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Harkin-backed regulations of for-profit colleges don’t go far enough

BY DI EDITORIAL BOARD | JUNE 09, 2011 7:20 AM

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Lately, many have begun to question for-profit colleges. Do they have the best interest of their students in mind? Or are they simply looking for a way to do exactly what’s in their name — profit?

With this question looming, U.S. Sen. Tom Harkin, D-Iowa, held his fifth hearing on for-profit schools yesterday. This hearing focused on the Department of Education’s new “gainful employment” regulations, which would establish parameters in which for-profit institutions must fall to receive federal funding.

While the for-profit college industry has needed oversight for some time, the new regulations are toothless compared to the original proposal; increases in oversight are welcome, but the federal government will need more stringent requirements to weed out unworthy institutions.

Even if they offend more traditional sensibilities, for-profit institutions could hypothetically provide more options for students in need of an education; in practice, however, they frequently amount to nothing more than federally-funded debt factories. For-profit colleges and private, profit-motivated companies (including career training institutions or career colleges) account for a quarter of all student loans. They are notorious for their easy and efficient online programs, which give students a smooth path to graduation. Frequently, however, the same doesn’t prove true when it comes time for them to find a job, and loans stack up into mountainous debt.

News outlets from Bloomberg to the Chronicle of Higher Education to USA Today have written pieces about the dangers of for-profit colleges, finding exaggerated success stories and frequent fraud. For-profit colleges, said Harkin, make up just 10 percent of students; however, they account for almost half of all student loans currently in default.

“I’m concerned that some of these colleges are actually putting people further behind by saddling them with debts they cannot pay,” Sen. Harkin said in a prepared statement. “It’s our responsibility to root out any waste, fraud and abuse of taxpayer dollars and ensure that the for-profit education industry is providing Iowa taxpayer dollars and student value for all the money they’ve invested in these companies.”

The new regulations would only allow federal grants to go to institutions that meet one of three criteria: More than 35 percent of the graduates are repaying their loans, their loan payments don’t exceed 30 percent of their discretionary income, or their loan payments do not exceed 12 percent of their total earnings. Colleges have three years to comply; the earliest disqualifications would occur in 2015.

This sets the bar awfully low; initially, the regulations allowed for only a year to get for-profit institutions into shape. And 35 percent is horrendously inadequate — particularly in light of a recent report showing that default rates on student loans were at a record high, with for-profit college students accounting for half of the loan defaults.

“Between 2009 and 2010 more than half a million students at for-profit colleges left with debt but no diploma,” Senator Harkin said in his media advisory on the “gainful employment” rule.

Former Kaplan University student Eric Schmitt fell into this exact problem when he enrolled at a for-profit college, which seemed like a good opportunity at the time. However, $45,000 in student loans and years of unsuccessful job-hunting later, he is one of many who have run into the major pitfall of for-profit colleges.

“I knew that I would take out loans to pay for my education, but since the school advertised their career-focused programs that gave you the skills you needed to work in the field I figured it would be worth it,” said Schmitt in a testimony released yesterday.

While the latest regulations have good intentions, seeking a proactive approach to protect students from insecure investments, they don’t go far enough. Perhaps this is a result of intensive lobbying by for-profit insitutions; the legislation faced a record number of comments, and large amounts of lobbying dollars.

As it stands now, the government’s famously shallow coffers are funding predatory institutions. Any step toward greater regulation is laudable, but the new standards won’t ameliorate the problem.
Keep pushing, Sen. Harkin; this crisis deserves a greater response.


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