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For-Profit Schools Donate to Lawmakers Opposing New Financial Aid Rules

House members who signed letters asking for an end to new financial aid regulations covering for-profit schools also received nearly $94,000 from the for-profit college sector in the first seven months of this year.

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Rep. Donald Payne, D-N.J., has received more than $20,000 in campaign contributions from for-profit schools and their lobby groups this year after co-signing three letters against proposed regulation that the industry says could close many of its schools. (Mustafa Abdi/AFP/Getty Images)

Between 2005 and the beginning of this year, Rep. Donald M. Payne, D-N.J., received $6,000 in campaign contributions from sources related to for-profit colleges. This year, he received more than $20,000 from the schools and their lobby groups, according to campaign finance records.

What changed?

For one, the colleges have upped their lobbying efforts considerably in the face of proposed regulations that the industry says could shutter many of its schools.

For another, Payne co-signed three letters to Education Secretary Arne Duncan, in which as many as 18 members of Congress pleaded with the secretary to put the brakes on that proposed regulation.

Collectively, members who signed the letters received nearly $94,000 from the for-profit college sector between the beginning of 2010 and late July, according to the most recent available campaign finance data reviewed by ProPublica. Most of the donations flowed after March 22 -- the date the first letter was written to Duncan.

(Take a look at the campaign contributions here.)

Other co-signers who received campaign cash from the industry include Reps. Alcee Hastings, D-Fla., and Debbie Wasserman Schultz, D-Fla.; and Jason Altmire, D-Pa. Payne and Altmire sit on the House committee that oversees education, as do several other members who signed the letters and received donations.

Payne did not reply to our requests for comment, but longtime campaign finance watchdog Fred Wertheimer, president of the group Democracy 21, which seeks to "eliminate the undue influence of big money in American politics," said the money given to Payne created a troubling impression.

"Whenever a member of Congress gets a large amount of contributions relatively close to the period where they take a specific action for an interest group, it raises appearance problems that undermine public confidence in the action that was taken, and also undermines the argument for the position on the merits," Wertheimer said.

A spokesman for Wasserman Schultz, who signed two of the letters and received nearly $7,400 from the for-profit industry this year, said the congresswoman signed the letters because the proposed Department of Education regulations are "overly broad and were written without Congressional hearings."

None of the other congressional offices we contacted responded to calls or e-mails.

The stakes are high for the for-profit schools because the proposed regulation tightens the conditions under which educational programs can participate in federal student aid programs. Many proprietary schools draw the majority of their revenue -- billions of dollars each year -- from those taxpayer-backed sources.

Called the "gainful employment" rule (PDF), the regulation would create a two-part test that Duncan has said is intended to stop some career schools from "saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use."

The first part would measure how many former students are paying down the principal of their loans, while the second establishes ratios between the debt students take on to finance their education and their earnings after leaving the school, according to the Department of Education.

The test applies to individual programs of study rather than an entire school. Each program must satisfy at least one part of the test for its students to remain eligible for financial aid.

For example, if a school's nursing program failed to meet the lowest thresholds for principal repayment and debt ratios, future students could not pay for that program using federal financial aid. But if the same school's computer sciences program was in compliance, students in that field of study could continue accessing federal aid.

Schools could be required to warn students about high debt loads if a particular program falls into a danger zone, the Education Department says.

The regulation would apply to all schools -- including for-profit, public and private, nonprofit institutions. Based on current numbers, the department estimates that "5 percent of all programs would no longer be eligible to offer their students federal student aid and 55 percent of all programs would be required to warn their students about high debt-to-earnings ratios."

Mark Kantrowitz, a financial aid expert who publishes Fastweb.com and FinAid.org, predicted the rule will have a greater impact on for-profit schools than other institutions. "The difference is that every type of program at for-profits is impacted, whereas at traditional colleges, it's just the vocational programs," he said.

The department's move comes after government investigations found fraud (PDF) in the recruiting practices of several major for-profit colleges, and amid worsening data on loan default rates, especially for students at for-profit schools.

Harris Miller, president of the Career College Association, which represents for-profit colleges and trade schools, said the gainful employment rule poses a "fundamental threat to a lot of very high-quality programs that could be forced to close."

The industry's effort to build congressional pressure against the new rules has been carefully planned. ProPublica obtained a "whip list" that appears to divvy up responsibilities to lobby individual Democratic members among various schools and industry groups.

The whip list is in an Excel spreadsheet (.xls) written by Chris Collins, according to the document's "properties" data. The Career College Association lists a Chris Collins as its "Grass Roots Coordinator," but Miller said he would not comment on "specific internal documents."

The for-profit industry has not been shy about using its financial weight to lobby for what it wants. The founder of one for-profit chain, Arthur Keiser, has become a major national donor, according to campaign finance records. Keiser is also the current chairman of the Career College Association.

Campaign finance records show that Keiser, his wife, Belinda, and mother, Evelyn, contributed a collective $31,600 to members of Congress who signed the letters since the beginning of this year, when the fight over the regulations had begun to heat up.

Key figures in the industry have also paid numerous personal visits to the Education Department, according to public documents. They include visits by John McKernan, chairman of Education Management Corp., a company that owns several major for-profit schools. McKernan is the former governor of Maine and the husband of Republican Sen. Olympia Snowe.

Records also show visits to the department by officials from DeVry Inc. and Kaplan Inc., two of the biggest players in the industry, and their lobbyists.

Schools have also elicited tens of thousands of comments about the proposed regulation from their students, resulting in what the Department of Education said is by far the largest ever response to a public comment period.

In one instance, the president of the University of Phoenix, William Pepicello, sent out what appeared to be a blast e-mail to students that the Department of Education called misleading.

The e-mail claimed the gainful employment regulation would "block hundreds of thousands of Americans from getting the college education they need and deserve to get ahead in their jobs or find even better jobs."

An Education Department official told ProPublica that the e-mail inaccurately implied that the rule would prevent students from getting loans, when in fact it would affect only particular degree programs at specific schools.

"Students do not lose loan eligibility," said James Kvaal, deputy undersecretary of education. "They can and many will choose from the tens of thousands of programs that remain eligible," he said.

The University of Phoenix would not say to whom the e-mail was sent. The school's most recent financial filings say it has 476,500 students.

Education Department officials would not comment on the industry's lobbying campaign. The agency expects the rule to be finalized by November, and schools that fail the gainful employment test could be cut from the federal aid programs beginning in 2012.

Deborah J. Boyd

Sep. 17, 2010, 10:42 a.m.

The problem with current education at all levels is politics. You have progressive populations both in formal education and informal that aim for purpose over process; and you have the more conservative population that confuses tradition with resistance to change. This latter group feels very insecure with any change and tend to think that if it was good for their generation then it is good for the current and future generations. Pragmatically speaking the best is in the middle. We need to learn to keep the best of the past and add the best of the current and future. Determining what is best needs to be objective and unbiased. The bias is where politics gets into the system. Politics is the art of power and in the modern world that translates to where the individual feels his/her support comes from.

“The regulation would apply to all schools—including for-profit, public and private, nonprofit institutions. Based on current numbers, the department estimates [7]  that “5 percent of all programs would no longer be eligible to offer their students federal student aid and 55 percent of all programs would be required to warn their students about high debt-to-earnings ratios.”

This only touches the surface of the issue.  In their current form, the regulations will disproportionately affect minorities and the areas with high poverty rates the most.  And the resulting restricted and ineligible programs will affect 100s of thousands of present students.

The only way to oppose Arne Duncan is to gain political support regardless of the timing or size of contributions.

Patrick Porras

Sep. 17, 2010, 1:41 p.m.

The for profit educational institutions have really gotten out of control. Some are good, but many are complete scams. I agree with making these schools prove the worthiness of the educational programs they tout. If they can’t, then they should not be privy to our tax dollars.

Nik Gallagher

Sep. 17, 2010, 2:07 p.m.

I’m gonna go out on a limb here but I’m pretty sure Deborah J. Boyd and Steve Fish work for for-profit institutions.

Nik Gallagher

Sep. 17, 2010, 2:17 p.m.

Surprise Surprise! Deborah J. Boyd works for Kieser College a for-profit university.

I have to agree with what you said in your earlier post Deb, “determining what is best needs to be objective and unbiased.”

As outrageous as the fact are what is even more outrageous is that this is the default way US “democracy” works.
I co-signed for $30,000 of loans for a two year course at Western Culinary Institute in Portland Oregon.  The counselors said that graduates had no trouble finding high paying management jobs in the hotel and restaurant industry.  My son has not been able to find a job paying for than !6.00/hour without benefits.  He is just able to pay the interest on the loan and unfortunately at this time I am not able to contribute.  It is clear now that the loan is going to be an albatross around his neck (and mine) for the foreseeable future.  If only these legislators could be shamed into doing the right thing, but they are obviously without shame! 
Thank you for your reporting.

Lord, save us from ourselves but most of all save us from Washington and the corporations, companies and Chamber of Commerce they represent.

ROBERT VON BARGEN

Sep. 17, 2010, 4:01 p.m.

Re Deborah Boyd comment #1:
What does all that blah, blah have to do with whether or not unsuspecting prospective students are exploited and/or defrauded because they are ignorant of how to get an education?  I can’t even figure out which side of this issue Ms. Boyd supports.

Randy Thompson

Sep. 17, 2010, 4:20 p.m.

My heart goes out to John Flynn. The institution that you mention has been hyping Cordon Bleu credentials as some sort of entry way into institutional/professional kitchens.  I’ve actually know some of the students and wonder what ever happened to the Community Colleges and affordable way to learn to food preparation.  And I speak as someone who worked his way in college from a dishwasher to a backup prep cook at the Marriott.

Way back when (1960’s-70’s), technical schools were very economical ways for non-college track students to learn a craft (plumbing, carpentry, electrician, auto mechanic, aircraft mechanics, welding, construction, surveying, etc.) with the outcome that these graduates were immediately gainfully employed.  High schools also supported several programs like auto mechanics, carpentry, home economics, wood working, etc. for non-college track students so their transition to the technical schools was smooth.  Now, everything is based on PROFIT MARGINS and schools of all sorts (including not-for-profit universities) are corporatized in that the athletic programs are clients of Nike, Adidas, Russell Athletics, etc., textbooks are a BIG money-making business (the publishers pay professors to use their textbooks in classes), and class structure/curricula is geared toward the business/corporate model with “group class projects” being assigned.  I know this from personal experience as both a student and current employee of a major university.  In-state tuition is double what I paid in the 1980’s and out-of-state tuition has tripled with graduate school tuition sky-high.  Higher education is rapidly going back to the days (1960’s and 1970’s) where going to college was accessible, for the most part, by moneyed elite.  (Tuition is only a part of the equation…factor in room, board, medical insurance, fees, textbooks, and personal expenses and even state universities leave parents and/or students burdened with loan payments that will last lifetimes.)  Capitalism has co-opted our democracy in so very many ways, including corrupting our public education system.

I am all for getting rid of greed and exploitation.  Some of the for-profits are just diploma mills.  Others are accredited and strive to do a good job of educating students.  One issue that needs to be kept mind is the fact that many of the students in question could not get into many of the public and non-profit schools because of grades.  Others must work full time and try to care for families, so returning to an on-ground school is often out of the question.  Some of those who get second chances fail, and we should expect the rate of failure to be higher than in more traditional schools with higher entrance requirements.  Others succeed and go from welfare to productive citizens.  This might be harder to measure than default ratios, etc., but I believe it must be measured in some way.

The legislation is meant to curb predatory practices by for profit institutions, similar to practices employed by credit card companies who ply their wares in colleges where vulnerable students do not fully know the consequences of their actions.  Politics isn’t the problem, it’s money, as in for profit institutions stand to lose a lot of it.  Legislation is needed because for profit institutions have proven incapable of policing itself.

I would agree that for profit educational institutions provide non-traditional students an opportunity that they would not otherwise have without the accommodations available at those institutions.  The problem that I have is the profit driven nature of these institutions, that does not always lead to gainful employment for those non-traditional students who are the victims in this case because they are the ones who are saddled with the loans they cannot pay back.  By extension, the U.S. taxpayers must then write off these losses, and the only winners in the charade are the for profit institutions.

Thomas E. Duggan

Sep. 19, 2010, 4:23 p.m.

Total ease of entry. Unlimited scaleability. No effective oversight. No quality controls.  Misplaced incentives rewarding quantity.  Unsophisticated, nieve and trusting clients. And, a taxpayer guarantee, regardless of the result.  Sounds like the sub-prime mortgage hustle. The bailout is already in place and the student loan taxpayer losses may approach anything we’ve seen to date. This has the potential to be a whopper!!!

Predatory practices, especially perpetrated on minorities who are mostly young and not very cautious with their school choices are out of hand.  These practices, like money lending and check cashing should have some regulation that curbs their ability to abuse the part of the populace that can least afford these practices.

Lawrence Scott

Sep. 20, 2010, 11:15 a.m.

Re: “mark”: I’m not saying it could never happen, but based on what I’ve read recently I believe it is a fallacy to say that taxpayers are somehow “on the hook” for student loans in default. When you combine the extra interest, the formidable collection powers of the government (garnishment of wages, attachment of tax refunds, etc.), and the near impossibility of discharging student loans in bankruptcy, most studies calculate that the government actually profits on these loans in the long run.

Mike LaFerrara

Sep. 20, 2010, 7:40 p.m.

The key statement Ms. Coutts makes is this:

“The stakes are high for the for-profit schools because the proposed regulation tightens the conditions under which educational programs can participate in federal student aid programs.”

“Public”, or government, funding is an opening wedge of statist control that enables the politicians to dictate how colleges run their institutions. They simply attach conditions to the money. Government funding means government control. When government exerts controls in a nation with First Amendment protections, the logical and necessary consequence is the rise of special interest lobbies.

It’s pointless to lament the lobbying efforts of the for-profit college industry. The issue is not politicization. Government funding is politicization. Those affected by the government-imposed “gainful employment” rule have every moral and constitutional right to take steps to influence the government decision-makers, including through campaign contributions and lobbying and other interest group activities. “Appearance problems” that may be. But federal financial aid, like all public funding, is inherently corrupt and immoral. It starts with forcing people to pay, through taxation, to establish a growing pot of government “aid” loot – and ends with fraud, corruption, and exploding prices.

There are only two possible solutions to the corruption and the “appearance problems”: End all government involvement in the financing of higher education and the regulatory power that goes with it, or repeal the First Amendment’s sanction of “the right of the people peaceably to assemble, and to petition the Government for a redress of grievances”. A special interest lobby is precisely a “peaceable assembly”. Any attempt to restrict the First Amendment is an attempt to shield the government from the people, a basic building block of dictatorship. If you’re not ready for either choice, then live with what we’ve got.


http://www.principledperspectives.blogspot.com/

Think about publicly financed elections. If the only source of funding from Congress was a fixed public donation, then we wouldn’t have this problem.

LaFerrara, you are way off-base.  We need to get the corporations out of public education NOT the government.  Where would many hundreds of thousands of students be without public community/junior colleges largely funded by tax revenues?  It is corporate greed that has created the ITT’s, Kaplans, and other for-profit institutions who, for the most part, go unregulated or worse, do not comply with regulations as they prefer to “fly under the regulatory radar.”  Student loans were privatized during GWB and costs for those loans exploded.  Banks love loaning money at high rates of interest to at-risk lendees…and we are currently experiencing the results of their greed.  It is very sad indeed when the for-profit schools have no conscience when it comes to extorting money from unsuspecting customers trying to improve their chances to achieve success in their lives.  Very sad indeed!

Phoenix Fraud

Sep. 22, 2010, 9:52 p.m.

Who needs a college degree when you can make $9 million dollars working at the University of Phoenix as an enrollment counselor! The University of Phoenix paid two of its enrollment counselors $9 million dollars each in December 2009.

You can read all about that here:

http://hubpages.com/hub/University-of-Phoenix-Multi-Million-Dollar-Salary

Mars, what are you talking about GWB privatizing student loans?  Please provide your source for this inaccuracy.

For profit institutions do serve nontraditional students, often well.  But I fail to see how defaults help anyone.  Requiring schools to demonstrate that individual programs are worth the time, money, and effort seems more than reasonable.  It appears like basic consumer protection to me.  Go Arne!

I attend UoP. I think it is great.  Except the part that i get out of class at 10 p.m. But every thing else is great. I work full time because I DO NOT want to be a broke college student.  The schools academic program does work and is educational.  I have learned so much since i started back in 2006-07.  It all depends on the student to do their best. I would be really disappointed if something would happen to my funding, I want to complete college but their is no way I can do it with out Fed. Student Loans.  Also I am in school with Veterans and currently Insisted on Active Duty, I also have fellow students in my class that work for Raytheon Missile Systems, my current instructor is works there as well…

This article is part of an ongoing investigation:
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For-Profit Schools

For-profit colleges are under fire for their recruiting practices, and the graduation and loan default rates of their students.

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