GOP Endorses Exemption Allowing For-Profit Colleges To Suck Away Even More Taxpayer Money

Republicans have made little secret of the fact that they intend to use some of their new-found muscle in Congress to push back on attempts by the Obama administration and Senate Democrats to better regulate for-profit colleges. When asked if he would be of any assistance in regulating for-profit education outfits, House Education Committee Chairman John Kline (R-MN) replied, “I don’t think so.”

For-profit colleges are already doing quite well at the expense of taxpayers, while graduating less than half their students; just 11 percent of higher education students attend these schools, yet they receive 26 percent of total federal student aid (while accounting for 43 percent of total student loan defaults). They have also been accused of using questionable recruiting tactics, as well as leaving students buried in debt and with bleak job prospects. Executives at the schools are paid significantly more than their non-profit and public sector counterparts.

By law, for-profit schools aren’t allowed to receive more than 90 percent of their revenue from the federal government. However, as Bloomberg News reported, two of the bigger for-profit schools — the University of Phoenix and Corinthian College — have said they may violate this level next year, so they are asking Congress for an exemption. And the GOP seems happy to oblige:

The companies are lobbying Congress to strike down the revenue cap, called the 90/10 rule, or extend an exemption that would help them comply for the next fiscal year. Changing the rule will be the industry’s most important battle in Congress, said Jarrel Price, an analyst with Height Analytics in Washington. […]

Minnesota Republican Representative John Kline, chairman of the House education committee, said he is “not thrilled” with the 90/10 rule. Job placement and student loan repayment rates are better indicators of program quality, he said. Senator Mike Enzi of Wyoming, the senior Republican on the Senate education committee, is also assessing the impact of the 90/10 rule, according to Craig Orfield, a spokesman.

In 1998, the 85/15 rule was turned into the 90/10 rule, and it didn’t result in for-profit colleges providing a better product to students. Of course, an exemption is warranted if there are extenuating circumstances, but to blow the cap off entirely would allow these schools to literally receive 100 percent of their revenue from the federal government, even as they lavish money on their executives and leave students with a questionable education. Sen. Tom Harkin (D-IA) said, “Given the abuses that my committee has documented — alarmingly high dropout rates and crushing debt loads for students — the 90/10 rule clearly isn’t enough.”


As it is, the GOP has already pledged fealty to corporate interests in the education arena, by pledging to revisit the student loan reform enacted in 2009 (and therefore reviving billions wasteful federal subsidies that were going to private student loan companies). This is just one more instance where the interests of business seem to come before the interests of students.