Washington
For-profit colleges suffered a major setback on Wednesday when a key subcommittee in the U.S. House of Representatives agreed to maintain a rule that requires the institutions to receive at least 10 percent of their tuition-and-fee revenue from sources other than the government’s student-aid programs.
The members of the Committee on Education and the Workforce’s Subcommittee on 21st Century Competitiveness also handed privacy-rights advocates a big victory when they voted to bar the U.S. Education Department from creating a new national database to track the educational progress of every college student (The Chronicle, May 6).
In addition, the panel set a time limit on how long students may use Pell Grants. Republicans and Democrats alike agreed that it was reasonable to restrict the period over which a student can receive a Pell Grant to 18 semesters.
Those amendments were among a half dozen that the subcommittee approved by voice vote on Wednesday as it took up legislation to renew the Higher Education Act, which expires this year. The panel’s Republican leaders, who first introduced the bill over a year ago (The Chronicle, February 11), are hoping to take a final vote on the legislation today and then send it to the full education committee, which is expected to consider it next week.
The legislation (HR 609) would make some significant changes in federal student-aid policy. Among other things, it would:
- Raise the amount of money that first- and second-year students may borrow from the federal programs. The loan limits for freshmen would be increased to $3,500, from $2,625, and for sophomores to $4,500, from $3,500.
- Reduce the fees students pay to obtain their loans from 3 percent of the amount borrowed to 1 percent. The reduction would be phased in over five years.
- Make Pell Grants available to students year-round, rather than only over the nine months of a traditional academic year.
- Place colleges that consistently raise their tuition and other costs of attendance by more than twice the rate of inflation on a government watch list, and require them to provide a detailed accounting of all of their costs and expenditures.
- Gradually phase out a part of the formula that the government uses to divvy up funds from three programs, College Work-Study, Perkins Loans, and Supplemental Educational Opportunity Grants. The formula essentially guarantees colleges the same share of money that they have received since the 1970s.
- Clarify that student-aid applicants who have been convicted of drug-related offenses are ineligible for federal aid only if the offenses were committed while they were attending college.
Rep. Howard P. (Buck) McKeon, the California Republican who is chairman of the subcommittee, hailed the bill, saying that it would “strengthen the nation’s higher-education system” and “expand college access for low- and middle-income students.”
But the panel’s Democratic members attacked the bill, saying that it would do little to help low-income students gain access to college. They especially took the Republicans to task for failing to raise the authorized level for the maximum Pell Grant (The Chronicle, May 21, 2004) and for proposing to make it more expensive for borrowers by keeping the cap on the interest rate students pay on their loans at 8.25 percent. Under current law, the interest rate on student loans is scheduled to change on July 1, 2006, from a variable rate based on market conditions, but capped at 8.25 percent, to a fixed rate of 6.8 percent. But the House bill would stop that change from going into effect.
“This bill in total does more harm than good,” said Rep. Dale E. Kildee, the top Democrat on the subcommittee.
Lawmakers on the subcommittee offered more than 40 amendments on Wednesday. The panel is planning to vote on the most controversial ones when it meets today.
Still, the panel surprised for-profit colleges when it approved an amendment, sponsored by Rep. Michael N. Castle, a Delaware Republican, by voice vote that would continue to bar for-profit colleges from receiving 90 percent or more of their revenues from the government’s aid programs.
The education committee’s Republican leaders had proposed eliminating the so-called 90/10 rule, arguing that the provision, which was added by Congress in 1992 to crack down on fly-by-night schools that had been set up to reap profits from the aid programs, was no longer needed. Advocates for proprietary institutions argue that the rule discriminates against their students and have made its elimination one of their top legislative goals this year.
But Mr. Castle said that he agreed with the for-profit higher-education industry’s critics who say that the provision is important because it requires proprietary institutions to prove that the training they offer is valuable. If the training is worthwhile, Mr. Castle argued, a for-profit college should be able to derive at least 10 percent of its revenue from students willing to spend their own money on it.
“That’s not an unreasonable requirement,” he said.
To deal with some of the concerns of the education committee’s leaders with the 90/10 rule, Mr. Castle proposed changing how it is enforced. Under the amendment, all colleges -- not just for-profit institutions -- would be subject to the restriction. In addition, colleges that violate the rule would not automatically become ineligible to participate in federal student-aid programs, as is currently true. Instead, those institutions would at first face lesser penalties, such as fines.
Eventually, however, if the colleges continued to defy the law, the Education Department would have the authority to remove them from the programs.
Mr. Castle said that he was concerned that the rule harmed students for their institutions’ transgressions by removing their eligibility for financial aid. As for extending the provision to apply to all colleges, Mr. Castle said, he did not believe that any traditional two-year or four-year colleges were in danger of violating the 90-percent threshold.
Mr. McKeon and Rep. John A. Boehner, the Ohio Republican who is chairman of the education committee, reluctantly supported the amendment.
College lobbyists applauded Mr. Castle. David S. Baime, vice president for government relations at the American Association of Community Colleges, noted that only about 6 percent of the revenue community colleges receive comes from the government’s aid programs.
“We believe so strongly in the need for the retention of the 90/10 rule that we are willing to support the extension of the provision even though it was never intended to apply to our institutions,” Mr. Baime said.
Advocates for for-profit colleges said they were unhappy with the amendment, and vowed to fight it as the bill progresses through Congress.
“A bad policy that is applied to one collegiate sector doesn’t get better by extending it to all sectors,” said Richard T. Jerue, vice president for government relations and corporate development at the Education Management Corporation, a publicly traded for-profit company.
There was less controversy surrounding the amendment, sponsored by Rep. Virginia Foxx, a North Carolina Republican, that would forbid the Education Department to create a “unit record” database to track the educational progress of students.
The Bush administration has not yet taken a position on the creation of such a database. Its main proponents have been researchers at the Education Department and some public-college lobbyists, who argue that the proposed system would allow it to measure a college’s performance more accurately by generating better information about retention and graduation rates (The Chronicle, March 31).
But critics of the proposal -- including many conservative groups and the education committee’s chairman, Mr. Boehner (The Chronicle, June 17) -- have argued that the creation of such a database is unnecessary and would present a grave threat to students’ privacy.
Ms. Foxx agreed. “This plan would take ‘big brother’ to another level,” she said.
Background articles from The Chronicle: