For-profit colleges, under attack in Congress and faced with regulation that could ravage their revenues, are staging an aggressive, but increasingly hopeless, campaign to ward off legislation and defeat a proposed rule.
In recent weeks, their representatives have filed thousands of comments criticizing the Education Department’s “gainful employment” rule, which would cut off federal student aid to programs whose graduates have high debt-to-income ratios and low loan-repayment rates. Advocates of the colleges have flooded town-hall meetings in lawmakers’ districts and pressured faculty and staff members to speak out against the proposal.
As of early last week, more than 26,000 comments had been filed with the Education Department, a spokeswoman said.
The colleges have spent hundreds of thousands of dollars lobbying Congress and federal agencies, nearly doubling their lobbying expenditures over the past year. Some of the most vulnerable companies spent three or four times as much on lobbying in the second quarter of 2010 than in the same period in 2009. One company, Education Management Corporation, spent eight times as much.

The fight has taken on new urgency in the three weeks since the Education Department released an analysis of loan-repayment rates suggesting that many programs could become ineligible for federal aid under the rule. Student aid is the lifeblood of many for-profit colleges, accounting for an average of 77 percent of revenue at the five largest companies, according to an analysis by the Senate education committee. Without access to federal dollars, many programs would be forced to shut down.
Lobbyists for for-profit colleges warn that the rule would displace millions of students and cost thousands of jobs, undermining the Obama administration’s efforts to revive the economy and expand college access.
But supporters of the proposal, including consumer and student groups, say the rule would affect only low-quality, overpriced programs, eliminating those that fail to deliver on their promises to students.
“The access fears are totally unfounded,” said Pauline M. Abernathy, vice president of the Institute for College Access & Success, an Oakland, Calif.-based nonprofit that advocates for affordable higher education.
The rule would take effect next July, but its penalties wouldn’t kick in until July 2012.
A Spending Spree
With so much at stake, for-profit colleges have intensified their lobbying, increasing spending by nearly a quarter, to $1.4-million, from the first to the second quarters of 2010 alone. Some of the largest increases came from companies that could suffer the most under the rule, including the Career Education Corporation, Corinthian Colleges, Education Management Corporation, and Kaplan Inc.
The biggest spender in the second quarter, which ended June 30, was Corinthian, which has nearly tripled its lobbying expenditures over the past year, to $310,000 in the second quarter. Only 26 percent of students who have left Corinthian in the past four years had paid down any principal on their loans as of last September, according to the Education Department’s analysis of loan-repayment rates. That’s nine percentage points below the department’s proposed cutoff for federal-aid eligibility. While the company’s programs could still qualify for aid by passing a debt-to-income test, analysts for the for-profit sector have predicted that at least some of its programs would fail that test as well.
Kaplan, which more than tripled its spending on lobbying between the first and second quarters, from $75,000 to $270,000, had a weighted average loan-repayment rate of 28 percent in the Education Department’s analysis, seven percentage points below the eligibility cutoff. Mark Harrad, a spokesman for Kaplan, said its increased spending on lobbying was “primarily the result of increased regulatory and legislative attention” to for-profits and “the fact that we brought on a new staff member.” Cheryl Smith, a former top aide to Rep. David R. Obey, a Wisconsin Democrat who is the departing chairman of the House Appropriations Committee, joined Kaplan as a lobbyist this year.
The lobbying effort extends all the way up to the chief executive of the Washington Post Company, which owns Kaplan. Donald E. Graham, son of the legendary publisher Katharine Graham, has made several trips to Capitol Hill to lobby against the rule. Mr. Harrad declined to say which offices Mr. Graham has visited.
The Career Education Corporation, which reported spending $200,000 in the second quarter, more than twice what it spent in the first quarter of this year, scraped by with a repayment rate of 35.3 percent, according to BMO Capital Markets, which provides corporate analyses. But two of its colleges, the International Academy of Design and Technology and the Gibbs Schools, fell below the cutoff. Jeff Lashay, a spokesman for Career Education, said it wanted to make sure that for-profit students are heard in the debate over the rule.
“We’re in the midst of frequently narrow-minded and unfair public criticism that lacks context, so it’s important that we raise the level of public discourse and provide a voice for the more than two and a half million students” the sector serves, he said.
Education Management Corporation, which raised its spending on lobbying from $10,000 to $80,000 per quarter over the past year, had a loan-repayment rate of 37 percent, just over the cutoff. But one of its colleges, Brown Mackie, came in at only 21.4 percent, according to BMO.
The company was one of three that hired Heather Podesta + Partners, a law firm led by a top Democratic fund raiser with longstanding ties to Congress. DeVry Inc. and Concorde Career Colleges also retained the firm.
It’s not clear what the colleges have gotten for their money. While a few more lawmakers have added their names to letters opposing the rule, only one member, Rep. Robert E. Andrews, a New Jersey Democrat who is a longtime supporter of for-profits, has offered an alternative to the department’s approach.
Aides to members of Congress say lawmakers are reluctant to stick their necks out for a sector that has gotten so much negative publicity in recent months, particularly when the Education Department appears intent on tightening its regulations.
“Democrats aren’t going to get in the way of a moving bus and be portrayed as allowing for-profits to take advantage of students,” said one Senate Republican aide, who asked not to be named.
Repairing Reputations
For-profit colleges have been on the defensive since last fall, when the department began holding a series of negotiations to craft the gainful-employment rule and other regulations aimed at the sector. The pressure mounted over the summer, when Sen. Tom Harkin, the Iowa Democrat who chairs the education committee, held a pair of damaging hearings on for-profit education.
The tipping point seemed to come in early August, when the federal Government Accountability Office released the results of an undercover investigation that found widespread deception in marketing by for-profit colleges. Though the report’s findings focused on recruiting, not job placement, they strengthened the department’s case for regulation and made legislation involving for-profit colleges almost inevitable.
In an effort to repair the sector’s reputation and build opposition to the rule, the Career College Association urged its 1,400 members to flood Congressional town-hall meetings over the August recess.
“Attending Town Hall Meetings and building relationships with Members of Congress are incredibly effective ways of combating the negative perceptions of our students and schools,” the association said in a notice on its Web site.
To prepare its members for the meetings, the association posted a Webinar that encouraged members to bring students—which the group called “our best asset"—to the meetings, along with “positive data to support our schools and students.” The material was created with the help of the press secretary to Rep. Jim Moran, Democrat of Virginia, whose brother, Brian, is the association’s vice president for government affairs. It described the meetings as a way to “set the facts straight” about for-profit education and “begin creating a positive narrative about our schools.”
The trade association has also provided financing and technical support to a group of for-profit college students called Students for Academic Choice. The group, which was formed at the association’s annual Hill Day lobbying event, in March, gathered 32,000 signatures on a petition opposing the Education Department’s proposed rules and recently created a Web site using money from the association. A spokesman for the association declined to say how much the effort had cost, only that it was “de minimus.”
Critics of for-profit colleges have dismissed the group as an exercise in “astroturfing,” an attempt by the Career College Association to manufacture opposition to the rule. But Dawn Connor, the student group’s president, said she’s genuinely concerned about preserving access to for-profit education.
Ms. Connor, a veterinary-technology student at Globe University’s campus in Eau Claire, Wis., said she had attended three nonprofit colleges but never got a degree. She said Globe offered smaller classes, better equipment, and more personal attention than the traditional colleges did. She called her decision to attend the for-profit college “the best choice I’ve made, by far.”
“I want other students to have that choice as well,” she said.
Ms. Connor estimated that about 150 students have joined the lobbying group. She said it is working with a lawyer to secure nonprofit status and is preparing to send an “action alert” e-mail to students who signed the petition urging them to submit testimonials on the group’s Web site about attending for-profit colleges.
“There is just so much negative press,” she said. “I just want to get it out there that there are so many students who have had a positive experience.”
For-profit colleges have also gotten some support from the U.S. Chamber of Commerce, which sent a letter to the Education Department in mid-August warning that the proposed gainful-employment rule would “limit education and economic opportunities for many Americans.” Rolf Lundberg Jr., the chamber’s chief lobbyist, said four or five of its employees are “very focused” on the rule and have attended a “couple dozen” meetings with Congressional aides in recent months.
“We are in the crescendo phase of this effort,” he said.
Minority-group lawmakers and groups are divided on the rule. While the NAACP and the National Council of La Raza have endorsed the proposed rule, saying it would protect minority students, the National Hispanic Caucus of State Legislators said it would discriminate against students who have to borrow to attend college and has passed a resolution opposing it.
The president of the Mexican American National Association, a pan-Latina group, has argued that the rule would establish “two tiers of colleges” and relegate minority students at career colleges to “second-class status.”
“I’m not a cheerleader for the career colleges,” said Alma Morales Riojas, the association’s president, in an interview. “But if we’re looking to educate our community, we need as many options as possible.”
In the House of Representatives, several members of the Congressional Black Caucus have signed on to a pair of letters to the Education Department. But the rule has split the Tri-Caucus, a coalition comprising the black caucus, the Congressional Hispanic Caucus, and the Congressional Asian Pacific American Caucus.
Forty-three percent of students attending for-profits are from minority groups, and almost 50 percent are among the first generation in their families to pursue higher education, according to the Career College Association.
For-profit colleges argue that they provide access to underserved populations at a time when some public colleges, faced with budget cutbacks, are turning students away. Critics of the for-profit sector say some colleges are taking advantage of those students, saddling them with debt and leaving them unprepared for a career.
As Harris N. Miller, president of the Career College Association, put it, “We see ourselves as helping minorities, the other side sees us as exploiting them.”
A Flood of Comments
With the public-comment period set to end this week, groups on both sides of the gainful-employment debate have created Web sites that encourage people to submit comments on the rule. The Institute for College Access & Success, a leading supporter of the proposed rule, said its site had generated 800 comments as of early last week.
That is dwarfed by the number of comments submitted through sites created for the Education Management Corporation by Bipac, a business-oriented lobbying group. Education Management recently sent an e-mail to its faculty and staff members urging them to file comments through the sites, which generate “customizable” form comments for students, faculty members, and friends and relatives of members of groups opposing the rule.
Education Management has also hired DCI Group, described by O’Dwyer’s PR Daily as a “brass-knuckled Republican PR firm,” to contact its employees to help them craft “personalized letters” to the department, according to Higher Ed Watch, a blog of the New America Foundation. Todd S. Nelson, Education Management’s chief executive, has sent an e-mail to the company’s roughly 20,000 employees encouraging them to participate.
“The proposed rule’s potential consequences on EDMC could be substantial,” he wrote.
Critics of the rule concede that the department isn’t likely to back down from its proposal, despite their efforts to defeat it. “I don’t think there’s anything that has arisen or will arise that will dissuade them,” said one lobbyist for the for-profits.
But the battle may be just beginning for for-profit colleges and their critics. The Education Department is expected to issue the final version of the gainful-employment rule by November 1. After that, the action will shift to the Senate, where Senator Harkin is promising more hearings and legislation cracking down on “bad actors” in the sector.
Goldie Blumenstyk contributed to this article.