The letter [PDF], signed by our own Consumers Union, cites the President’s own words from last August, in which he talked about big-ticket for-profit schools that get billions in federal money through student loans but have remarkably high dropout and unemployment/underemployment rates for their graduates.
“Students aren’t getting what they need to be prepared for a particular field,” explained the President at the time. “They get out of these for-profit schools loaded down with enormous debt. They can’t find a job. They default. The taxpayer ends up holding the bag. Their credit is ruined, and the for-profit institution is making out like a bandit. That’s a problem.”
In the months since Education began the process of refining the rule, which required all schools that get federal funding demonstrate they “prepare students for gainful employment in a recognized occupation,” the for-profit college industry has managed to effect numerous changes that would weaken the rule.
“The changes would have made the regulation so weak on predatory colleges and so hard on low-cost, high-performing colleges that not a single negotiator voiced support for the Department’s last proposal,” reads the letter, which calls on the President to propose a stronger version of the rule in time for it to be finalized by the Nov. 1 deadline.
The letter addresses several failings of the current draft of the rule and minimum standards for what these groups believe the rule should include.
DROPOUT RATES AND OR LOAN REPAYMENT RATES
The current draft of the legislation only considers the employment and debt levels of graduates of a school. It does not take into account dropout rates or the debt levels of those students who do not finish their education during a given number of years.
“This is like measuring the success of a baseball team by counting only the games it won and ignoring the ones it lost,” the Center for Responsible Lending, one of the signers of the letter, explained back in September.
The new letter points out that, by the standards of the current draft of the rule, “programs where 99% of the students drop out with heavy debt” would still be allowed to continue receiving federal funding, as these dropouts and their debt are not taken into consideration.
In advance of these rules, and to paint a rosier public image of their graduates, some schools have been accused of “rewarding” students who do well and will graduate on time with retroactive scholarships. This effectively lowers their debt on graduation. While there’s no problem with providing incentive to good students, the concern is that the schools are attempting to manipulate their stats by saying to regulators, “Look, our graduates are not leaving school with mountains of debt.”
The current rule also only takes into account loan default rates, but the letter says this doesn’t consider the large number of student loan borrowers who are not in default but occasionally miss payments or need to make partial payments to avoid default.
PROGRAMS THAT AREN’T PREPARED TO TRAIN
It’s one thing if a former student can’t get a job in his or her field of training because their teachers weren’t very good; it’s another if that school takes thousands of dollars and its graduates are not allowed to even attempt to get a legitimate job in that field.
The letter gives the example of a dental assisting training program that receives federal funding but whose students didn’t receive the proper coursework (or the school lacks the proper accreditation) for its graduates to then take the required licensing exams.
“Subsidizing such programs misleads students, who trust the federal government to fund only worthwhile programs and is clearly inconsistent with the statutory requirement that all career education programs receiving federal funding ‘prepare students for gainful employment in a recognized occupation,’” reads the letter.
The current does allow for partial loan relief — relief that does not come out of taxpayers’ pockets — for students who borrowed to pay for schools that are deemed to be unfit for federal funds.
However, the letter’s authors state that these students should receive full loan relief — again, with all the money coming from the schools’ coffers — for loans taken out to pay for such unqualified programs.
“Providing full relief to all such students is not only fair, it also provides a more effective incentive for schools to improve their programs so they never have to provide such relief.
DEBT-TO EARNINGS RATIO
Part of how the draft rule determines a school’s worthiness to receive federal funds is the debt-to-earnings standards for its graduates. So if a school’s graduates consistently have a level of debt that is disproportionate to their income, the school risks losing its ability to get federal funding.
However the letter claims that the latest version of the rule is so weak that “literally thousands of programs with median and mean debt levels that exceed their graduates’ entire discretionary incomes would not fail the standards.”
While the above topics represent the core of the authors’ concerns about the draft rule, the letter also discusses issues with misleading and inconsistent job-placement statistics used by colleges in their marketing.
“[T]he Department’s proposals do nothing to increase the accuracy or comparability of the job placement rates that schools advertise to students,” reads the letter. These claims — like “70% of our students find jobs in their field” — have been the subject of numerous lawsuits filed by former students and attorneys general around the country who claim that the stats used in some marketing materials are either misleading or flat-out false.
The state of California is currently suing Corinthian Colleges Inc. (operators of schools like Everest, Heald and WyoTech colleges) over these sorts of job-placement allegations.
Even when a school is not lying to applicants and students about placement rates, it’s hard to know what calculations are being used to arrive at these numbers. The letter points out that the only thing that seems to be a standard among the rates used by schools is that they exclude deceased students.
The following groups signed the letter addressed to President Obama:
The American Association of State Colleges
and Universities (AASCU)
American Association of University Professors (AAUP)
American Association of University Women (AAUW)
American Federation of Teachers (AFT)
Americans for Financial Reform
Association of the United States Navy (AUSN)
Center for Law and Social Policy
Center for Public Interest Law
Center for Responsible Lending
Children’s Advocacy Institute
Consumer Federation of California
Council for Opportunity in Education
Crittenton Women’s Union
East Bay Community Law Center
Initiative to Protect Student Veterans
The Education Trust
The Institute for College Access & Success
Institute for Higher Education Policy (IHEP)
Iraq and Afghanistan Veterans of America (IAVA)
The Leadership Conference on Civil and Human Rights
Mississippi Center for Justice
National Association for Black Veterans, Inc. (NABVETS)
National Association for College Admission
Counseling National Consumer Law Center (on behalf of its low-income clients)
National Consumers League
National Education Association
The National Guard Association of the United States (NGAUS)
National Women Veterans Association of America
New Economy Project (formerly NEDAP)
Paralyzed Veterans of America
Public Advocates Inc.
Public Higher Education Network of Massachusetts (PHENOM)
Rebuild the Dream
Service Employees International Union
Student Veterans of America
United States Student Association
Veteran Student Loan Relief Fund
Veterans Education Success
Veterans for Common Sense
VetsFirst, a program of United Spinal Association
League of United Latin American Citizens
Vietnam Veterans of America