Could For-Profit Question Impede Short-Term Pell?

Lawmakers pushing for a dramatic change to the federal Pell Grant program have for months sought to placate liberal critics by arguing that new money wouldn’t go to for-profit colleges.

Legislation dubbed the JOBS Act would expand eligibility for Pell money to programs as short as eight weeks that are designed to land students employment quickly, stirring a debate over whether the funding should be directed toward job training rather than traditional college programs.

Some for-profit colleges would likely take advantage of those funds, especially those geared toward skills training, if not for the prohibition in the bill. But despite rumblings about a potential fight, there’s been muted opposition from the sector so far.

The agreement to exclude for-profits from the bill shows there are exceptions to GOP lawmakers’ dedication to a common set of standards for all colleges. Republicans like Tennessee senator Lamar Alexander, the chairman of the Senate education committee, have been staunch critics of regulations like gainful employment that apply only to for-profits and other career education programs. For the most part, they've argued that federal standards shouldn't single out any particular sector. The lack of activity from for-profits on the JOBS Act, meanwhile, suggests much of the sector may have bigger preoccupations as lawmakers negotiate a new landmark higher ed law, including a potential fight over the federal rule that limits the proportion of a for-profit college's revenue that can come from federal student aid.

Still, exclusion of for-profits could be a fraught issue for supporters of the bill, said David Baime, senior vice president for government relations at the American Association of Community Colleges.

“That’s the reality that we’re dealing with,” he said. “Anything that could complicate passage of the JOBS Act, which is at the top of our priority list, would be a concern.”

Debate Over ‘Sector-Neutral’ Rules

Community college groups have been among the biggest advocates of the JOBS Act. The legislation has also received major backing from corporate leaders, including the Business Roundtable, a group of CEOs from major U.S. corporations. Roundtable board member Ginni Rometty, the chairman, president and CEO of IBM, told lawmakers in a letter in May that the JOBS Act would allow financial aid to "meet learners where they are." The U.S. Chamber of Commerce, on the other hand, hasn't endorsed the bill and a spokeswoman said the chamber has lobbied against the exclusion of for-profits from short-term Pell. 

Skeptics of the JOBS Act among consumer groups have questioned whether short-term training actually pays off in the long run for students from low-income backgrounds. They’ve also made hay over the potential for the proposal to create a bonanza for low-quality for-profit programs. The bill’s supporters have argued that the exclusion of for-profits in the latest version of the legislation addresses those concerns.

While that debate has played out, for-profit colleges themselves haven’t been very engaged on the legislation. That could change soon. Steve Gunderson, president and CEO of Career Education Colleges and Universities, said his group opposes any attempt to apply different regulations to certain sectors, and he plans to raise the issue with lawmakers.

“We’re in the business of workforce preparation, but we’re not allowed to use the short-term Pell Grant in this bill,” he said.

CECU was taken by surprise by the JOBS Act’s exclusion of for-profits -- a provision of the bill that flew under the radar for many until recently. Previous versions of the legislation hadn’t based eligibility on a program’s tax status.

“There’s a way to serve students and protect taxpayers,” Gunderson said. “No. 1 is transparency and No. 2 is universal outcome metrics for all schools.”

Other players in the for-profit sector, though -- CECU mostly represents smaller colleges -- haven’t made the legislation a top concern. The two chief co-authors of the bill, Senator Tim Kaine, a Virginia Democrat, and Senator Rob Portman, an Ohio Republican, haven’t been lobbied on the for-profit ban, aides said.

A Portman staffer said leaving for-profits out of the proposed short-term Pell expansion allowed the bill to address the top concerns of Republicans and Democrats alike.

"The major concern on the Republican side was the cost of Pell expansion," the aide said. "The major concern on the Democratic side was the quality of the programs and making sure we were not opening the space up to bad actors."

Congressional Budget Office scores show the bill would cost about $423 million less over 10 years by dropping for-profits, the aide said.

The Portman aide said the Ohio Republican had no philosophical objection to for-profits receiving short-term Pell funds but wanted to start with programs at community colleges already active in providing short-term skills training. Portman's staff also noted that four other Senate Republicans back the bill, even with the provision.

JOBS Act Tied to HEA Reauthorization

While CECU has promised to push back on the for-profit ban in the JOBS Act, many larger proprietary institutions have focused their attention elsewhere as talks over a reauthorization of the Higher Education Act unfold. One reason is that the biggest players in for-profit education aren't necessarily heavily involved in short-term training. Another is that the JOBS Act is only one potential piece of an overhaul to the landmark federal higher ed law being negotiated by lawmakers. Another involves the federal 90-10 rule -- a much bigger concern for those colleges. That rule caps the proportion of total revenue proprietary colleges can receive from federal financial aid at 90 percent.

Student veteran groups have made tightening 90-10 a top priority for reauthorization of the Higher Education Act. Veterans’ and military education benefits aren't counted toward the rule, and those groups argue that veterans are targeted by for-profit colleges for enrollment as a result. Veterans’ organizations were also among the most vocal opponents of the PROSPER Act, a 2017 GOP proposal to reauthorize HEA that would have done away with 90-10 entirely. A Democratic HEA proposal released last year would have changed the standard to an 85-15 formula, further limiting the proportion of revenue for-profits could take in from federal sources.

The most polarizing debates around for-profits could involve potential changes to that standard.

Whether the JOBS Act moves forward at all will likely have a lot to do with whether lawmakers reach a broader agreement to reauthorize the Higher Education Act in the coming months. That’s both because the costs attached to Pell expansion would be offset by other legislative changes in an HEA deal and because Congress rarely moves stand-alone bills forward that aren’t part of a more comprehensive deal.

“It would be really hard to imagine big changes like that happening to Pell absent a full HEA reauthorization,” said Lexi Barrett, associate vice president for state and federal policy at Jobs for the Future. “That doesn’t mean it’s impossible.”