House Oversight Subcommittee Criticizes For-Profit Oversight Under DeVos

By Allie Arcese, Director of Communications

By Allie Bidwell, NASFAA Senior Reporter

The House Oversight Subcommittee on Economic and Consumer Policy on Wednesday held a hearing focused on oversight of the for-profit college sector, during which Democrats and Republicans took starkly different stances on how to address college accountability, prevention of waste, fraud, and abuse, and student loan debt.

While Democrats pointed to abuses within the for-profit education sector, school closures that have left students in the lurch, and the Department of Education’s (ED) attempts to rewrite federal regulations related to for-profit oversight as reason for concern, Republicans claimed there have been abuses and poor outcomes in all sectors of higher education, and any regulatory oversight should be applied to all institutions. Rep. Virginia Foxx (R-NC), ranking member of the House Committee on Education and Labor, added that for-profit institutions fill a need for students that other sectors do not currently provide.

The witnesses included ED’s Acting Under Secretary Diane Auer Jones; Robert Infusino, a former student of the for-profit Illinois Institute of Art; Lindsey Burke, director of the Center for Education Policy at The Heritage Foundation; Christopher Madaio, an assistant attorney general for the Consumer Protection Division of Maryland’s Office of the Attorney General; and David Halperin, an attorney and counselor.

The subcommittee Chairman Rep. Raja Krishnamoorthi (D-IL) opened the hearing by recounting the rapid growth of the for-profit sector, followed by the collapse of two large for-profit college chains—Corinthian Colleges and ITT Tech—which prompted increased regulatory oversight from the Obama administration.

“At the heart of these collapses are students determined to improve their career and life prospects through the promise of higher education,” he said, referencing Infusino’s story.

The former student, who would have graduated this month, said he was deceived and led to believe his institution—which in 2017 was sold to the nonprofit Dream Center Education Holdings which early this year collapsed—would lead to job prospects and a career in his dream field.

“This is my first visit to Washington, D.C.,” he said. “This should be an exciting and happy day, but the truth is I am here because my life has been turned upside down by a school that cared more about making money than looking out for students. My career plans are on hold. I’ve lost thousands of dollars, and I’ve lost faith in the system that is supposed to protect students like me.”

Holding back tears, Infusino went on to say that while he discovered he would be eligible for a closed school loan discharge, it would mean not recovering “the thousands of dollars my dad had already paid out of pocket for tuition, and I would have to give up my dream of becoming an audio engineer.”

Ultimately Infusino decided to transfer to another for-profit institution, “eyes wide open,” and is now on track to graduate in March of 2020. He added that while the Dream Center had promised him $5,000 for tuition after transferring, that money never came to fruition. Infusino wrote to ED via his attorneys, asking for loan discharge for him and for his fellow students.

“At the beginning, I never would have thought to question or doubt the honesty and intentions of a college. And I always would have thought that the Department of Education was there to help and serve students like me,” he said. “But I don’t have much trust in higher education anymore. I wish this weren’t true. But it feels like I’m wrong for having wanted to learn, like I am being punished for trying to get an education and follow my dreams. I know there are thousands of other people

with stories just like mine, many even worse. On behalf of my fellow classmates, I hope that [ED] will step out of the shadows and do what is right for students. And I

hope that by sharing my experience with you today, I can help, in some small way, to prevent more people from being hurt like I was.”

In his written testimony, Halperin said the federal investment in student aid at for-profit institutions has “flunked” tests when it comes to preventing waste, fraud, and abuse, holding institutions to performance standards, and protecting students as beneficiaries of those investments.

“With all the abuses, outcomes have been abysmal for many students—veterans, service members, single parents, people of color, immigrants, older working  Americans, low and middle income—people who just wanted a chance to improve their lives,” he said. “Many are the first in their family to go to college, and some are swiftly manipulated and deceived by the hard-core boiler room operations of predatory schools.”

Halperin recounted the collapse of several for-profit college chains, the state investigations and lawsuits brought against some institutions, the creation of the gainful employment and borrower defense regulations under the Obama administration, and the subsequent repeal and re-write of those regulations under the Trump administration.

“The DeVos Department has eliminated protections for students and taxpayers even as state attorneys general, state oversight agencies, state legislatures, and accreditors are all moving in the direction of stronger accountability,” he said. “The DeVos Department’s abandonment of oversight of the for-profit college industry has been carried out with clear disregard for the law.”

Still, Burke said that while higher education in America “needs significant reform,” the way to improve outcomes is not by “targeting proprietary institutions.”

“For-profit colleges are finding success because they are helping a segment of students that have historically been underserved by traditional universities,” she said. “The real problem afflicting higher education today is the vast amount of taxpayer subsidies being poured into the system. That’s the issue that deserves oversight, rather than singling-out a sector that is meeting the needs of students in a way the traditional system has failed to accomplish.”

Burke went on to say that there are for-profit institutions that outperform the average public colleges, and public colleges that underperform the average for-profit. She added that the gainful employment and 90/10 rule have “unfairly targeted” the for-profit sector.

Proponents of the gainful employment rule have pointed to language in the Higher Education Act that specifically states for-profit programs and non-degree granting programs at public and nonprofit institutions must lead to gainful employment. Opponents of the rule, as it was written under the Obama administration, said it singled out for-profit institutions unfairly.

“If gainful employment and 90/10 are good policies, they should be applied to all types of universities, regardless of tax status, not just to the for-profit sector,” she said in her written testimony. “Better yet, instead of layering on more and more regulations to contain a taxpayer exposure problem created by Washington in the first place, Congress should cut—or at the very least significantly cap—federal student loans.”

Jones began her testimony by saying that as the landscape of higher education continues to change and enrollments shrink, school closures will be inevitable and will include both nonprofit and for-profit institutions, “as is the case already.”

In terms of current oversight, Jones said during her testimony that ED’s program reviews and ability to place institutions under heightened cash monitoring help protect student and taxpayer resources, as well as the requirement that institutions submit a letter of credit if they fail ED’s Financial Responsibility Composite Scores.

She also pointed to the recently-concluded negotiated rulemaking session on accreditation and other issues including distance education, the Teacher Education Assistance for College and Higher Education (TEACH) Grant program, state authorization, and more. She said the consensus language reached by the negotiating committee would “create better off-ramps that facilitate and incentivize orderly closures rather than precipitous closures.”

“Also, the consensus was these proposed regulations would also encourage accreditors and the Department to take action sooner because a built-in wind-down period will provide new alternatives to precipitous closures,” she said in her written testimony. “This time would provide regulators as well as faculty and staff time to help students find a new institution, obtain their records and understand their financial aid options.”

She also discussed the nature of implementing a teach-out plan, which she said must be approved by the accreditor of both the closing and receiving institution, and in some cases the state.

“The Department believes higher education marketplace must remain dynamic and able to accommodate the inevitable ebbs and flows of student enrollments,” she said. “If there is another economic recession, many Americans will likely decide to go back to school, and once again public institutions will be bursting at the seams and private institutions will be expanding to accommodate demand.”

Jones said that the nation has become “very good at adjusting our higher education capacity in times of need by adding new programs and institutions.

“However, in times like the present, when the economy is soaring and other options exist, we must become equally skillful at closing campuses and eliminating outdated or ineffective programs in a way that protects students and taxpayers alike,” she said. “The Department is making progress, but we have more work to do. I welcome this opportunity to discuss the government’s past management of school closures and our efforts to encourage more orderly closures in the future.”


Publication Date: 5/23/2019

You must be logged in to comment on this page.

Comments Disclaimer: NASFAA welcomes and encourages readers to comment and engage in respectful conversation about the content posted here. We value thoughtful, polite, and concise comments that reflect a variety of views. Comments are not moderated by NASFAA but are reviewed periodically by staff. Users should not expect real-time responses from NASFAA. To learn more, please view NASFAA’s complete Comments Policy.

Related Content

House Subcommittee Hearing Puts Spotlight on For-Profit Colleges


Report: Almost All Nonprofit Institutions Would Pass the 90/10 Rule


View Desktop Version