For-Profit Schools, an Obama Target, See New Day Under Trump

Patricia Cohen
Betsy DeVos
Getty Images

Since Election Day, for-profit college companies have been on a hot streak. DeVry Education's stock has leapt more than 40 percent. Strayer's jumped 35 percent and Grand Canyon Education's more than 28 percent.

You do not need an M.B.A. to figure out why. Top officials in Washington who spearheaded a relentless crackdown on the multibillion-dollar industry have been replaced by others who have profited from it.

President Trump ran the now-defunct Trump University, which wound up besieged by lawsuits from former students and New York's attorney general, who called the operation a fraud. Within days of the election, Mr. Trump, without admitting any wrongdoing, agreed to a $25 million settlement.

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Betsy DeVos, the newly installed secretary of education, is an ardent campaigner for privately run schools and has investments in for-profit educational ventures.

While Ms. DeVos's nomination attracted a flood of attention, most was focused on the K-through-12 system and the use of taxpayer-funded vouchers for private, online and religious schools. Higher education was barely mentioned during her confirmation hearings.

Yet colleges and universities are the institutions most directly influenced by the federal government, while public schools remain largely in the hands of states and localities. So it is in higher education that the new administration's power is likely to be felt most keenly and quickly.

Under the Obama administration, the Education Department discouraged students from attending for-profit colleges, arguing recently that the data showed "community colleges offer a better deal than comparable programs at for-profit colleges with higher price tags."

The for-profit sector has about 8 percent of those enrolled in higher education, according to the Education Department, but it has 15 percent of subsidized student loans.

While some career training schools delivered as promised, critics argued that too many burdened veterans, minorities and low-income strivers with unmanageable tuition debt without equipping them with jobs and skills that would enable them to pay it off.

After years of growing complaints and lawsuits, the agency moved aggressively to end abusive practices that ranged from deceptive advertising to fraud and cost students and taxpayers billions of dollars.

Two mammoth chains collapsed — Corinthian Colleges in 2015, and ITT Technical Institute in 2016 — leaving thousands of students stranded without degrees and in debt. Overall enrollment in for-profit institutions declined from 2.4 million in 2010 to 1.6 million in 2015 as hundreds of campuses closed. And as the largest provider of student loans, the federal government was left to bail out the defrauded.

Just weeks before Mr. Trump took office, the department identified 800 failing programs by applying its new "gainful employment" rule, which links vocational schools' access to federal funds with their record on job placement and earnings. Ninety-eight percent of the programs were at for-profit colleges.

The Education Department, using this tool and others, ultimately has the power to punish egregious violators by cutting off federal financial aid — the industry's lifeblood — with the efficiency of a guillotine.

Ms. DeVos suggested she was unlikely to play the executioner, though, when asked at her confirmation hearing about rules like gainful employment. "I will review that rule and see that it is actually achieving what the intentions are," she said. "The last thing any of us want is to unnecessarily close down important programs."

Asked for elaboration from Ms. DeVos for this article, the Education Department offered no comment. But others have offered more explicit assurances to the industry.

"We're going to get some regulatory relief, which is desperately needed," said Steven Gunderson, president and chief executive of Career Education College and Universities, a trade association of for-profit schools. He said he has repeatedly spoken with members of Trump's transition team, White House domestic policy advisers and congressional Republicans.

Repealing the gainful employment rule and ending expanded financial stability standards are at the top of the trade association's priorities. Mr. Gunderson said his group also wanted to overturn the decision to shut down the largest accreditor of for-profit colleges, the Accrediting Council for Independent Colleges and Schools, and give it a year to repair the failings that prompted the Education Department to shut it down last year.

Representative Virginia Foxx, Republican of North Carolina, who is the new chairwoman of the House Committee on Education and Workforce, has already said that the Republicans will do "everything we can to roll back those rules and regulations," whether through new legislation or executive orders.

In addition, Jerry L. Falwell Jr., an evangelical Christian leader who is president of Liberty University in Lynchburg, Va., said he had been asked by Mr. Trump to lead an education task force dedicated to limiting "overreaching regulation."

"The goal is to pare it back and give colleges and their accrediting agencies more leeway in governing their affairs," Mr. Falwell said in an interview with The Chronicle of Higher Education.

Career and technical colleges have a long history in the United States, stretching back to the commercial colleges of colonial days, through secretarial schools like the one poor Laura Wingfield in "The Glass Menagerie" enrolled in, to today's computer coding boot camps that cost tens of thousands of dollars.

They have been championed by some on the left for providing opportunities for minorities and the disadvantaged, and on the right for allowing entrepreneurs to provide higher education more creatively and efficiently than traditional models.

Certainly, for-profits — which range from mom-and-pop operations to giant publicly traded corporations like DeVry, Strayer and Grand Canyon — actively woo a much broader segment of the public. Their students are more likely to have fewer skills, poor preparation and little money. Many are juggling work and families and can manage only part-time or online courses. They need the most help, but they are also at the most risk — of failing to graduate and defaulting on their loans.

That is equally true of students at community colleges, which can have similarly dismal completion rates. Tuition at public and nonprofit institutions, however, is significantly lower.

"Nobody is profiting on a community college student's default," said Sara Goldrick-Rab, professor of higher education policy and sociology at Temple University and the author of "Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream."

More troubling is the for-profit industry's scandal sheet. A congressional investigation concluded in 2012 that exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, regulatory evasion and manipulation were rampant. "These practices are not the exception — they are the norm," Senator Tom Harkin, the Iowa Democrat who headed the committee, said at the time. "They are systemic throughout the industry, with very few individual exceptions."

Mr. Gunderson and other operators strongly disagree with that characterization, arguing that the entire sector has been tarred by a few rogue employees.

Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said Mr. Trump had made several encouraging general comments about higher education — that tuition is too high, that free speech should be protected and that student debt repayment should be based on income.

But he added that as a businessman and Republican, Mr. Trump has "an anti-regulatory mind-set" — as well as a distaste for government spending and a willingness to have private companies take over services traditionally provided by the government.

While some of the regulations have been labeled intrusive, Mr. Nassirian said they also prevent fraud, abuse and predatory practices.

Mr. Trump's business background is exactly what has heartened a sector that has felt under attack by state prosecutors and government regulators.

As Carl Barney, the founder of a chain of for-profit colleges, said, "Trump is a businessman — whether you think he's a good one or bad one."

Mr. Barney's schools filed a federal lawsuit last year against the Education Department after it challenged the chain's conversion to nonprofit status. Officials argued that the switch was a ruse to avoid stricter oversight, a charge that Mr. Barney dismissed.

"A lot of people out there have feared for their very existence," Mr. Barney said, referring to others in the industry. "I've been expecting them to close us down for a year."

Now, his outlook has brightened: "Let's say the carnage for the for-profit sector has stopped."