Obama’s “War” on For-Profits

In his recent opinion piece in the Chronicle of Higher Education, “Is Obama at War With the For-Profit Universities?” Richard Vedder makes an interesting point. By attacking private sector institutions, President Obama and his administration are jeopardizing their self-proclaimed goal of increasing the number of college graduates. And in this economy, when a college education is necessary to get and keep a job, we should not be discouraging any student from pursuing higher education.

Private sector colleges and universities increasingly are the innovators among higher education institutions.  Many increasingly fuse innovative teaching practices with the latest in technology; they have a record of “customer focus” that has resulted in their offering convenient class times at nearby locations with career-related degrees.  The private sector of the higher education industry has thrived, in part because of its innovation and accessibility.

We should neither be employing legislative nor executive remedies to rising student debt that jeopardize access to higher education for only some students in only some programs at only some schools.  Our focus should be Instead on raising the quality of all of the higher education players, making the experience of higher education a transformative one that educates and raises the quality of our labor supply.  And that focus should be on traditional, public and private colleges and universities as well as private sector colleges and universities.  We should work to improve the state of higher education as a whole, without depriving students of access to federal financial aid.


Keep the Data Coming

The release of the Apollo Group’s study, Higher Education at a Crossroads, is another example of much-needed data in the for-profit education debate. While this study was commissioned by a private sector school, it should not be discounted, and it deserves attention along with what was reported here in a Chronicle of Higher Education article – about Apollo and about for-profit education in general. In this debate, all data should be welcomed and it should be evaluated on the usual issues, e.g., its methodology.

Private sector schools play an important role in our education system today.  They do so by providing non-traditional students access to college degrees. This study’s findings are quite startling and they have very significant policy implications.  While I have long argued that private sector schools are essential to meeting President Obama’s goal for college graduates, the study estimates that meeting the goal without proprietary colleges would cost taxpayers more than $800-billion over the next 10 years.  As anyone in a public college or university knows all too well, there is not enough public funding for our existing, public colleges and universities, much less an expansion of this enormity.

If the Department of Education moves forward with the gainful employment rule as proposed, the educational future of our students will be jeopardized. I encourage the Department to take another look at how the rule will affect thousands of students that attend private sector institutions.

Gainful Employment Rule Coming Out Today

The Department of Education is set to release the Gainful Employment rule today according to several news sources:

Chronicle of Higher Education – Education Department Takes Aim at For-Profits With Student-Debt Rule

Inside Higher Ed – Splitting the Difference on Gainful Employment

Associated Press – Proposed federal rules target for-profit colleges

Wall Street Journal – U.S. to Scrutinize For-Profit Career Colleges

Washington Post – Administration proposal aims to tighten oversight of for-profit colleges

Reuters – U.S. rule would force education cos to show work

New York Times – U.S. Releases Rules on For-Profit Colleges

USA Today –  Plan would crack down on for-profit college industry

College Complexities

In previous blogs, I have observed how complex the challenges of higher education really are.  The news from three recent, separate sources, when considered together, confirm its complexity and also once again raise concerns about the capacity of U. S. higher education to respond to our growing needs for sophisticated human capital as a foundation of our economic competitiveness.

On Sunday West Virginia Governor Joe Manchin called on state governors to focus this year on higher education productivity – e.g., enrollment, persistence, and graduation.  Governor Manchin is the new Chair of the National Governor’s Association.

And just five days earlier, the Wall Street Journal reported that low and moderate income students are less likely today to enroll in college, underlining the Governor’s call for a focus on productivity.  The Wall Street Journal summarized a report to Congress from the Advisory Committee on Financial Assistance; compared with 1992, the percentage of low income students who enroll in college has fallen 14 percentage points with only 40% enrolling by 2004.  For moderate income students, the burden of college expense had gone from 22% of family income to 26% of family income in the same period.

Monday’s Chronicle of Higher Education added a third, but inter-related piece of news with its report by Goldie Blumenstyk.  Median family income of students in for-profit colleges is just $24,300, 60% of family income of public college and university students.

If we are to raise U. S. competitiveness and increase higher education productivity as called for by Governor Manchin, we must turn around the decline in enrollment among the lowest income group, and we must assure support for students from low income backgrounds who are increasingly choosing for-profit schools for their education.

Lowering Default Rates

Despite the overtly negative tone of The Chronicle of Higher Education’s story, “Business Is Up in Keeping Default Rates Down,” two things are clear:

  • For-profits are committed to lowering default rates: “Default management has become a flourishing practice and business in its own right, and colleges are seeking help on that front with increasing urgency.”
  • For-profit colleges serve a large majority of at-risk students: “Most for-profit colleges enroll more low-income and working-adult students than higher education does as a whole, and college leaders in that sector say that is a major reason for their high default rates.”

While the story seems to advocate a “misalignment in interests” between the students and the school in managing loan defaults, the article misses the point by targeting assumed motivation rather than positive outcome. Truly, default management is in the same interest as the students, the school, and the government.

“Mr. Hawn, of ECMC, says the practical realities of default-management protect against abuse, as does the ethos of the industry …Colleges aren’t looking to cut corners either, Mr. Hawn ads.  “So far I’ve not run into any school that’s saying, ‘Dave, just focus on the easiest thing,’ he says.”


One Size Does Not Fit All

Chronicle of Higher Education reporter Jennifer Gonzalez makes a very interesting point in her article “Nonprofit Colleges Have Their Own Concerns About New Federal Rules” stressing that it’s not just the proprietary schools that are having concerns with the proposed Dep of Ed regulations.

Mollie Benz Flounlacker, associate vice president for federal relations at the Association of American Universities says “There is concern that some of these regulations targeting the for-profit sector will have a spillover effect. This one-size-fits-all approach doesn’t work in higher education, which has such a diverse set of institutions.”

Students and their learning needs vary enormously.  One-size does not fit all, and traditional colleges and universities are well aware of the resulting challenge.  Schools shouldn not be regulated in a one-size-fits-all approach.

In the same article from the Chronicle, it was also interesting to note C. Todd Jones’ comment. He is the president and general counsel of the Association of Independent Colleges and Universities of Ohio. He makes the point that “the department has created a new regulatory regime to fix a problem that they have not fully articulated with a solution whose impact they don’t fully understand.”

As with any federal rule-making, , there are going to be concerns on both sides of the issue. It is important for the Department to consider the various and unintended consequences of its regulations. At the end of the day, the U. S. needs to consider what is best for the student and what is best for raising U. S. economic competitiveness through education.  And a one-size-fits-all approach probably is not a solution.