Lingering Regulatory Differences

After 1972, for-profit schools were eligible in theory for all the major components of federal student aid in Title IV of the HEA—Pell Grants, Stafford Loans, and later Federal PLUS loans and Supplemental Equal Opportunity Grants. However, while Title IV eligibility was determined by section 102 of HEA and its subsequent iterations, for-profit schools remained ineligible for all other non-Title IV institutional aid programs, which were regulated by subsequent iterations of section 101 of HEA—which, again, did not include for-profits as institutions of higher education.

To this day, for-profit colleges are ineligible for Title III and Title V institutional aid programs for developing institutions, which go primarily to historically Black colleges and universities (HBCUs), Native-American serving, and Hispanic-serving institutions—even though many for-profit colleges have predominantly Black or Hispanic student bodies.

Similarly, for-profit colleges, no matter how educationally innovative they may be, are ineligible for the Title VII Fund for the Improvement of Postsecondary Education (FIPSE), intended to encourage the reform, innovation, and improvement of postsecondary education. Nor can for-profit colleges compete for Title VIII grants to support the academic, financial, and social needs of veterans, though veterans disproportionately attend for-profit schools.

Industry and conservative resentment about the disparate regulatory treatment of for-profit schools first peaked in 2004 when Representative John Boehner—then chairman of the House Education and Workforce committee—held a hearing with the rhetorical title, Are Students at Proprietary Institutions Treated Equitably Under Current Law? Boehner, a champion of for-profits, opened the hearing by stating, “Today, we ask: Are students at proprietary colleges or proprietary institutions treated equitably under current law? And I think the answer is no.”

Boehner introduced legislation to eliminate both HEA’s statutory distinctions between for-profit and nonprofit postsecondary institutions and the 90-10 rule requiring for-profits to get at least 10 percent of their revenues from programs other than the Title IV federal student aid programs.

Those provisions never made it into law. But ever since, Republican lawmakers have continued to introduce similar legislation. In November, Rep. Virginia Foxx (R-NC) submitted an amendment to the Build Back Better Act to the House Rules Committee to ensure that “all institutions of higher education are treated equally.” Her amendment, which would have effectively eliminated HEA’s restrictive definition of a for-profit college, was rejected too.

Differential regulation is not a dusty or obscure relic of the pre-1972 era of GI Bill abuses. As Elizabeth Warren and three other Democratic U.S. senators pointed out in April 2020, a strict reading of the HEA would have precluded for-profit schools from receiving pandemic stimulus funding, since the Higher Education Emergency Relief Fund (HEERF) in the CARES Act provided non-Title IV emergency funding, which for-profit schools technically were ineligible for.

The Trump administration rejected the senators’ appeal and provided up to $1 billion in HEERF relief to for-profit schools. But that wasn’t the end of the story.

In December 2020, Congress enacted a second COVID relief bill, with 50 percent more HEERF funding. This time, Congress explicitly limited for-profit schools to 3 percent of the $21.2 billion in HEERF dollars. The third COVID stimulus bill, passed in March 2021, limited for-profit schools to just 1 percent of the $39.5 billion HEERF funding, all of which for-profit schools were required to pay to students in the form of emergency financial aid grants. Due to the “heightened risk” from precipitous closures and improper grant payments associated with for-profit schools, the Biden administration announced in May 2021 that presidents, CEOs, and all owners with at least a 25 percent interest in a for-profit school would have to sign a novel certification form to receive funding and to aid in program oversight.