The for-profit college industry — which is composed of schools like the University of Phoenix and Kaplan University — has been going all out to prevent new regulation proposed by the Department of Education from ever coming online. They have bought a phalanx of high-profile lobbyists and have been running a slew of ads.
But no public policy offensive is complete without some allies in the halls of Congress. And as the Minneapolis Star-Tribune reported, for-profit schools have found a friend in House Education Committee Chairman John Kline (R-MN):
In the 2009-2010 election cycle the industry donated millions of dollars to the campaigns and political action committees of nearly 100 Democratic and Republican congressional candidates. More than $100,000 went to Rep. John Kline of Minnesota’s Second District, the new Republican chairman of the House Education Committee. “Congressman Kline is deeply involved in these issues,” said Kent Jenkins, communications chief of Corinthian Colleges Inc., a publicly traded for-profit college group that gave $15,750 to Kline’s political action committee. […]
Kline vows to pass legislation with bipartisan support to undo or neuter gainful employment regulations if the U.S. Department of Education implements them. “We’ve looked at the regulations, and they’re not just aimed at bad actors,” he said. “They’re aimed at everyone.”
The proposed regulations would cause for-profit schools to lose their access to public money if their graduates fail to meet a certain debt-to-income ratio or have high rates of student loan default. The proposals arose because students who attend for-profits are using an increasing amount of federal student aid, while accounting for a disproportionate amount of student loan defaults (even as the schools reap profit margins of 30 percent and pay their executives huge salaries).
Evidence suggests that the schools mislead students with outsized promises of future earnings, while actually leaving them buried in debt and with bleak job prospects. Sen. Tom Harkin (D-IA) even put together a report finding that for-profit colleges scammed $521 million from U.S. taxpayers “by recruiting armed-services members and veterans through misleading marketing.”
A new report released this week by the National Consumer Law Center also notes that for-profit schools are making in-house loans to students, even though the schools know will never be repaid, as a gambit to keep federal funding flowing:
Many for-profit (or proprietary) schools have begun making costly private student loans knowing in many cases that more than half of these loans will never be repaid...The schools seem to view these “institutional loans” as loss leaders to keep the federal dollars flowing. Among other reasons, proprietary schools must show that at least 10% of revenues come from sources other than Department of Education federal student assistance. Schools make unaffordable loans as a way of filling up the 10% category with vapor revenues derived from loans that will never be repaid.
The NCLC said that these in-house loans are essentially predatory. The regulations propose by the Department of Education would require this industry to clean up its act, but instead of simply complying, they’re attempting to push the levers of power in the Capitol to prevent the regulations from being enacted.