For-Profit, Nonprofit Schools Could See Same Funding Standard

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By Emily Wilkins

Lawmakers and the Education Department are considering proposals that would hold for-profit schools, which critics say too often leave students with worthless degrees and dim job prospects, to the same standard as nonprofit schools for purposes of federal funding.

The department is proposing expanding an Obama administration regulation known as “gainful employment” to programs at all colleges and universities. The regulation currently looks only at vocational programs and prevents a school from receiving federal student aid, also known as Title IV funding, if a high percentage of the program’s graduates struggle to repay their student loans.

About 800 programs, with thousands of students, had a high enough percentage of graduates struggling with debt that they would have been in danger of losing their federal funding, according to January 2017 data released in the waning days of the Obama administration. The Trump administration has delayed further implementation of the regulation while it is rewritten.

“They basically opened up the floodgates of federal money for many programs that wind up leaving their graduates in poverty with a lot of debt,” said Michael Itzkowitz, a senior policy adviser at with centrist think tank Third Way. He said that while all schools should be held accountable, the gainful employment standard was initially created “because of the disproportionately poor outcomes within the for-profit space.”

House Legislation

Republican lawmakers, however, argue accountability should not differ due to a college’s tax status. House GOP lawmakers have introduced legislation (H.R. 4508) that would combine the definition of for-profit and nonprofit institutions and get rid of the phrase “gainful employment.”

The Senate’s education committee chairman, Sen. Lamar Alexander (R-Tenn.), also considered that possibility at a hearing this week when he asked if “relying on the outcomes of different universities and campuses is more important than looking at whether they’re for-profit or non-profit.”

Anthony Carnevale, director of Georgetown University Center on Education and the Workforce, told Alexander that while for-profits had raised a number of issues with their behavior, he agreed “what’s good for the goose is good for the gander.”

“If we set standards and they don’t make them, then they don’t get Title IV money,” he said, referring to for-profits. “But that should also be true for the rest of the higher education system.”

The area is likely to be a bone of contention among Republicans and Democrats. Sen. Elizabeth Warren (D-Mass.) began her questions during the hearing with half dozen statistics highlighting concerns with for-profit colleges. She said students who attend for-profit schools are more likely to default on their loans and file claims that they were defrauded.

“For-profit colleges are different,” Warren said. “And when the federal government pours billions of dollars into these colleges, we should put some restriction on the money that recognize those differences.”

To contact the reporter on this story: Emily Wilkins in Washington at ewilkins@bgov.com

To contact the editor responsible for this story: Paul Hendrie at phendrie@bgov.com

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