In the Crosshairs?

Education Department officials have been insisting for months that, despite the warnings of some Wall Street analysts to the contrary, the federal government is not intent on intensifying its regulation of for-profit higher education.

That assertion got a little harder to believe on Friday, when the department announced the composition of a committee charged with negotiating a set of new federal regulations related to the integrity of federal financial aid programs. Given the issues on the panel's agenda, its membership leans notably toward critics of the for-profit sector of higher education, and decidedly short on representatives of the colleges.

Department officials, however, reject the idea that the panel they've appointed is unbalanced.

As is typically the case in the federal negotiated rule making process (which is explained here), the department's September 9 announcement inviting nominations for the committees said it would populate the panels with people who "represent the interests significantly affected by the topics proposed for negotiations."

In this case, the topics under the overall rubric of the integrity of federal financial aid programs include such things as incentive compensation for college recruiters and the use of tests to gauge students' "ability to benefit" from a higher education, which are heavily used by for-profit universities, community colleges, and other open-access institutions.

The goal of negotiating committees like this one (and another the department is creating to look at foreign institutions) is to try to reach unanimous agreement on a set of recommendations for proposed regulatory changes, to provide to the education secretary. Disapproval from any single negotiator can torpedo the whole process, giving the federal agency that sponsors the session -- in this case the Education Department -- free rein to propose whatever it wants.

It was inevitable that any group of officials deemed to have an interest in issues related to potential financial aid fraud and abuse would contain some people who don't like for-profit colleges. The institutions have long been viewed with skepticism by consumers' rights groups that (citing many historical examples and a smaller number of high-profile recent ones) accuse some of the institutions of preying on low-income students by charging comparatively high tuitions and underdelivering on their promises of good jobs.

So it's no surprise that the committee appointed by the Education Department contains consumer and student advocates with a track record of criticizing for-profit colleges. The student members (one primary representative and an alternate) come from two student groups, U.S. PIRG and the United States Student Association, that frequently take aim at for-profit colleges. Both groups signed a letter this month, for instance, that urged Congress to toughen its regulation of private student loans made by for-profit colleges.

The panel also features two consumer advocates. One, Margaret Reiter, is a lawyer who, as deputy attorney general in California, sued Corinthian Colleges, Inc., for “a persistent pattern of unlawful conduct” that included allegedly inflating job placement data and falsifying government records. (Corinthian settled for $6.5 million in 2007.) Her alternate, Deanne Loonin, represents the National Consumer Law Center, which published a 2005 study called "Making the Numbers Count: Why Proprietary School Performance Data Doesn't Add Up and What Can Be Done About It."

What's more unexpected, perhaps, is that the group gathered by the department to negotiate a set of issues that relate heavily to for-profit institutions contains so many other members with a clearly stated antipathy toward the sector, and so few members from for-profit institutions themselves.

As is common, the financial integrity committee includes one representative (plus an alternate) from each of the major sectors of higher education -- public two-year (Richard Heath of Anne Arundel Community College), public four-year (Philip Asbury of the University of North Carolina at Chapel Hill), private four-year (Todd Jones of the Association of Independent Colleges and Universities of Ohio) and for-profit colleges (Elaine Neely of Kaplan Higher Education). Aside from Neely, who can be counted on to advocate for the career college sector, none is known to be particularly a friend or foe of for-profit higher education.

But based on their track records or previous statements, it's fair to expect several of the officials selected by the department to represent various other "communities of interest" to take a sharply skeptical view of for-profit colleges.

Jim Simpson, associate vice president of workforce development and adult education at Florida State College (formerly Florida Community College at Jacksonville), was appointed to fill a slot designed to represent the interests of "work force development." Simpson traveled to Denver in June to speak at one of three regional hearings the department held to solicit views on the issues it should explore in negotiated rule making, and he closed his presentation (which can be found on Page 35 of this transcript) with a stinging critique of for-profit colleges.

He flew to Denver, Simpson said, in part to "put a human face on what happens when schools take advantage of lax regulations." He then recounted the story of a student who applied to his institution after having made the honor roll at an unidentified for-profit university -- "despite later test results ... that placed the student at an elementary school level in mathematics, language and reading," Simpson said.

"This student and their family took out $16,000 in student loans to pay for a two-year degree from a for-profit university that was clearly only interested in tuition money obtained from federally backed student loans," he said. "It is a travesty that they were encouraged to take out huge student loans when their daughter has almost no chance of getting a job that would allow the eventual repayment of those loans."

College presidents are represented in the negotiation process by Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education. Hartle typically stays above the fray in the regular political skirmishing between traditional colleges and for-profit higher education. But ACE, as the lead lobbying group for higher education, almost always sides with traditional colleges in policy debates, and the Career College Association, the leading lobbying group for for-profit institutions, withdrew from ACE in a public spat earlier this decade.

The Education Department chose David Hawkins, director of public policy at the National Association for College Admission Counseling, to represent the interests of admissions officers on the negotiating team. Like several major higher education associations, NACAC does not let for-profit colleges into its membership.

And Hawkins, who writes widely about ethics and other issues in higher education, wrote a 2007 article challenging the notion that for-profit institutions are doing a good job of serving students from low-income backgrounds.

"During the long-running debate over the current reauthorization of the Higher Education Act, lobbyists for the for-profit institutions would have you believe that 'traditional' colleges and universities are fighting against the for-profit colleges in a spiteful legislative contest," Hawkins wrote. "In reality, the 'contest' in Washington is one to preserve the integrity of student-aid programs in an environment characterized by increasingly aggressive recruiting, indiscriminate admissions and loan financing -- often with little to no regard for the student’s ability to benefit or repay -- and questionable ‘return on investment’ for many students lured in by the publicly traded for-profit colleges’ massive advertisement complex."

Apart from Neely, the Kaplan senior vice president of regulatory affairs, and her alternate, David Rhodes, president of the School of Visual Arts, the only other negotiator who appears likely to advocate for for-profit institutions is, by design, is Anthony Mirando, who as president of the National Accrediting Commission of Cosmetology Arts and Sciences was appointed to represent national accrediting agencies.

(Other negotiating teams in the recent past contained just one representative of for-profit colleges, too, but they were focused on topics -- such as accreditation and student loans -- that did not disproportionately affect those institutions. The loan team contained multiple lenders, and the accreditation team three or four accrediting officials.)

Officials of the for-profit higher education sector had argued -- to no avail -- that given the growth of for-profit colleges and the emphasis in this round of rule making on issues that could directly affect them, the department should consider appointing more than one person from the institutions to the negotiating team.

Harris N. Miller, president and CEO of the Career College Association, declined to comment on the makeup of the negotiating panel, which begins its work a week from today.

Officials at the Education Department offered only a one-line statement in response. "The make-up of this committee is similar to past committees and we remain committed to ensuring that it reflects key constituencies," said Justin Hamilton, a spokesman.

But Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, vigorously challenged the assertion that the negotiating team appointed by the department is tilted against for-profit colleges, and that the department has it in for the sector.

Nassirian specifically disputed the notion that Hawkins and others (including Nassirian himself) who have criticized for-profit colleges in the past are biased against the colleges. Hawkins has criticized the colleges' use of incentive compensation for recruiters, Nassirian said, because he believes such payments "inevitably lead to abuse" in the admissions world that Hawkins's group oversees.

"But on the rest of the issues, he is a fairly moderate guy, and I don't know that he is any harsher on the for-profit sector than the nonprofit sector," Nassirian said. Like many experts on financial aid and higher education, Nassirian said, Hawkins believes "it's in everybody's interest that these programs be able to demonstrate accountability and program integrity, or else the billions of dollars that are being devoted to them could be redirected elsewhere."

For-profit colleges have "legitimate concerns ... that they not be subjected to utterly destructive requirements," Nassirian said. But if the institutions are feeling picked on by the new administration, that may have more to do with the fact that the previous White House and Education Department were soft on the sector, greatly softening the very same regulations on executive compensation that are now under review in the upcoming negotiations.

"I can understand why, from the perspective of the last eight years of the Bush administration, any change can only be perceived as a change for the worse" for for-profit colleges, Nassirian said. "But when you judge the matter from the perspective of the taxpayers who fund the system, all the department has asked them to do is to be more reasonable. There is a new mindset in this administration that every dollar needs to be reasonably accounted for, and that money is not being wasted. I don't believe that the good for-profit schools want to contest that view."