Higher Ed Watch Exclusive: Career College Association Strategy Memo Revealed

The for-profit higher education sector is coming under a level of scrutiny unmatched since the early 1990s. But judging from an internal Career College Association (CCA) strategy memo that Higher Ed Watch has obtained, all of the controversy surrounding proprietary schools appears to have done little to temper the organization’s ambitions. In fact, the document, which CCA distributed to its members during its national convention in Las Vegas last month, shows that the group is fighting as hard as ever to get Congress to gut key consumer protection provisions in federal law that aim to prevent unscrupulous for-profit colleges and trade schools from taking advantage of financially needy students.

These proposals are part of what has been a nearly 20 year campaign by the career college group to chip away at provisions that Congress added to the Higher Education Act in 1992 to protect students and taxpayers from trade schools that were set up to reap profits from the federal student aid programs. In this effort, CCA, with its high-priced lobbyists and bountiful campaign contributions, has been remarkably successful.

But it appears that the association’s luck has finally run out. With the Senate Health, Education, Labor and Pensions [HELP] Committee holding a high-profile series of hearings examining waste, fraud, and abuse in the proprietary school sector, it’s extremely unlikely that lawmakers will have any appetite for weakening the government’s ability to oversee the schools any further. [Not to mention that any such changes would have to be approved by Sen. Tom Harkin, the Iowa Democrat who has spearheaded the hearings.]

Still, the strategy memo provides a revealing look into the mind-set of an organization that has grown all too-accustomed to flexing its muscles on Capitol Hill and getting its way — no matter how much controversy is swirling around its schools.

CCA’s #1 Legislative Priority

At the top of CCA’s legislative agenda is to get Congress to further weaken the “90-10” rule, which has long required for-profit colleges to obtain at least 10 percent of their revenue from sources other than federal student aid in order to continue participating in the government’s financial aid programs.

Congress introduced the requirement in 1992 (at the time it was the “85-15 rule”) as part of a broader effort to crack down on unscrupulous trade schools. At the time, lawmakers felt that the provision was important because it required proprietary institutions to prove that the training they offered was valuable. They figured that schools that offered worthwhile training would be able to derive at least a small portion of their revenue from students willing to spend their own money on it.

Career college lobbyists have spent years and lots of campaign cash trying to get lawmakers to eliminate the requirement or at least take the teeth out of it. And they have largely succeeded in this effort. When the Democratic-led Congress reauthorized the Higher Education Act in 2008, for example, it stopped requiring schools that exceeded the 90 percent limit to become automatically ineligible to participate in the federal student aid programs. Instead, schools now have to exceed the threshold for two consecutive years before they can be penalized. And while the legislation, known as the Higher Education Opportunity Act (HEOA), allows the U.S Department of Education to strip such schools of their eligibility to participate in the government’s financial aid programs, it does not require the agency to do so.

The reauthorization legislation also widened the sources of funds that schools could count towards the 10 percent threshold, including tuition discounts they provide to their students, and temporarily exempted from the 90-10 calculation federal student loan increases Congress had approved earlier that year as part of the Ensuring Continued Access to Student Loans Act (ECASLA).

But career college lobbyists were not satisfied with those victories. So last summer, Rep. Rob Andrews (D-NJ), one of CCA’s most zealous supporters in Congress, persuaded the House Education and Labor Committee to approve an amendment to the student loan reform legislation it was considering at the time that would have further gutted this important consumer protection provision. The legislation proposed lengthening to three years the amount of time that schools could be out of compliance with the law before being punished. It also proposed extending the exemption for the earlier student loan limit increases. These proposals, however, did not make it into the final student loan reconciliation bill.

No Surrender

Despite the setback, career college lobbyists have not given up the fight. According to the strategy document, they are continuing to push these changes with the blessing, they claim, of the Democratic chairman of the education committee:

Chairman [George] Miller’s staff has indicated to CCA that there may be another higher education legislative vehicle moving in Congress that could include items that were excluded from the reconciliation bill, including 90/10 temporary relief. Rep. [John] Spratt has recently introduced H.R. 5448, co-sponsored by Rep. Miller, which would make technical amendments to HEOA. CCA is working with House members to urge inclusion of 90/10 relief in that bill.

Chairman Miller’s aides, however, deny  the association’s account. “This memo inappropriately attributes this statement to Chairman Miller’s staff,” a committee spokesperson stated.

Regardless, even if the association gets what it wanted, it would still not be satisfied. “CCA’s goal is a long-term fix or replacement to the 90/10 calculation due to the serious weaknesses in the 90/10 rule as a metric for the quality of a school,” the document states.

To that end, the association reports that both Reps. Andrews and Tim Bishop (D-NY) have expressed interest to the group “in assisting with the development of either a fix or an alternative to 90/10 that provides a better quality of measurement.” Andrews has recently indicated that he is working on a proposal that would rank all colleges according to their success in graduating students, placing them in jobs, and getting them to repay their loans. Colleges that scored low on this “education quality index” — which would be weighted to provide an advantage to the schools that enroll the most low-income students (i.e. for-profit colleges) — could lose access to at least some federal student aid dollars.

In the current environment, it is extremely unlikely that this plan, which seems to be aimed primarily at scaring traditional colleges away from supporting efforts to reform for-profit higher education, will go anywhere.

Taking on the New Default Rate

The Career College Association is also trying to roll back changes Congress made in the reauthorization legislation that aimed to help the government more accurately measure the rate at which borrowers default on their federal student loans.

Starting next year, the Education Department will officially include in the annual cohort default rate all borrowers who fail to make payments on their loans within three years of college, rather than two, as in current law. The Department will begin holding colleges accountable for the three year rates in 2014. At that time, a default rate of 40 percent in one year or 30 percent (up from 25 percent in current law) for three consecutive cohorts will result in a school losing access to federal student aid funds.

For-profit colleges vigorously fought this change when it was first proposed and, according to the strategy memo, are now looking to stop it from taking effect:

Similar to the search for an alternative to the 90/10 rule, CCA staff and the Federal Legislative Committee are in the process of developing ideas on various legislative fixes and potential technical corrections to take to Capitol Hill to address weaknesses in the Cohort Default Rate measurements.

The association says that with the economy in turmoil, the new standard is too harsh – particularly for judging the performance of schools that predominantly serve low-income and non-traditional students. While lawmakers made some fixes to try and mitigate the impact of the change, CCA argues that they did not go far enough:

Congress also increased the threshold from 25 to 30 percent for three consecutive years and allowed schools to file an appeal after their 2^nd year above 30 percent, but these measures are insufficient to counter the increase in default rates that most certainly will occur based on the current economic conditions.

But at Higher Ed Watch, we believe that CCA has an ulterior motive for wanting to reverse the changes Congress made to the default rate: the new standard makes it at least somewhat more difficult for their member institutions to skirt the rules.

To get around the cap on student loan default rates, proprietary schools have been hiring companies to aggressively push high-risk students to get forbearances and deferments on their loans. Their sole purpose has been to prevent these students from going into default during the two-year window when defaults are counted against the school by the Education Department. Ironically, the schools’ intervention has left many of these borrowers worse off. While obtaining forbearance allows borrowers to stop making payments temporarily, interest continues to accrue on the loans, ballooning the size of their overall debt load.

The Education Department showed how successful these schools have been in artificially lowering their rates during the two-year window when it released preliminary three-year default rates for all colleges last fall. Overall, the proportion of for-profit college students who defaulted on their loans nearly doubled, from 11 percent to 21.2 percent. Meanwhile, 65 percent of for-profit colleges had three-year default rates of 20 percent or more, compared to 4 percent of private colleges, 3 percent of public four-year colleges, and 22 percent of community colleges, according to analysis of the data by Student Lending Analytics. And just 16 percent of these institutions had three-year rates of 15 percent or less, compared to 86 percent of private colleges, 74 percent of public four-year colleges and 36 percent of community colleges.

With all of the scrutiny on for-profit colleges, and particularly the Senate hearings, it would be shocking if CCA got its way. At this point, lawmakers are much more likely to seek to strengthen the government’s ability to measure default rates than to weaken it.

Conclusion

For years, CCA has been a “Teflon” lobbying group. Despite all of the serious charges that have surrounded its schools over the last decade, the association has been remarkably successful in pushing its agenda on Capitol Hill and at the Education Department. Thankfully, those days appear to be coming to an end. We certainly hope so — for the benefit students and taxpayers alike.