NAICU Washington Update

Painful Gainful Employment Hearing

July 12, 2011

Members of two House subcommittees joined forces in the most recent debate over the merits of the Department of Education's recent gainful employment regulations on July 8.  The regulations are the most controversial of the 14 regulations being implemented by the Department of Education to gain greater control of for-profit colleges.

Virginia Foxx (R-Va.), chair of the Education and the Workforce Subcommittee on Higher Education and Workforce Training, presided over the hearing.  Also attending were members of the Oversight and Government Reform Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending, chaired by Rep. Jim Jordan (R-Ohio).

As has been the pattern for the past two years, many Republican members expressed concern that the regulations would have adverse effects on businesses and the economy, and are unfairly focused on the for-profit sector.  Democrats spoke of their concerns about the low graduation and high default rates of for-profit students, though several qualified their statements with expressions of support for the sector.  Three of the four witnesses spoke against the regulations.  They emphasized different concerns, but largely stressed the harm to low-income and minorities students if the for-profits serving them were to be eliminated.

Harry C. Alford, president and CEO of the National Black Chamber of Commerce, offered a spirited defense of the for-profit sector, noting it as the only one "stepping up to the plate and taking on the daunting task of educating ‘high risk' students."  He condemned the regulations, as well as the process by which they were developed.  Alford asserted that the regulations shut down "a major path to education and jobs," and that the other sectors -  notably the community colleges - couldn't provide the "facilities and faculty" for these at-risk students.

Several Democrats countered his accusations later in the hearing.  Education Committee member Danny Davis (D-Ill.) disagreed with the comments about capacity.  Maxine Waters (D-Calif.) took exception to Alford's description of the rule-making process as "biased and corrupt" (Allford's written testimony alluded to Department "secret meetings" and collusion with short sellers).  Waters read a list of the interests, including for-profits, that were represented in the negotiated rule-making process.

Rep. George Miller (D-Calif.), ranking member of the Education Committee, suggested in an aside that if the country had listened to the short sellers before the housing crisis that it might have been avoided.  Rep. Tim Bishop (D-N.Y.) pointed out that 90,000 responses to the proposed rule was evidence of an opportunity for input into the rule. (Bishop, Davis, and Miller acknowledged that they had urged the department to back off from the regulations as first offered.)

Dario A. Cortes, president of Berkeley College, a family business in New Jersey, cited the success of his 80-year-old, 9,000-student enterprise.  Rep. Danny David (D-Ill.) used his time with the Republican witness to make the case for maintaining student aid funding.  Asked by Davis about the effects of cuts to Pell Grants, Cortes replied that they would negatively impact access and persistence.

Karla Hammer Carpenter spoke in glowing terms of the flexibility and opportunities offered by Herzing University, a for-profit in Wisconsin.  She had earned her associate's degree from Herzing, and went on to a successful career at Quest Software.  When asked by Rep. Tom Petri (R-Wis.) about her experience in hiring for a global market, Carpenter replied that, while there was need for technically trained workers, what was of great importance was language competence and cultural understanding.

Anthony P. Carnevale, an economist and director of the Georgetown University Center on Education and the Workforce, said that, based on the center's research "the for-profit sector of higher education has had a positive impact on the higher education community."  He saluted the sector's responsiveness "to demand for more capacity in our postsecondary system," but also noted that "growing pains have produced a minority of non-performing programs that have tarnished the reputation of the entire industry."

Carnevale stated that he supports the gainful employment regulations, however.  His view is that they are "not as a job-killer," but rather provide "greater market efficiency" which "will be a boon to both taxpayers and students, not to mention ...the for-profit sector itself."  His assessment is that the regulations are geared for "program improvement, not program elimination."

Near the end of the hearing, Rep. Jackie Speier (D-Calif.) attacked the regulations as too weak, and described the gainful employment rules as "embarrassingly small."  She spiritedly pointed out that, since for-profits receive up to 90 percent of their funding from federal student aid, they were in fact "government institutions."  Speier also warned that she would be watching student outcomes at schools that enroll a high number of veterans.

Despite the misleading spin from for-profit colleges that their sector has been singled out, gainful employment rules in fact apply to all sectors of higher education.  Disclosure requirements for defined programs were to be published on institution websites by July 1, 2011.  Gainful employment reports for recent years are due to the Department by October 1.  (See related story)

The Department has set up a website that includes all the background documents, as well as a Q&A section with responses to colleges' questions about these complicated regulations.   Sanctions for not meeting gainful employment standards relating to student debt levels and repayment rates for programs falling under the regulation won't be implement for several years.

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