Commercial colleges cost students- government more

Flurry of Data as Rules Near for Commercial Colleges

By TAMAR LEWIN  NYTimes

As the United States Department of Education gets closer to issuing its final regulations on commercial colleges’ eligibility for the federal student aid that provides the bulk of their revenue, a flurry of new reports and litigation are being filed in advance of important policy decisions for the schools.

“There’s obviously a great deal of political posturing and positioning taking place,” said Terry W. Hartle, senior vice president at the American Council on Education. “The for-profits want to underscore the importance of the needy population they serve. Critics want to undermine the sector. It’s very hard to separate fact from fiction, given all that’s taken place.”

On Thursday, the department issued new data showing that many commercial colleges leave large numbers of their graduates unable to pay back their loans. The data — covering all institutions of higher education — found that among students whose loans came due in 2008, 25 percent of those who attended commercial colleges defaulted within three years, compared with 10.8 percent at public institutions and 7.6 percent at private nonprofit colleges and universities.

“Our schools are primarily educating working adults and lower income students, which is not true of traditional higher education,” said Harris Miller, president of the Association of Private Sector Colleges and Universities. “My expectation is that if you compared schools with our demographics, they would have similar rates, and I don’t understand why the Department of Education can’t break it down that way.”

Senator Tom Harkin, chairman of the Senate Health, Education, Labor and Pensions Committee, who has been holding hearings on the commercial colleges, said the new data made it clear that students at those colleges are “dramatically worse off after they leave” than students at private or public nonprofit schools.

“With for-profit students accounting for almost half of all student loan defaults, serious questions have to be raised about the taxpayer investment in these companies,” he said.

Starting next year, colleges that have default rates greater than 30 percent for three consecutive years will, as of 2014, lose their eligibility for federal student aid.

At a background briefing on Thursday afternoon, department officials said it was impossible to predict from the data how many colleges would be cut off.

The University of Phoenix, the largest commercial institution, was at 22.77 percent. Kaplan University, owned by The Washington Post Company, had a 30 percent three-year default rate. And Corinthian Colleges had some units that edged far higher — with one, Everest Institute in Texas, at 58 percent.

The new default rates are only one point of dispute in a larger battle over the department’s efforts to impose new rules on the commercial colleges, which enroll about 12 percent of the nation’s college students.

At the heart of the fight is the department’s new “gainful employment” rule, which would cut off federal financial aid to programs whose graduates have big student loans, low income and low loan-repayment rates.

That rule was part of a package intended to remedy abuses in the for-profit sector — abuses that have been detailed in Senate hearings, and a report by the Government Accountability Office in which undercover investigators found wrongdoing at all 15 of the colleges they visited.

While most of the new regulations were released in final form last fall, the department split off the gainful employment rule for later action — now expected next month.