For-profit regulations protect students and taxpayers

In the case of student loans, large loan companies were
getting paid handsomely as if they were lenders, when in fact they bore little
risk: When students defaulted, taxpayers paid the bill. A few years ago,
congressional staffers told us this windfall could not be undone, because
lenders could use their abundant profits to hire armies of lobbyists and provide
campaign contributions to keep Congress on their side. Yet the president and
Secretary of Education Arne Duncan took on these special interests by pushing
legislation to reform student loans and free up more money to help students pay
for college. The administration faced down a fierce lobbying campaign and
prevailed in Congress last spring.

Unfortunately, the battle over for-profit colleges has
made the fight over loan reform look like a cakewalk. Secretary Duncan has
proposed regulations enforcing an existing mandate from Congress that certain
short-term education programs receive financial aid only if they prepare
students for “gainful employment.” Administration officials tell us the
pressure from industry to kill the rule is ten times more intense than in the
lender dispute.

The for-profits have spent millions hiring lobbyists,
lawyers, and consultants, including former Clinton and Obama administration
officials and former members of Congress. They have increased their campaign
contributions to both parties, and they are bombarding the airwaves with slick
TV ads claiming that government is threatening college “choice.” One for-profit
filed a lawsuit naming advocacy groups who support the regulation as “co-conspirators”
in an effort to derail for-profits through misinformation. For-profit lobbyists
have made vague accusations about Education Department officials having “secret
meetings” with a speculator who bet against for-profit stocks.

Despite what opponents claim, the new rule does not
represent the government expanding its regulatory reach; the government is
already involved with for-profit schools because it provides financial aid to
their students. The question is whether government policy should direct
students to programs that fail them, or if it should help students succeed in
programs that work.

What is the current system that for-profit schools defend
with such ferocity? One marked by extremely disturbing behavior by some
for-profits, including deceptive recruiting practices, false reporting to
authorities, skyrocketing tuition, high dropout rates, and dismal job
placement. These practices have left many struggling low-income Americans,
especially people of color, buried in debt, while diverting scarce federal
money away from programs that actually help students and our economy.

For-profit schools use federal resources at a
disproportionate rate: They serve 10 percent of U.S. students, but receive 25
percent of federal student aid and have 44 percent of student loan defaults. Kaplan
Higher Education, for example, receives more than 90 percent of its revenue
from federal grants and student loans, and 72 percent of its students are not
paying back those loans.

There are quality programs in the for-profit sector. Those
will be able to thrive under the regulations, which ask the right questions:
(1) Is a program leaving students with overwhelming debt? (2) Is it training
students to earn a living? Programs that don’t meet these minimal standards
should not receive financial aid.

The expensive lobbying by for-profit schools underscores
how the industry has thrived under the current system, and why it wants to
preserve the status quo. But the Obama administration is right to stand up for
a system that will better serve taxpayers and students. It would be a travesty
if pressure by moneyed interests prevailed over fiscal sanity, educational
quality, and economic opportunity for those who need it most.

David Halperin is senior vice president, the Center for
American Progress, and director of Campus Progress. Angela Peoples, Campus Progress Policy and Advocacy Manager.