Battle on For-Profits Moves to Senate

For-profit college companies—which draw much of their wealth from taxpayer subsidies—are trying to quash federal rules that would protect students from sleazy recruitment tactics and crippling debt burdens. The industry’s lobbying and advertising blitz seems to have swayed members of the U.S. House of Representatives, who voted Thursday afternoon for the Kline amendment, which cuts off federal funding for rules on “gainful employment” promised to students in career programs.

This amendment eliminates funds for enforcing rules that require for-profit colleges to inform students about the costs, placement rates, and student debt burdens of their programs, and also for crafting proposed regulations that define gainful employment. The battle over reining in for-profit abuses now moves to the U.S. Senate, which is expected to decide on a similar measure in the next several weeks.

A growing coalition of lawmakers and advocacy groups are seeking to save the federal rules. In addition to The Education Trust, the organizations include the Children’s Defense Fund, the NAACP, the National Council of La Raza, and the Mexican American Legal Defense and Educational Fund (MALDEF), among many others.

Opposition to the amendment in the Senate includes the leadership of Sen. Tom Harkin (D-Iowa),  who chairs the Health, Education, Labor, and Pensions Committee. In response to the vote, Harkin said:  “Despite the alarm bells set off by this data, some members of Congress want to block a commonsense rule to ensure that taxpayer-funded federal aid does not go to for-profit colleges or other career programs that consistently leave their students with debt they cannot repay. Rest assured, I will vigorously oppose their efforts. Blocking this rule would amount to willfully ignoring how billions of taxpayer dollars are used every year, shirking our responsibility to both the American taxpayers and the students who deserve a better education. Instead, we should take this and other basic steps to ensure that students are being educated, not just indebted.”

Against this backdrop, recent press stories have exposed the whopping salaries earned by board members at some of the nation’s for-profit colleges. The Chronicle of Higher Education reports that at the Apollo Group, which runs the University of Phoenix, nine (nonofficer) directors in 2009 pocketed pay packages of roughly $400,000 each for their part-time jobs.

These boardroom rewards came as graduation rates across the University of Phoenix system averaged a paltry 9 percent for first-time, full-time freshmen seeking bachelor’s degrees. Student loan defaults, meanwhile, soared. Among students who began repaying their loans between October 1, 2007 and September 30, 2008, nearly one-fourth (23 percent) had defaulted by September 30, 2010.

Apparently, the irony of top pay for college leaders who deliver mostly failure and debt for students—many of them young people of color or youth from low-income families—has been lost on Apollo’s board members. It remains to be seen if the Senate grasps the discrepancy—not to mention the waste of taxpayer dollars and destruction of student hopes—and is moved to act.