For-Profit SchoolsAs our nation’s students begin returning to school this month, President Obama hit the road to talk about the plight of middle class Americans dealing with a host of economic challenges, among them the soaring cost of higher education. The President’s college affordability plans include making better use of online tools, and rewarding innovative ideas like a three-year bachelor’s degree. But his boldest idea is to create a new ratings system that will link a college’s eligibility for federal aid to how many of its students actually graduate, and how many successfully enter the job market – a move that he said, “won’t be popular with everyone – including some who’ve made higher education their business – but it’s past time that more of our colleges work better for the students they exist to serve.”

Those who have “made higher education their business” are for-profit colleges, whose profitability hinges on enrolling individuals who will qualify for federal student loans and grants, regardless of the educational benefit to the student. And their business is booming at our expense: in 2011, federal taxpayers invested $32 billion in companies that operate high-cost, low-value for-profit colleges – 25 percent of the entire federal student loan budget.

As I mentioned in an earlier blog, there are hundreds of for-profit schools in New York State and almost two-thirds of them operate in the greater New York City area. NYLAG serves hundreds of clients a year who have attended for-profit schools. They are targeted because they are unemployed and underemployed, so desperate to believe that an education will translate into a good paycheck that they sign up without realizing they have taken on enormous debt in return for little if any valuable training or education. They soon realize that the programs are inadequate, with overcrowded classrooms, poor teachers and language barriers. Over 50 percent of students who enroll in for-profit schools drop out within four months. Those who do graduate find that their “education” does not lead to jobs: the unemployment rate among students who attended for-profit schools in 2008 and 2009 was 23 percent. And many of those who are employed are working at the same low-paying jobs they had before they attended school.

There is a pressing need for vigorous federal oversight, in coordination with major improvements at the State level, to ensure the integrity of federal student loan programs.  As President Obama said, “Just tinkering around the edges won’t be enough: To create a better bargain for the middle class, we have to fundamentally rethink about how higher education is paid for in this country. We’ve got to shake up the current system.”

There is no denying that those whose profits depend on maintaining the status quo will strongly oppose the President’s plan, as they have other efforts to condition a school’s participation in federal student loan programs on the success of its graduates.  Next month, the U.S. Department of Education will open a round of negotiated rulemaking, which brings together representatives from government and diverse interest groups to negotiate and reach a consensus on the terms of a proposed administrative rule.  In this case, the subject of the rulemaking is “gainful employment,” a regulation aimed at holding for-profit secondary schools accountable for the quality of their programs by monitoring the job outcomes of their students. NYLAG attorney Eileen Connor will represent legal aid organizations at the negotiating table.  We support a gainful employment regulation consistent with President Obama’s plan, which would cut off federal student aid to for-profit schools that do not meet minimum standards.  But it is imperative that improved regulations be backed by rigorous oversight of the program by federal and other agencies.

By improving oversight of for-profit schools, this administration could reclaim millions of taxpayer dollars that would be better invested in private and community colleges committed to their students’ success, not their profit margins. It could also create opportunities for poor and near poor students to receive a good education, earn a decent living, and join the ranks of the middle class.

Blog Post by Yisroel Schulman
President & Attorney-in-Charge