2019 Proprietary Higher Education Review: “Food Fight!”
By Tony Guida, Partner, Education Group of Duane Morris LLP
“Life imitates art far more than art imitates life.” – Oscar Wilde, The Decay of Living (1891)
In my Proprietary Higher Education Review article last year, I discussed how President Trump’s approach to the Presidency shared much in common with Cecil B. DeMille’s filmmaking, harkening to DeMille’s movie “The Greatest Show on Earth.” In observing parallels between that movie and the Trump administration, I pointed to many critics over the years that rate the Oscar winning movie as one of the “worst” movies ever to win an Academy Award and described, variously, as “pompous,” “overblown,” “brash,” “a big stink bomb,” “frivolous,” “shallow,” and “juvenile.”
Let’s face it, President Trump has been bombastic from the start. Much has been written about his strategic use of chaos (described by Politico as a “vortex of chaos”) to distract and consume his opponent’s energy while he sets out to accomplish his agenda, or deflects his latest attacks. And basically, since President Trump was elected, you cannot watch CNN, MSNBC or other liberal media outlets without finding extended coverage of President Trump’s latest outrageous tweets and public indignities, or recent score on the Truth-O-Meter.
At the time of this writing, House Democrats are in the midst of a marathon impeachment inquiry into whether President Trump directed his personal attorney Rudy Giuliani and others to broker a “quid pro quo” with Ukraine that would personally benefit his presidential reelection campaign. It seems our national politicians can focus on little else than impeachment and the proceedings which will almost assuredly move from a House vote to impeach to a Senate impeachment trial that will bring in the New Year. Palpable chaos.
As I look at the current state of affairs in our Nation’s capital, including campaign activities gearing up for the 2020 presidential election, I can’t help but be reminded of the cafeteria scene from the movie “National Lampoon’s Animal House.”
“Bluto” Blutarsky, after he torments ROTC cadet tough guy Doug Niedermeyer with an imitation of the sounds of his recently deceased horse, imitates what he refers to as a “zit” by spewing mashed potatoes from his mouth at a table of rival Omegas and their colleagues, and is chased around the cafeteria by a mob of Omegas and ROTC cadets, yells “Food Fight!” to create and the iconic food fight scene whereby he makes his escape during the ensuing chaos.
It was tempting in writing this article to do a complete juxtaposition of characters and scenes from the movie “Animal House” to real life people and recent events in Washington D.C. A quick matching of characters was a fun exercise: Faber College Dean Vernon Wormer (Speaker Nancy Pelosi), Niedermeyer (Rep. Adam Schiff), Omega president Greg Marmalard (Special Prosecutor Robert Muller), Eric “Otter” Stratton (Senator Lindsey Graham), Delta House president Robert Hoover (Senate Majority Leader Mitch McConnell), and Kent “Flounder” Dorfman (Rudy Giuliani). However, many of the movie’s scenes don’t withstand legitimate criticisms in the era of #MeToo, so I will refrain from detailed comparisons of how Washington imitates the movie.
Suffice it to say that the current hyper-volatile political environment has created countless distractions that prevent lawmakers from genuinely solving the fundamental questions facing higher education today: how to provide universal access to education that leads to in demand jobs without over-burdensome debt. Instead of true higher education reform, we have a Democratic primary in which each candidate is attempting to outdo the other with their populist higher education giveaways, a Congress singularly focused on the impeachment process, and a Department of Education besieged by House oversight investigations and lawsuits. These distractions will impede the regulatory reset and potentially derail efforts to reauthorize the Higher Education Act (HEA) before the November 2020 election.
The White House Education Agenda
On March 18, 2019, the White House released a 10-point proposal to reform the Higher Education Act (HEA), both through legislation and revised higher education regulations. The administration stated its goal for HEA is to “increase access to affordable, flexible, and innovative postsecondary education and skills attainment to meet the interests and lifelong learning needs of every American.” The Trump administration vowed to continue “to reverse harmful regulatory initiatives that increased the cost of college, fueled skyrocketing student debt levels, and hampered innovation.” Touchstones of this reform proposal are 1) providing more American’s access to a quality education, 2) holding institutions accountable for student outcomes, and 3) helping students and families make informed decisions regarding their educational options. Specific proposals included expanding Pell Grants to high-quality, short-term programs that provide students with credentials, certifications or licenses in high demand fields to better align education with the needs of today’s workforce, requiring institutions that receive taxpayer’s funds to share in the financial responsibility associated with student loans, and encouraging responsible borrowing by limiting Parent and Grad Plus loan limits, improving financial aid counseling, and simplifying student aid repayment.
To the White House and most Congressional Republicans, the Administration’s goals to make a college education worthwhile and to make it simpler to apply for federal student aid and pay back student loans, with less regulations, is commendable. Not all share this vision.
“Double Secret Probation”
“The time has come for someone to put his foot down. And that foot is me!” — Dean Vernon Wormer
Similar to Dean Wormer putting the Deltas on “double secret probation” and ordering the Omega president to find a way to get rid of the Deltas permanently, House Democrats have used their oversight authority to attempt to slow down, if not reverse where they can, the agenda of the Trump administration.
Hearings and Investigations Become the Norm
At the first meeting of the House Education and Labor Committee (HELC) in January, the panel’s new chairman, Rep. Bobby Scott (D-VA), vowed that his committee would conduct “aggressive oversight” of the Trump administration. That Committee, as well as other House Committees, have since held a series of hearings and launched a number of investigations into the DeVos-led Education Department, often with a particular focus on the proprietary sector. A sample of a few titles of House hearings scheduled during 2019 provide a good sense of the Committees’ focus and often their point of view:
- “’With Extreme Displeasure’: Examining the Education Department’s Refusal to Provide Debt Relief to Defrauded Students,” HELC Nov. 19, postponed;
- “Obstruction of Oversight: Examining the Department of Education Ties to the Loan Servicing Industry,” HELC Sept. 25 – postponed;
- “Broken Promises: Examining the Failed Implementation of the Public Service Loan Forgiveness Program,” HELC Sept. 19.;
- “Examining For-Profit College Oversight and Student Debt,” House Veterans Affairs subcommittee May 22; and
- “Examining Mid-Semester School Closures Impact on Student Veterans,” Subcommittee on Economic and Consumer Policy June 19.
And while not directly related to the sector, three separate House Committees – Education, Financial Services and Oversight – are investigating the Department and the Consumer Financial Protection Bureau (“CFPB”) actions related to the Department’s oversight of student loan servicing companies amid claims that the Department has failed to hold the student loan industry accountable.
On the Senate side, the Senate HELP Committee held fewer higher education hearings but did hold a hearing entitled “Reauthorizing the Higher Education Act: Strengthening Accountability to Protect Students and Taxpayers” on April 10 that is representative of the positions of the HELP Committee members. Chairman Lamar Alexander (R-TN) in his opening remarks spoke of autonomy, competition and choice, and a commitment to excellence by higher education institutions’ leaders and faculty as keys to success in institutions of higher education.
While recognizing the need for more accountability, he did “not want the federal government acting as a sort of National School Board for Colleges — telling states and accreditors and boards of directors at institutions how to manage the 6,000 colleges and universities.”
Instead, he proposed a new accountability measure based on a repayment rate of federal student loans. Statements by Committee Democrats, on the other hand, included a heavy focus on for-profit schools, with issues raised including 90/10 reform, the Gainful Employment (GE) rule, the incentive compensation ban, the impact of closed schools, aggressive marketing and recruiting, for-profit conversions to nonprofit status, restored accreditation agency ACICS, and a stated need for more aggressive oversight of the sector, with Senator Murphy (D-CT) calling for “some additional heat on the for-profits.”
2019 also saw multiple new lawsuits filed against the Department which, along with existing lawsuits, challenged both its promulgation of regulations and its oversight of federal student aid funds.
Noteworthy actions include a suit filed in New Jersey federal court in September by the New Jersey attorney general under the Freedom of Information Act to compel the release of student loan records that allegedly would assist it in protecting student borrowers from fraudulent and predatory practices by student loan servicers, for-profit schools, and other institutions. In October, the Massachusetts attorney general sued the Department in federal court over its failure to recognize the state’s group application for loan forgiveness on behalf of more than 7,000 students who attended a school owned by Corinthian Colleges.
And Harvard Law School’s Project on Predatory Student Lending filed separate suits on behalf of student borrowers in federal courts in Massachusetts and California against the Department alleging that it was illegally stalling on processing hundreds of thousands of applications for student loan forgiveness by former students of ITT, Corinthian, the Art Institutes, and other for-profit colleges.
Finally, in October, a federal judge in California held Secretary DeVos in contempt of court and imposed a $100,000 fine for violating an order to stop collecting on the student loans owed by students of Corinthian Colleges.
These hearings, investigations and lawsuits, in addition to being a distraction to the Department’s important day-to-day activities, are tying up resources and bandwidth in an already understaffed Office of Federal Student Aid and General Counsel.
Bills Introduced Against Sector in 116th Congress
The hearings and investigations directed against the sector were clearly designed to support a very aggressive legislative agenda against the sector. Since January, a number of bills directed against the sector were introduced as markers for a HEA reauthorization bill (discussed next). These bills include the following:
- The Court Legal Access and Student Support Act of 2019 (CLASS Act) (S. 608; H.R. 1430), introduced by Sen. Dick Durbin (D-IL), would prohibit mandatory pre-dispute arbitration agreements and bar class action waivers
- The Preventing Risky Operations from Threatening the Education and Career Trajectories of Students Act of 2019 (PROTECT Students Act) (S. 867 and H.R. 3512), introduced by Sen. Maggie Hassan (D-NH), would, among other things, change the 90/10 rule to 85/15, closing the so-called “military loophole” in the 90/10 rule by including GI Bill and Department of Defense education benefits in the numerator, restore the Obama-era GE and Borrower Defense to Repayment (BDR) rules, create a For-Profit Education Oversight Committee, restrict expenditures on marketing, advertising and lobbying activities, expand the incentive compensation ban, and regulate nonprofit conversions
- The For-Profit Fraud Act (H.R. 3112), introduced by Rep. Maxine Waters (D-CA), would change the 90/10 rule to 85/15 and close the “military loophole”
- The Protecting Our Students and Taxpayers Act of 2019 (POST Act), (S. 1775 and H.R. 3179), introduced by Sen. Durbin, which would change the 90/10 rule to 85/15 and close the “military loophole” on June 11
- The Defending All Veterans in Education Action (DAVIE ACT), (H.R. 3369), introduced by Rep. Donna Shalala (D-FL), which would change the 90/10 rule to 80/20 and close the “military loophole”
- The Protections and Regulations for Our Students Act (PROTECT Students Act), (H.R. 3487), introduced by Rep. Susie Lee (D-NV), which would, among other things, change the 90/10 rule to 85/15 and close the military “loophole,” limit efforts to manipulate Cohort Default Rates, prohibit schools from using ANY federal student aid funds for marketing, advertising or lobbying, and provide for the assessment of large civil penalties (i.e., no less than $100,000 and with multipliers of $1 million, $2 million or $3 million depending on the severity of the violations) against institutions and its officers who knowingly and willfully, or with gross negligence, violate the Act
Senate HELP Committee Chair Lamar Alexander (R-TN) began the year earnestly seeking a bipartisan HEA reauthorization bill, negotiating with Senate HELP Committee Ranking Member Patty Murray (D-WA) until early summer when that effort seemingly stalled due to differences on several key and contentious areas, including Title IX. In response, on Sept. 26, Senator Alexander introduced a mini-HEA, the Student Aid Improvement Act (SAIA) (S. 2557), which is a bipartisan package of proposals that include: an extension in funding for HBCUs and minority-serving institutions; FAFSA simplification; expanded Pell Grants for incarcerated students and short-term programs; and standardizing the format and terminology used in financial aid award letters. Since Senator Alexander introduced the bill, Senate Ranking Member Murray and House Chair Bobby Scott have stated publicly they would not support anything other than a comprehensive HEA reauthorization bill.
On Oct. 15, the House Education and Labor Committees introduced its 1,200-page HEA reauthorization bill called The College Affordability Act (CAA). Unlike the Senate’s SAIA, the CAA’s Fact Sheet touts that it “cracks down on predatory for-profit colleges that leave students with exorbitant debt and useless degrees.” Specific proposals in the CAA directly relating to proprietary schools include:
- Restoring the Obama-era GE and BDR rules
- Changing the 90/10 rule to 85/15 and closing the “military loophole”
- Excluding proprietary schools from Pell Grants for incarcerated individuals and short-term programs
- Creating a process for the review and regulation of conversions of institutions from for-profit to nonprofit
- Including receiverships in the same category as bankruptcy filings that render institutions forever ineligible for Title IV funding
- Creating a secret shopper program to improve enforcement of the bans against incentive compensation and making misrepresentations to students
- Creating an FSA Enforcement Unit to review and investigate HEA violations and increasing penalties for colleges who make misrepresentations to students
Other proposed changes to the HEA in the CAA include raising the maximum Pell Grant by $500, enacting a federal-state partnership to make community colleges free (funded by the federal government) and streamlining student loan repayment.
As if to set a further marker against the sector, on Oct. 17, Senator Democrats Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) introduced the Students Not Profits Act (S. 2640) to protect students from the “predatory practices of for-profit colleges.” The proposed bill would remove references to proprietary institutions from the Title IV definitions, making them ineligible to receive Title IV student aid. The next day, Democratic Representative Pramila Jayapa (D-WA) introduced a companion bill in the House (H.R.4724).
Heightened prominence of 90/10 reform
During the past year, the 90/10 rule, and in particular the desire to close the rule’s “military loophole,” has been the subject of a highly coordinated campaign by opponents of the sector and has far and away been the most talked about reform directed at the proprietary sector. Coordinated efforts included a field hearing by Rep. Mark Takano (D-CA), Chair of the Subcommittee on Veterans’ Affairs, and multiple reports, issue briefs and press releases published by highly politicized veterans organizations, liberal think tanks, and consumer groups.
A bill recently introduced in the Senate – the first bipartisan bill in the Senate that would address the “military loophole” – reinforced growing concerns that bipartisan support for tightening the 90/10 rule is increasing in the Senate. The Protect Veterans Education and Taxpayer Spending (Protect VETS) Act of 2019, introduced by Senators Tom Carper (D-DE), Jon Tester (D-MT), Bill Cassidy (R-LA) and James Lankford (R-OK), would amend the 90/10 rule to close the “military loophole” by including military funding in the numerator, but keep the rule at 90/10, and provide for a three-year transition period and other elements such as an appeal process that grants high-quality institutions relief from penalties to “soften the blow” of the 90/10 changes for impacted institutions. The Protect VETS Act also would apply the new 90/10 rule for a limited time to for-profits schools after they convert to nonprofit status.
In a significant departure from his previous position statements, Senate HELP Chairman Alexander has endorsed the Protect VETS Act as “a responsible and reasonable step to ensure that all of our military and veteran students are attending quality institutions worth their time and money.” Senator Alexander also said that he will work to include the Act in the mini-HEA legislation. Senator Alexander’s recent embrace of the 90/10 rule is in stark contrast to a staff white paper he released in February 2018 that discussed the flaws with the 90/10 rule. Specifically, Senator Alexander concluded in that 2018 white paper that what “90-10 really measures is the socioeconomic status of students enrolled at the school, not the quality of the institution” and that “90-10 is neither a good accountability tool nor a measure of quality, but merely an indicator of the level of government support for low- and middle-income students.” Senator Alexander’s complete flip on this issue is attributed to his strong desire to pass even a mini-HEA reauthorization bill prior to his retirement at the end of this term, as well as waning support in general by some Senate Republicans for the sector.
It is important that the sector vigorously oppose the current proposals to amend the 90/10 rule. Schools need to remind policy makers of the flaws with the 90/10 rule as pointed out by Senator Alexander last year.
Even more troubling from a policymaking standpoint, the 90/10 rule does not measure, address or improve the serious problems of student debt or institutional accountability for outcomes (retention, completion and placement). Outcome measures for all institutions of higher education that account for characteristics of students enrolled, regardless of organizational form, are a better focus for Congress as it evaluates HEA reform proposals.
Action on a substantial Senate HEA bill is not expected until late spring 2020, at the earliest, though some less contentious issues such as extension in funding for HBCUs and minority-serving institutions and FAFSA simplification might be addressed sooner. The Senate is preoccupied with other matters before then. There is also a question as to whether Alexander can move forward without support from Senator Murray. As noted above, they have yet to reach an agreement on contentious Title IX sexual assault procedures, including requirements for live hearings. And even if the Senate passes a HEA bill, reconciliation with the House’s CAA is a heavy lift for what time remains for the 116th Congress.
State Activities to Fill the Perceived Federal Enforcement Gap
In February, a group of Democrats in the California Assembly introduced a legislative package of seven bills that had the potential to force many California proprietary schools out of business and increase the cost of doing business in California for nearly all private institutions of higher education. These bills were said to be in response to the perceived DeVos led Department’s laissez-fair approach to regulating propriety schools.
The California bills as introduced would have: required covered institutions to comply with the existing federal gainful employment rule (AB 1340); required the California Attorney General to verify the status of all nonprofit institutions for California education regulatory purposes (AB 1341); authorized the California Attorney General to approve certain transactions of nonprofit corporations that operate private postsecondary institutions in the state, such as the sale of assets (AB 1342); required covered institutions to comply with the federal 90/10 rule, as revised to change the ratio to 85/15 and to include all federal and state funding in the numerator (AB 1343); subjected out-of-state online institutions to all requirements of the California Private Postsecondary Education Act (CPPEA) (AB 1344); broadened the coverage of California’s existing incentive compensation provisions and removed the “bundled services” exception that applies to OPMs such as 2U and other service providers (AB 1345); and broadened the scope of student eligibility for relief under California’s Student Tuition Recovery Fund (STRF) (AB 1346).
Ultimately, after sailing through the Assembly, nearly all of the bills were killed or significantly scaled back in the Senate when faced with a well-organized sector effort led by the California Association of Private Postsecondary Schools (CAPPS). The California legislature chose not to take further action on four bills, two that would have regulated nonprofits (AB 1341 and 1342), the 90/10 rule bill (AB 1343), and the bill related to incentive compensation (AB 1345), though they may be reintroduced in the 2020 legislative session. The GE bill (AB 1340) deleted all references to the federal GE regulation and was limited to a requirement that schools report graduate earnings and debt levels once the California Department of Consumer Affairs certifies that it is capable of processing the data as required by the bill. The bill with respect to out-of-state online schools (AB 1344) removed the requirement that those institutions were required to comply with the CPPEA. Only the STRF bill (AB 1346) was passed substantially as introduced.
Other states, such as Maryland, Massachusetts, New York, Oregon, Virginia and Washington have considered or are considering similar state level oversight of proprietary schools in response to perceived lax oversight by the Trump administration.
Regulatory reset nearly complete
Education Secretary Betsy DeVos is one of the few remaining original cabinet members in the Trump administration and appears committed to fulfilling, from the Department’s perspective, President’ Trump’s promise made in his February 2017 Executive Order 13777, entitled “Enforcing the Regulatory Reform Agenda,” “to alleviate unnecessary regulatory burdens” on the American people. 2019 saw much progress towards that promise.
Gainful employment (GE) rule repeal
On June 28 the Department issued its long-awaited Gainful Employment rule that repealed the Obama-era Gainful Employment rule. While the effective date of the repeal of the 2014 Rule is July 1, 2020, the Department exercised its authority to permit “early implementation” of the repeal, allowing schools to elect to drop compliance with the regulation immediately.
Borrower defense to repayment rule (BDR)
On Aug. 30, the Department released its revisions to the 2016 Obama-era Borrower Defense to Repayment Rule, which becomes effective with one exception related to financial responsibility on July 1, 2020. The revisions provide more stringent standards under which federal student loan borrowers can cancel their debt and schools can be held responsible for these cancellations. The rule also restores the ability of colleges to use mandatory arbitration agreements and class action waivers.
The new rule also revised the triggering events that would require the posting of letters of credit to ensure financial responsibly to include only three “mandatory” triggers and six “discretionary” triggers, moving some triggers from mandatory to discretionary and removing other triggers altogether.
Finally, for purposes of calculating the financial responsibility composite score, the new BDR rule addresses new requirements issued by the Financial Accounting Standards Board (FASB) with respect to operating leases and reverts back to the original treatment of long-term debt, so that only long-term debt associated with the purchase of property, plant and equipment (PP&E) can be included in the numerator of the composite score’s Primary Reserve Ratio.
Accreditation and state authorization regulations
On Nov. 1, the Department issued its final rule on accreditation and related matters, including state authorization requirements for institutions offering distance education. These changes were developed by consensus from a negotiated rulemaking committee that met earlier this year. Except for a few provisions that are eligible for early implementation, and a few provisions relating to the recognition of accrediting agencies, which will take effect July 1, 2021, these regulations are effective July 1, 2020.
Changes to the accreditation regulations removed “geographic area” from the existing scope of recognition, which would allow regional accreditors to expand beyond their current regions. Other changes make it easier for accreditors to approve substantive changes, prevent accreditors from having to take action against an entire institution when noncompliance is limited to a particular program or location, increase the time for institutions and programs to come into compliance with accreditation requirements, and would permit an institutions to continue to award Title IV aid following the end of its participation in the Title IV program for up to 120 days to assist with a teach out of students. Finally, the new regulation clarified the definitions of “regular” and “substantive” interaction between students and faculty as they pertain to the definition of distance education.
With respect to state authorization of distance education programs, the Nov. 1 regulations address the role of reciprocity agreements, update language regarding where students are located, and revise consumer disclosure requirements.
Significantly, the rule eliminates requirements for States to establish new or separate consumer complaint processes for students enrolled in distance learning programs, a requirement in the 2016 rule that has caused conflict with states concerning their appropriate role as a member of the Title IV regulatory “triad,” as well as creating compliance issues and confusion among institutions. The new rule clarifies the requirement to document a complaint process for distance education students by providing that an institution must disclose at least one point of contact for filing student complaints but it may be, in addition to the state where the student is located, the home state of the institution or a third party identified by a State or State reciprocity agreement.
In April, a California federal judge struck down the Department’s two-year delay of the state authorization rules, causing the Obama administration’s 2016 rules to take effect in May.
Implementation of the 2016 rules threatened the loss of aid for public and nonprofit colleges located outside of California that enroll California residents due to a lack of a process in California for resolving student complaints that complies with the 2016 rule. After some public gamesmanship between the Department and the State of California, this issue was resolved by California instituting a complaint process. As California is the only state not to become a member of the National Council for State Authorization Reciprocity Agreements (NC-SARA) state reciprocity initiative, left open was the issue of compliance with the 2016 rule by California institutions that were exempt from regulations for offering online programs in other states and therefore not able to utilize those states’ processes for resolving student complaints.
Finally, the new rules provide that states that join a reciprocity agreement cannot layer additional state higher education authorization requirements on institutions that participate, but they can continue to apply other State laws and regulations that apply to all entities doing business in the statute. A consumer advocate who served on the state authorization negotiated rule-making panel claims that the final rule is not consistent with what the panel agreed. Under the 2016 rule, a state participating in SARA was permitted to enforce “its own statutes and regulations, whether general or specifically directed at all or a subgroup of educational institutions.” The new rule permits states to enforce their own “general purpose state laws and regulations outside of the state authorization of distance education,” with the reference to laws “specifically directed at all or a subgroup of educational institutions” being removed.
SARA-participating states such as Maryland have recently attempted to apply additional laws specifically directed to out of state propriety schools. It will be interesting to see how the Department and NC-SARA hold such states to the new state authorization requirements.
As of the writing of this article, the Department’s final Title IX rule governing campus sexual assault was before the White House Office of Management and Budget (OMB) for approval.
Executive orders to curb impact of informal guidance
The Trump administration on Oct. 9 issued two executive orders that would limit the impact of informal guidance issued by various departments and agencies within the federal government. This guidance takes the form of bulletins, memos and letters (often referred to as “dear colleague letters”) issued by the agency. One executive order would require agency guidance to “clearly state that it does not bind the public, except as authorized by law or as incorporated into a contract” and subject the guidance to a 30-day comment period and a cost-benefit analysis if certain thresholds are met. The second executive order provides that the agency cannot treat noncompliance with a standard of conduct announced solely in guidance as justification for an enforcement action. Instead, as the executive order states: “When an agency uses a guidance document to state the legal applicability of a statute or regulation, that document can do no more, with respect to prohibition of conduct, than articulate the agency’s understanding of how a statute or regulation applies to particular circumstances.”
It will be interesting to see how these executive orders will be applied to the countless Dear College Letters issued over the years by the Department.
2020 Presidential Election
“My advice to you is to start drinking heavily.” – Bluto
As the 2020 presidential election continues to ramp up, the Democratic primary has rightfully been dubbed the “Free-Stuff Primary.” Higher education is at the top of the free stuff list. Further, virtually all Democratic candidates have made cracking down on for-profit colleges a particular focus of their presidential campaign, with Senator Warren calling for an outright ban on for-profit colleges receiving any federal aid. I briefly highlight the higher education positions of the front-runners, in no particular order.
Vice President Joe Biden would make two years of community college free. He would not require student borrowers to make payments (or accrue interest) on their student loans until they are earning at least $25,000, forgiving those loans after 20 years. He would reduce the income-based repayment minimum payment threshold to 5%. He would double the maximum Pell Grant award.
Biden vows to “stop for-profit education programs from profiteering off of students.” Calling for-profit schools “often predatory,” Biden would “require for-profits to first prove their value to the U.S. Department of Education before gaining eligibility for federal aid, ” not explaining what that means. He would also return to what he calls the” Obama-Biden Borrower’s Defense Rule” and eliminate the “90/10 loophole that gives for-profit schools an incentive to enroll veterans and servicemembers in programs that aren’t delivering results.”
Senator Elizabeth Warren’s higher education platform includes as its anchor the cancellation of up to $50,000 in student loan debt for 42 million Americans. After having “cleared out” this debt, Senator Warren would give “every American” the opportunity to attend a public two-year or four-year college “without paying a dime in tuition or fees.” As part of her goal to allow students to graduate “debt-free,” Senator Warren would expand funding available to cover what she refers to as “non-tuition expenses.” To that end, she would increase Pell Grants by $100 billion over the next ten years to cover housing, books and stipends.
Senator Warren’s approach to for-profit schools is to completely eliminate them. As stated on her presidential campaign’s website, her plan would: “[a]fter an appropriate transition period, ban for-profit colleges from receiving any federal dollars (including military benefits and federal student loans), so they can no longer use taxpayer dollars to enrich themselves while targeting lower-income students, service members, and students of color and leaving them saddled with debt.”
Senator Bernie Sanders promises to eliminate tuition and fees at four-year public colleges and universities, tribal colleges, community colleges, trade schools, and apprenticeship programs. He also would cancel the entire $1.6 trillion in outstanding student debt for 45 million borrowers. Like Senator Warren’s plan, Senator Sanders would continue to provide Pell Grants to low-income students to cover non-tuition and fee costs of school including housing, books, supplies, transportation and other “costs of living.” For those who do still need to borrow to go to college, Sanders would cap student loan interest rates at 1.88%.
Senator Sander’s official website does not mention for-profit colleges (although he does address ending the for-profit motive of charter schools).
Mayor Pete Buttigieg takes a middle of the road approach to college free stuff, opposing free college for all, but supporting debt-free college for low income students. His official college affordability proposal includes “free” public tuition for 80% of American families and “substantial tuition subsidies” for students and families earning up to $150,000. He also would increase the size of the maximum Pell Grant by $1,000.
Buttigieg states on his official campaign website that “[u]nscrupulous for-profit colleges have taken advantage of students, particularly service members and veterans.” And he supports “closing a loophole that leads for-profit colleges to target service members and veterans.” Buttigieg vows to “aggressively pursue accountability for for-profit colleges that leave students with unaffordable debt and without viable job prospects,” promising to cancel debt for students who attended these programs.
Senator Cory Booker co-sponsored the Debt-Free College Act, while Senator Amy Klobuchar, who initially came out against Warren’s and Sanders’ free college and debt forgiveness programs as unrealistic, has recently proposed free community college and a proposes a significant expansion to the Pell Grant program.
Only in Hollywood…
The movie “Animal House” ends with a “where are they now” epilogue. The last shot of the film is of a smiling Bluto driving away in a white convertible with the top down with his future wife, Mandy Pepperidge, also smiling and leaning on his shoulder, beneath the words: “Senator & Mrs. John Blutarsky, Washington, D.C.” With any luck, as I look toward 2020 and the various scenarios that could play out politically, for the sector and for our nation, my hope and prayer is that next year’s article recounting the year 2020 will be based on a sappy Disney or Hallmark Channel Christmas movie with a predictable happy ending, and not the series “Game of Thrones.”
TONY GUIDA is a Partner with and co-lead of the Education Industry Group of Duane Morris LLP, a law firm with more than 800 lawyers in offices across the United States, United Kingdom and Asia. Tony focuses his practice on the PreK-12, postsecondary, Edtech and corporate training education sectors on issues relating to federal and state education law; accreditation; mergers, acquisitions and other substantive changes; government response and crisis management; federal and state higher education policy; and government affairs. Tony has previously served in senior executive positions with two major publicly traded companies that owned and operated colleges and universities on multiple platforms, where his responsibilities included regulatory affairs and compliance, acquisitions and divestitures, government and public affairs, policy, strategic planning, new campus development, and public relations. He has also served as CFO and general counsel for a small proprietary college. Prior to joining the higher education industry nearly 20 years ago, Tony was a partner in the litigation section of a large regional law firm.
Tony currently serves on the Board of Trustees of a private nonprofit university and previously served on the Board of Directors of Career Education Colleges and Universities (CECU), a national trade association representing proprietary institutions. He has previously served on the Advisory Committee on Student Financial Assistance, which was created by Congress to serve as an independent source of advice and counsel to Congress and the Secretary of Education on student financial aid policy. Tony is a frequent speaker at symposia and conferences on higher education issues.
Tony is a 1986 graduate of the University of Cincinnati College of Law, where he was an Editor of the Law Review, and a magna cum laude graduate of the University of Dayton with a degree in Accounting.
Areas of Practice: K-12 and Higher Education Transactions, Government Response and Crisis Management, Licensure and Accreditation, Federal and State Education Law, Online Education, Federal and State Education Policy and Government Affairs.
Contact Information: Tony Guida // Partner // Duane Morris LLP // 619-744-2256 // TGuida@duanemorris.com // www.duanemorris.com