For-profit colleges, faced with the threat of program closures, have gone on a lobbying and public-relations blitz, spending hundreds of thousands of dollars in an attempt to beat back an Education Department proposal to cut off federal student aid to for-profit programs whose graduates carry high debt-to-income loads.
In the five months since the department offered its controversial “gainful-employment proposal,” for-profit colleges and their chief association have spent at least $620,000 lobbying members of Congress, the Education Department, and the Office of Management and Budget, which is reviewing the department’s proposed rule (see related article, with tables). The University of Phoenix, the nation’s largest for-profit institution, has taken out ads in major publications, including The Chronicle, defending the sector and arguing against the rule, while for-profit colleges are urging their students to sign on to a petition opposing the plan.
For-profit lobbyists and executives are swarming Capitol Hill and federal agencies, pushing an alternative plan that would require programs only to provide prospective students with more information about their graduates’ debt levels and salaries. During the Career College Association’s annual “Hill Day” in March, members of the organization met with aides from nearly every Congressional office. Their message: The proposal would cost jobs and limit access to college at a time when President Obama is pushing education as a solution to high unemployment.
In an attempt to discredit the proposal, some opponents have tried to paint Robert M. Shireman, who as deputy under secretary is the department’s top political appointee on higher-education issues, as a rogue actor. But even critics of the plan acknowledge that Mr. Shireman, who is stepping down this summer, was not the sole author of the proposal.
Lobbyists for the for-profit sector say the last time there was a lobbying push of this magnitude was in 1992, when the Education Department was crafting rules governing commissions for college recruiters. The fight extends all the way to the top, with the chief executives of major for-profit companies like ITT Educational Services, the Career Education Corporation, and Corinthian Colleges holding meetings with agency heads.
For-profit lobbyists and Congressional aides say Education Department officials have been surprised by the amount of pushback they’ve gotten on their proposal.
“I doubt that when Arne Duncan was planning his 2010 calendar, he thought he’d be spending a lot of time on gainful employment,” said Harris N. Miller, president of the Career College Association, which represents more than 1,400 colleges.
Backing From Business
The for-profits have gotten a boost from the U.S. Chamber of Commerce, which represents both for-profit colleges and the employers who hire their graduates. In recent weeks, Arthur J. Rothkopf, executive vice president of the Chamber’s Institute for a Competitive Workforce and a former president of Lafayette College, has met with Secretary of Education Arne Duncan and other department officials to voice concerns about the “gainful employment” rule, said Rolf Lundberg Jr., the Chamber’s chief lobbyist.
“Employers are keenly interested in the continuing ability of the for-profit industry to thrive,” he said.
Consumer and student groups, meanwhile, have launched a counteroffensive, urging the department to stand firm and issuing briefs challenging the sector’s claims about the impact of the proposal. In April the Career College Association released a report on a study of more than 10,000 for-profit college programs. It estimates that nearly a fifth of those programs would become ineligible for federal student aid and forced to close under the proposed rule, which would bar federal aid for programs where a majority of the students’ loan payments would exceed 8 percent of the lowest quarter of expected earnings for graduates in that program, based on a 10-year repayment plan.
The association has extrapolated from those findings to predict that more than five million students could be displaced over the next 10 years if the rule is adopted.
Supporters of the rule say the study demonstrates that the rule would hardly devastate the for-profit college industry because 82 percent of programs would be unaffected.
“What is truly troubling,” said Pauline M. Abernathy, vice president of the Institute for College Access & Success, is the Career College Association’s response to the study. Rather than fighting the rule, she said, its members should shut down programs that require students to take on more debt than their likely earnings would allow them to repay.
The study was conducted by Jonathan Guryan, an associate professor of economics at the University of Chicago’s Booth School of Business, along with a colleague from Charles River Associates, a consulting firm with offices around the world. Neither Mr. Miller nor Mr. Guryan would reveal how much the association had paid for the research or for the professor’s trips to Washington to explain the findings to staff members on Capitol Hill and the Obama administration. But both insisted that the association had had no say over how the study was conducted or in interpreting the results.
An Appeal to Minority Groups
Though for-profit colleges are, in the words of one college lobbyist, “leaving no stone unturned” in their effort to build Congressional opposition to the plan, they are particularly targeting minority lawmakers and members with for-profit colleges in their districts. In April the Career College Association held a briefing for aides to members from the “Tri-Caucus"—the Congressional Black Caucus, the Congressional Hispanic Caucus, and the Congressional Asian Pacific American Caucus—in which association leaders warned that the proposal would harm minority students attending for-profit institutions. At the briefing, the association circulated charts showing that for-profit colleges educate, and graduate, more African-American and Hispanic students than public two- and four-year colleges do.
The sector’s effort to appeal to minority groups has met with mixed success. While the League of United Latin American Citizens and the National Black Chamber of Commerce have come out against the plan, members of the Tri-Caucus groups are split over the proposal.
In the U.S. House of Representatives, two African-American lawmakers—Rep. Alcee L. Hastings, Democrat of Florida, and Rep. Donald M. Payne, Democrat of New Jersey—sent a letter signed by 18 lawmakers to Mr. Duncan warning that the department’s proposal would “disproportionately harm nontraditional and lower-income students” and “lead to educational-capacity cutbacks in critically important fields.” The letter urged the secretary to consider expanding disclosures instead.
But other members of the Tri-Caucus groups are suspicious of the sector. At the Career College Association’s briefing, some aides to minority lawmakers raised doubts about the value that for-profit institutions are providing students, with one aide calling proprietary colleges “the Toyota” of education, according to an individual who attended the meetings. An aide to one of the Hispanic lawmakers said that roughly seven of the 10 or so questions raised by the two dozen attendees ranged from “somewhat skeptical to very skeptical.”
“We agree that the colleges provide the access,” said another aide to a Hispanic lawmaker. “Our concern is that the quality of the education is not what it needs to be.”
The aide suggested that the rules should be even stronger, calling the department’s proposal “actually pretty wimpy.”
He called the association’s appeal to minority members “cynical.”
“Minority status is always used to get away with something,” the aide said.
Lobbying and PR Blitz
For-profit colleges have also been hiring lobbyists with ties to the Congressional Black Caucus, the Education Department, and Congressional leaders. Both the Career College Association and the Career Education Corporation have retained the Podesta Group, a powerful lobbying shop led by Tony Podesta, who is a top Democratic fund raiser with longstanding ties to members of Congress.
Among the lobbyists working for the colleges are Paul Brathwaite, a former executive director of the Congressional Black Caucus; Lauren Maddox, a former assistant secretary of communications for the Education Department; and former aides to Sen. Richard J. Durbin, Democrat of Illinois and the assistant majority leader, and Rep. Al Green, Democrat of Texas and a member of the Congressional Black Caucus.
During the first three months of 2010, the association and the Career Education Corporation paid the Podesta Group about $140,000 in lobbying fees, making it No. 1 among 14 lobbying firms hired by the largest for-profit college groups, according to a Chronicle analysis of lobbying disclosure forms. (The Podesta Group has represented both for several years.) Another lobbying firm, led by Mr. Podesta’s wife, Heather, received approximately $20,000 each from Concorde Career Colleges, DeVry Inc., and Education Management LLC during that period.
Meanwhile, Kaplan Inc. has hired Dezenhall Resources, a Washington-based public-relations firm known in political circles (and a 2006 Business Week article) as the “pit bull of public relations” for its secretive work for interests seeking to undermine environmental groups and advocates for open access to research findings.
Kaplan officials declined to comment on Dezenhall’s entire role, but did acknowledge that the firm has been helping it to place op-ed articles that question the proposed rule. (One of those, by Robert H. Atwell, a former president of the American Council on Education and also a former board member of the Education Management Corporation, which owns for-profit colleges, recently appeared as a letter to the editor in The Chronicle.)
For-profit colleges are being “undeservedly lambasted” by the news media and others and “in situations like this, companies hire outside experts like Dezenhall,” said Ronald H. Iori, a spokesman for Kaplan Higher Education, which runs Kaplan University and other for-profit colleges.
Calls and e-mails to Dezenhall from The Chronicle were not returned. On its Web site Dezenhall describes its chief product as “crisis management” and notes that it is “typically brought in during times of intense scrutiny, risk, or competition.”
In addition to the personal visits to lawmakers and regulators, the colleges and companies have been trying to make their case in the news media, both with op-ed commentaries criticizing the rule and paid advertisements.
This week, for example, the University of Phoenix ran advertisements aimed at discrediting the proposed gainful-employment rule as a policy that could “limit access to the education so many Americans desire.” One of the ads uses a quote from Mr. Shireman praising the for-profit sector. The ads will or have run in newspapers widely read on Capitol Hill—Politico, CQ Today, Roll Call, The Washington Post, and The Chronicle.
Terri C. Bishop, executive vice president for external affairs for the university’s parent company, the Apollo Group, would not say how much the company is spending on the ads.
On the other side of the fight over the gainful-employment rule are groups representing students, consumers. and civil-rights organizations. They have also held meetings with Congressional aides and agency heads, and this week a coalition of more than 20 groups will announce its support for “strong and effective regulation.”
“CCA is much louder than we are because they have way more to lose,” said Christine Lindstrom, higher-education program director for the U.S. Public Interest Research Group, a consumer organization.
“They have just been a force on the Hill and in the media,” she said. “Now we’re feeling the need to amp it up ourselves.”
Ms. Lindstrom said the association’s message, and in particular its argument that it serves minority students, is disingenuous. “They keep saying, ‘We serve this population. We serve this population.’” But the reality is, if you’re serving a financially needy population, “then you need to care about debt and defaults and job placement.”
An association of Florida community-college presidents has already publicly endorsed the proposed rule, calling it “a fair measure” in a letter to Mr. Duncan, and a Texas community-college association is considering doing so.
Student Petition
One unusual piece of the lobbying effort is the online petition drive by an organization calling itself Students for Academic Choice.
For more than two weeks, the self-described organization of “proud students and graduates of private, postsecondary career-oriented institutions” has been seeking signatures from at least 100,000 fellow students and graduates for their petition opposing the proposed rule. (As of Tuesday, the counter on the site showed under 32,000 signers.)
“This new regulation would treat career-college students as separate and inherently unequal,” the petition reads, invoking language of the segregation era.
The site was established with the technical and financial help of the Career College Association, and a number of colleges have put up links to it on their own Web sites. At least one of those pages with the link invites readers with questions to contact a Career College Association lobbyist, Bruce Leftwich.
Advocates for the proposed rule call the petition a classic example of “astroturfing"—an attempt by the association to create the appearance of grass-roots opposition.
The Career College Association’s president, Mr. Miller, said the idea for the petition had come from some of the same 150 students who participated in the association’s March 11 “Hill Day,” an annual event that brings hundreds of college officials to lobby their representatives and senators. The association, he said, had helped out at the students’ request.
“These are not wealthy, middle-class students who have lots of free time,” he said. “We make no apologies for assisting the group getting set up.”
He said the language of the petition was not an attempt by his association to make allusions to the civil-rights battles overturning racial segregation. “I’m not clever enough to use code words,” said Mr. Miller.
Another group, the Business Industry Political Action Committee, has created Web sites for the Education Management Corporation that urge the company’s 20,000 employees and 136,000 students to weigh in with Congress on the gainful-employment rule.
With the department’s decision on the rule expected to affect the stocks of publicly traded for-profit companies, Wall Street analysts have also been closely watching the debate over the proposal. One of them, Trace A. Urdan, an analyst with Signal Hill Capital Group, has even offered for-profits some advice on fighting the proposal: “Embrace the media, control the message,” he urged in an April 27 note to clients and others. “Go on cable television (right and left) and make the case for more-rigorous disclosure and student choice over government price controls.”
He also suggested that the companies appeal to their supporters within the Congressional Black Caucus and to the alternative media outlets that serve minority communities and other interests. “Industry has a great story to tell in terms of expanding educational access within minority communities and in terms of a government policy that seeks to rob these students of choice and condescends to their ability to make informed choices,” he said.
Congressional Pushback
The colleges’ arguments appear to be getting some traction in Congress. In addition to the letter sponsored by Representatives Hastings and Payne, at least two Democratic senators—Bill Nelson of Florida and Bob Casey of Pennsylvania—have sent letters to the Education Department raising concerns about the proposal. Sen. Lamar Alexander, Republican of Tennessee, has suggested that the department consider applying caps on default rates to for-profit college programs rather than adding another layer of regulation. The existing rules penalize colleges whose default rates over all exceed certain levels.
Mr. Alexander, a former secretary of education and a member of the Senate education and appropriations committees, has warned that he will offer an amendment to withhold funds to put the rule into effect if the department follows through with its original proposal.
One senior Republican aide said that the Education Department had failed to make a case for its proposal. Education Department officials have so far refused to provide opponents of the rule with the data they say they used in drafting the rules.
“The department hasn’t presented a factual case,” the aide said. “Before you can legislate, you have to have a factual case.”
Meanwhile, on the House side, Rep. Robert E. Andrews, Democrat of New Jersey, is preparing to offer legislation that would substitute the debt-to-income ratio for a “matrix” of variables used to measure the value that for-profit colleges add. The matrix, he said in an interview, would apply to all colleges, nonprofit and for-profit, and assess four things: job placement in the advertised field, graduation rates, default rates, and success in serving low-income, high-need populations. His goal, he said, is to measure students’ “actual outcomes,” rather than their “projected incomes.”
“I think the department has chosen the wrong method to measure value-added,” Mr. Andrews said. “If we want to measure whether people get a job and how much money they make, let’s measure whether people get a job and how much money they make.”
Jeffrey Brainard contributed to this article.
