After Intervention: The Post-1992 Rebirth of Distance Learning

Ultimately, the 1992 HEA amendments did more to “crack down on sham schools” (in the words of President George H. W. Bush), including shoddy correspondence schools, than any legislation Congress has enacted before or since. In today’s bitterly partisan Washington, it is easy to forget that the 1992 HEA Amendments passed the House and Senate with overwhelming support on both sides of the aisle. The House voted 365–3 in favor of its bill, and the Senate bill passed with a 93–1 vote, with conservative Jesse Helms as the lone opponent. Congressman Steve Gunderson (R-WI), the future head of the career schools trade association, hailed the bill during the House floor debate, calling it “the most important piece of legislation that Congress will consider during this session,” and pledged that committee members on both sides of the aisle had drafted the reauthorization bill to respond to “the challenges in the area of program integrity, especially in the area of guaranteed student loan defaults.”¹

In addition to a series of new accreditation requirements that primarily targeted for-profit schools, the 1992 law contained a slew of provisions in other areas that cracked down on abuse and waste in the federal aid programs.² Among those, the “50 percent rule” provision in the 1992 HEA Amendments effectively ended federal taxpayer support for correspondence schools. Under the 50 percent rule, schools that offered more than 50 percent of their courses by correspondence, or where more than 50 percent of students were enrolled in correspondence courses, were barred from receiving federal student aid.³ After decades of trying to regulate correspondence schools, lawmakers of both parties concluded that the only way to control abuses in these for-profit distance learning institutions was to effectively cut off their life support of federal aid.

After decades of trying to regulate correspondence schools, lawmakers of both parties concluded they had to effectively cut off federal aid.

The 1992 HEA Amendments had a profound impact on the for-profit sector and on correspondence programs, particularly the federal sanctions that barred schools with high default rates from the federal student aid program and the 50 percent rule restricting correspondence education. From 1993 to 1997 alone, 860 for-profit schools closed. But as many of the worst for-profit schools shut their doors, and as news reports of abuses in the sector declined, two profound but related shifts in higher education slowly reignited interest in distance learning.

The first shift was the spread of the internet and the advent of online learning. Unlike the correspondence courses of the past, online learning could be interactive. Distance education students were no longer expected to get course materials in the mail, learn on their own, and study with little or no communication with a qualified instructor. That technological breakthrough created an exciting array of new opportunities for innovative instruction and curriculum. Reflecting policymakers’ interest, the 1998 HEA Amendments waived the “50 percent rule” which required institutions to offer at least half of their programs via brick-and-mortar locations, in a new demonstration program designed to test the quality and viability of predominantly online colleges.

Fifteen postsecondary institutions participated in the demonstration program when it began in July 1999, a number that grew to 24 institutions by 2007, including nine for-profit schools. The number of students in the online demonstration program grew too, from just under 8,000 students in 1998–99 to more than 63,000 students by 2003–04,⁴ although the growth of online learning in postsecondary institutions was still sharply limited by the 50 percent rule for other institutions. By the time George W. Bush took office in 2001, Omer Waddles, testifying for the Career College Association, was claiming that the 50 percent rule was little more than a needless relic. The 50 percent rule “was created in response to various concerns about the level of quality of correspondence courses back in the late 1970’s and early 1980’s,” Waddles told a House subcommittee. “This rule does not reflect the highly effective communications and interactive teaching methods developed for use on the internet only in the last few years.”⁵

The second big shift after 1992 was the explosion in large, publicly-traded for-profit corporations, many of which would expand by adding tens of thousands of online students. A few large for-profit college chains had existed before 1992 and had been traded on the stock exchange, but the giant for-profit corporations that emerged by 2001 had no precedent in the industry. At the time of the Apollo Group's initial offering in 1994, its flagship University of Phoenix had 33 campuses in eight states and enrolled fewer than 27,000 students. Ten years later, the University of Phoenix had more than 225,000 students,⁶ including more than 100,000 students enrolled online, a bigger enrollment than any public university in the nation. At the same time, the political allegiances of the for-profit sector began to shift from Democrats to Republicans. The multi-billion industry became a powerful lobby on Capitol Hill and befriended GOP lawmakers, especially House Speaker John Boehner (R-OH).

Boehner, then-chairman of the House education committee and later Speaker of the House, was the industry’s biggest booster in Congress. He asserted that the abuses of the past were now safely in the rearview mirror and introduced legislation to lift a number of restrictions on for-profit schools. “I believe and others believe,” Boehner stated, “that the accountability provisions still in the law are more than sufficient to prevent the abuses that we saw back in the 1980s and early 1990s.”⁷ Nick Glakas, president of the Career College Association (now the Career Education Colleges and Universities association) agreed, and told Boehner that his 1,250 member-schools were “committed to and focused on compliance,” so widespread abuses in the for-profit sector would never reoccur. “We have to because of our past,” Glakas told Boehner’s committee. “We simply cannot and will not allow what happened 15 years ago to happen again.”⁸

To prevent the abuses that had plagued correspondence education, Congress subsequently decided to add a requirement in 2008 that aid-eligible online learning programs had to have “regular and substantive” interaction between students and instructors.

Glakas and Boehner’s optimism soon proved unfounded as new scandals arose in the for-profit sector, including a damaging 60 Minutes report in January 2005 on the Career Education Corporation that became the subject of a hearing by Boehner’s committee. But Boehner managed to loosen and weaken the 50 percent rule in a 2005 budget act, which provided relief in the aftermath of Hurricane Katrina. The law maintained the 50 percent limitations for correspondence schools but did away with them for telecommunications/distance learning courses.⁹

To prevent the abuses that had plagued correspondence education—in which students learned material largely on their own, often without the aid of a qualified instructor—Congress subsequently decided to add a requirement in 2008 that aid-eligible online learning programs had to have “regular and substantive” interaction between students and instructors. The definition was drawn from the Bush administration’s 2005 report to Congress on the demonstration project, which recommended creating a definition for distance education distinct from that of correspondence education. The administration noted in its report that “our concern is that the current definition could be interpreted to allow a correspondence school to qualify for full participation in student financial assistance programs by introducing even a very limited amount of email contact between students and a grader or instructional assistant with or without subject matter expertise into what is essentially a correspondence course.”¹⁰ It recommended that the definition of distance education include “regular and substantive interaction between students and the instructor”—the very language Congress ultimately used in expanding aid eligibility for online programs.

In a matter of months, the lifting of the 50 percent rule in distance education courses sparked an explosion of online for-profit college programs that qualified for Title IV aid, including those that offered online-only programs to students. In 2003, fewer than 50,000 students nationwide enrolled in exclusively online programs in all sectors of higher education.¹¹ Within two years of the lifting of the 2006 elimination of the 50 percent rule, online-only education was no longer an anomaly, especially in the for-profit sector. The Senate HELP committee investigation of the for-profit industry (a.k.a. the “Harkin Report”) found that 11 for-profit companies alone had enrolled 435,000 students in exclusively online programs by the start of the 2008-09 school year.¹² By the fall of 2017, nearly 50 percent of the 1.4 million students enrolled at federal aid-eligible, for-profit institutions were enrolled in exclusively online programs.¹³

Nearly 70 percent of students at four-year for-profit colleges take all of their courses online, compared with only 5 percent at two-year for-profit schools.

It is notable that students at four-year for-profit schools today are far more likely to take all their courses online than any other group of students. Nearly 70 percent of students at four-year for-profit colleges take all of their courses online, compared with only 5 percent at two-year for-profit schools. In general, for-profit students are now more than twice as likely as their peers at public and private nonprofit institutions to take their courses exclusively online. Many for-profit students also enroll in “brick-and-clicks” for-profit institutions, where only a minority of students attend courses in brick-and-mortar classrooms. Of the 14 large publicly-traded for-profit chains evaluated in 2010 by Senator Harkin's committee, at least seven of the chains then had more than 50 percent of their students in exclusively online curriculum.