In July, we published a story about how investment firms with bets against the for-profit higher education industry stirred up controversy about the industry’s recruiting tactics. We highlighted how one investment firm enlisted the help of executives from homeless shelters and service providers by getting them to sign onto a letter urging the U.S. Department of Education to tighten regulation of for-profit colleges.
Turns out, short-sellers weren’t the only ones to use third-parties to bolster their cause. According to a piece on Bloomberg today, for-profit colleges have been enlisting students to write letters opposing proposed regulation that could limit federal student aid. The proposed rule would limit federal loans to students at schools where graduates have trouble finding jobs or repaying their loans--an effort to prevent schools from overpromising to prospective students, under-delivering on the quality of education, and leaving students saddled with mounting debt ending in default.
But in came the letters opposing the regulation, and it wasn’t just a few letters. It was about 26,000 letters—the most the Department of Education has received on any one topic since 1983, reported Bloomberg. That was enough to make the department suspicious:
U.S. Education Secretary Arne Duncan received so many letters asking him not to cut off funding to for-profit college students, without mentioning the proposed rule, that the department began calling the writers to clarify their purpose, said David Bergeron, acting deputy assistant education secretary for policy, planning and innovation in the Office of Postsecondary Education.
“They had been told the rule was going to take away all financial aid to students at for-profit colleges,” Bergeron said in a telephone interview. “We’re concerned that some people are misrepresenting the rule to generate comment.”
The department wouldn’t say which schools’ students had been called.
The Department of Education recently released data on loan repayment rates. Based on that data, for-profit colleges will be particularly affected by any regulation that bases aid eligibility on loan repayment rates. Here’s the Houston Chronicle explaining the proposed regulation:
Essentially, the new rule would cut off federal money for students in programs where fewer than 35 percent of former students are on-track to pay back their loans and whose graduates have student loan payments [that] exceed 30 percent of their discretionary income and 12 percent of their total income.
For-profit colleges derive much of their revenue from federal aid and have high percentages of students defaulting on loans, which then leaves taxpayers on the hook.
Many for-profit colleges have argued that the regulation would hurt needy students. Harris Miller, CEO of the Career College Association—an industry group representing for-profit schools—told Bloomberg that coaching students to write letters is necessary to help protect their interests.