NAICU Washington Update

Concerned About For-Profits, Harkin Seeks Solutions

July 27, 2011

Continuing his series of public inquiries into the growth and poor student results of for-profit colleges (see links to earlier articles below), Sen. Tom Harkin (D-Iowa), chair of the Health, Education, Labor and Pensions Committee, presided over a roundtable of witnesses with various view points on the issue on July 21.

Harkin laid out the purpose of the roundtable as a series of questions: What constitutes success for a student at a for-profit school - or in fact, a successful for-profit itself? What should students know to inform their decisions? Are current disclosures sufficient? Should for-profits be subjected to stricter standards? And are there ways to align for-profit incentives to ensure better student outcomes?

Jose Cruz, vice president for higher education policy and practice at the Education Trust, began the discussion by outlining his concern for the rapid growth, concentration, high profit margins, and poor student results of the for-profit sector. He also addressed the conflicting pressures on the for-profits in delivering earnings for shareholders while also addressing the educational needs of under-served populations.

Daniel Hamburger, president and CEO of DeVry, Inc. pointed to the need for outcomes measures for all colleges - a theme he returned to several times - describing those metrics as including what students learn, whether they graduate or accomplish their goals, and whether they are able to repay their loans.

Former deputy under secretary of education Robert Shireman, now of California Competes, felt that while steps had been taken to combat problems with for-profits, the gainful employment regulations ultimately had been weakened. He noted the potential of the for-profit sector, led by people who were "innovative, nimble, and responsive" - something that should be looked for in all colleges. Unfortunately though, he said, "the reality doesn't match the rhetoric."

Holly Petraeus, director of the office of servicemember affairs at the Consumer Financial Protection Bureau, noted that the 90/10 rule doesn't include funding from the Department of Defense or the Department of Veterans Affairs. Sen. Al Franken (D-Minn.) followed up, asserting that including their funding in the 90/10 rule would decrease the likelihood of for-profit schools targeting the military.

Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers (AACRAO), explained that the 90/10 rule was a means of "market viability" by assuring more than one purchaser (i.e., the federal government) for an education product. He suggested that schools with such large percentage of their revenue from the federal government be subject to government subcontractor rules.

Nassirian also noted that faculty highly invested in the integrity of their fields have been replaced by executives more interested in profit, and expressed frustration that the current triad of federal, state, and accreditors provides "neither oversight nor outcome measures," leaving "the lunatics in charge of the asylum."

Late in the discussions, Harkin raised the question of limiting the amount of money a for-profit that is highly reliant on federal funding could spend on marketing. He concluded by voicing his intent to make meaningful changes, and that while the education goals of the country needed the capacity provided by the for-profits, the sector's profitability might have to shrink so that low income students could be more successful.

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