If Trump Pulls Back, Can States Do More to Regulate For-Profit Colleges?

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This week the U.S. Department of Education began the process of renegotiating a pair of Obama-era rules aimed at holding colleges accountable for abuses against students and student-loan borrowers. The outcome of those renegotiations remains to be seen, but the mere fact that the regulations are once again up for discussion seems like a win for the for-profit education industry.

For-profit colleges were among the most vociferous opponents of the so-called gainful-employment and borrower-defense rules, both of which were seen as threatening to the sector. But even if Betsy DeVos, the education secretary, gets rid of or weakens the rules, for-profits can expect to face oversight. States, particularly those with Democrats in office, will seek to fill the void left by the Trump administration.

“Frankly, it’s almost inevitable,” said Barmak Nassirian, director of federal regulations and policy analysis at the American Association of State Colleges and Universities. But where federal rules promised a more uniform approach, he said, states’ approach to the issues will vary. “It matters enormously who’s in office and what their orientation is on these issues.”

State attorneys general have already taken the lead. Last week 18 of them sued the Department of Education, asserting that it had violated federal law by delaying the borrower-defense rule, a regulation meant to help student-loan borrowers seek loan forgiveness for being defrauded by their colleges.

The attorneys general of Illinois, Massachusetts, and New York have launched investigations of for-profit colleges operating in their states over the past few years, in some cases reaching multimillion-dollar settlements with the companies or striking agreements with the federal government to have students’ loans forgiven.

The attorneys general have written letters to try to keep the pressure on Ms. DeVos’s Education Department to discharge federal loans for students who attended colleges that misrepresented their job-placement rates.

But advocates for strong regulation of the for-profit-college industry, like Mr. Nassirian, say states could do much more. Mr. Nassirian last year helped write a report arguing that state authorization is an underused mechanism for protecting students from colleges with high rates of student-loan default.

A majority of higher-education institutions must be authorized by a state to operate even before they get accredited, though the criteria for authorization vary from state to state. Mr. Nassirian said he was unaware of any states that had made their authorization processes more stringent in response to the threat of waning federal protections. But the option to do so, he said, is available.

“It could be robust by a couple of orders of magnitude more,” Mr. Nassirian said. “You could regulate credit hours or degree requirements.”

Vickie Schray, executive vice president for regulatory affairs and public policy at Bridgepoint Education, a for-profit company that operates universities, mostly online, said states possess robust regulations for education institutions.

“We already have pretty comprehensive requirements,” Ms. Schray said. She favors the Education Department’s efforts to solicit feedback on various regulations, and hopes the department will work to more clearly designate which regulatory bodies — the states, the federal government, and the accrediting agencies — perform which roles.

Other State Actors

Some states have already pursued legislation and regulations that affect the for-profit sector.

A member of the California Assembly, Marc Berman, proposed a bill that would codify the federal gainful-employment regulation in state law. The regulation tries to ensure that students in for-profit vocational programs and other nondegree programs earn enough money after graduating to pay off their student-loan debts. The legislation was intended to “prevent the Trump administration from undoing important student protections,” according to the bill’s summary. It did not pass, but Mr. Berman said he planned to revise the bill and pursue it again next session.

“The gainful-employment regulations that were enacted by the Obama administration were appropriately strong,” Mr. Berman said. He added that he intended to look out for other education regulations that the Trump administration steps away from.

“When we get a sense of what is Betsy DeVos going to focus on,” he said, “then we’ll know these are the areas we need to focus on.”

Though they lack the size, breadth, and power of federal Title IV funding, states also have their own financial aid. To some degree, states can wield that aid as an accountability tool by controlling how and where it can be used.

In 2012 California adopted rules restricting the type of colleges that could accept Cal Grants, the state’s primary student-aid program. Institutions receiving Cal Grants now must have a student-loan default rate below 15.5 percent and a graduation rate above 30 percent. More than 80 percent of the for-profit colleges participating in Cal Grant programs became ineligible after the new rules went into effect, according to a report by the state legislative analyst’s office.

“Many states allow students attending for-profit colleges to receive state grant-aid funding,” said Debbie Cochrane, vice president of the Institute for College Access and Success, a nonprofit group that favors more student-borrower protections. “States can use that access to state resources as a lever to get colleges to improve student outcomes or just direct students to colleges where they might be better served.”

Ms. Cochrane said states also can control which institutions have access to GI Bill and other veterans’ benefits. (Many for-profit institutions heavily recruit veterans.)

“Another thing that states can do is legislate in ways that make improper business practices illegal,” Ms. Cochrane added.

In Massachusetts, the attorney general’s office rolled out regulations in 2014 meant to accomplish that goal. The rules required for-profit and occupational colleges to provide accurate information to the public on their graduation rates, program-completion time, and tuition and fees, and prohibited the institutions from using high-pressure sales tactics.

While the attorney general’s office has led the way in going after bad actors in the industry, State Sen. Michael O. Moore, chair of the legislature’s joint education committee, said he is willing to use state laws to accomplish what the Obama regulations had sought to do.

“I am not opposed to filling in the void if the federal government is going to repeal regulations or statutes that we think are critical to providing protections to our students,” he said. “I will take the lead in making sure we try to fill that void.”

Those in the industry hope efforts to curb wayward for-profit institutions also hold abusive nonprofit colleges responsible. Some for-profit colleges say they welcome consumer-focused oversight and are well positioned if some states ramp up their scrutiny.

Francis J. Felser, president of the for-profit Bryant & Stratton College, said his college is committed to accountability and transparency. The college is based in New York, another state that has investigated for-profit colleges and whose attorney general, Eric T. Schneiderman, was among those who sued the Department of Education last week.

“In New York, there is a longstanding history of working together with institutions of higher education in all four sectors to benefit all New Yorkers,” Mr. Felser said in an email. Oversight shouldn’t attempt to single out for-profit institutions, he added. “Any changes in state regulations for improvements in teaching, learning, and institutional outcomes should be made equally across all sectors to protect the consumer but also the federal and state taxpayer.”

Nell Gluckman writes about faculty issues and other topics in higher education. You can follow her on Twitter @nellgluckman, or email her at nell.gluckman@chronicle.com.