the Signal Hill Capital Group, Alexandra Chan and Trace A. Urdan, showed that in the hour between publication of the news of Mr. Shireman’s impending departure and the 4 p.m. close of trading on Monday, shares of Corinthian Colleges Inc. rose more by more 12 percent. Share prices of Career Education Corporation rose by 9 percent, of Apollo Group Inc. by 7.3 percent, and of ITT Educational Services by 7.2 percent (below).
Although Mr. Shireman was not the sole author of the gainful-employment proposal, many for-profit colleges view him as the driving force behind the plan.
The sector’s mistrust of him deepened last month, when Mr. Shireman gave a speech that likened for-profit colleges and their accreditors to the Wall Street firms and rating agencies responsible for the financial meltdown. (Mr. Shireman has insisted his comments weren’t meant as an attack on for-profit colleges, but Harris N. Miller, president of the Career College Association, which represents more than 1,400 colleges, most of them for-profit, said staff members who attended the speech viewed it as “a slap at the sector.”)
With the department expected to issue proposed new rules in the coming weeks, for-profit colleges have been frantically lobbying the Education Department and the Office of Management and Budget, pushing an alternative that would require for-profit programs to provide prospective students with more information about their graduates’ debt levels and salaries. Now, with Mr. Shireman leaving, some for-profit college leaders and lobbyists hope the department will soften its stance.
But Mr. Miller, the chief lobbyist for for-profit colleges, isn’t breathing a sigh of relief yet.
“This is not just about Bob Shireman; this is about the department,” he said. “He may be the instigator, but at the end of the day, it’s the entire department.”
Direct-Loan Legacy
However the fight over gainful employment turns out, Mr. Shireman will probably be best remembered for taking on a different powerful lobby: the student-loan industry. Though the industry spent millions on lobbying and campaign contributions fighting a bill to end the bank-based program, Mr. Shireman and Congressional Democrats prevailed, passing the measure this spring.
For Mr. Shireman, the bill’s enactment completed a project he began in the early 1990s as an aide to Sen. Paul M. Simon, Democrat of Illinois, and continued as a senior education-policy adviser in the Clinton administration.
But it was the strides he made in simplifying the Free Application for Federal Student Aid that Mr. Shireman cites as his proudest accomplishment. For years, student-aid experts had advocated for allowing Fafsa filers to import information from their income-tax returns electronically, saying it would save applicants time and frustration while reducing the transcription errors that can occur when parents and students copy information from their tax forms onto the Fafsa. But the Internal Revenue Service had long been reluctant to take on the additional workload. During his first year in Washington, Mr. Shireman brokered an agreement between the Education Department and the IRS that allowed the agencies to share some information.
“It was kind of quiet and behind the scenes and difficult and complicated, but the team got it done,” Mr. Shireman said in an interview on Monday. “Because it wasn’t fighting special interests, it didn’t get major press attention. But when I’ve been out at colleges and in the community, they notice, and that feels great.”
Still, Mr. Shireman didn’t achieve everything he’d hoped to during his time in Washington. While ending the bank-based student-loan program freed up billions of dollars in subsidies to lenders that could be redirected to student aid and community colleges, delays in passing the student-loan measure (HR 4872) meant that there was much less money for the programs than originally projected. In the end, Congress rejected the president’s plan to make Pell Grants an entitlement and index the maximum award to the Consumer Price Index plus one percentage point, instead providing a slight bump in the maximum award, followed by an inflationary increase. On Monday, Mr. Shireman said his biggest disappointment was not getting a full Pell entitlement.
It’s unclear who will replace Mr. Shireman as the department’s point person on higher-education issues. But whoever succeeds him is unlikely to have the opportunity to expand student aid that Mr. Shireman had. Even with cuts, the student-loan bill provided $43-billion for spending on education programs. That kind of money, says Thomas A. Butts, a former University of Michigan lobbyist and longtime direct-loan supporter, “is not likely to be around for awhile.”
“Sometimes decades pass before an opportunity like the one that’s just been enacted comes around,” he said.
