For-Profit Colleges Double Spending, Hire Ex-Congressmen to Beat Aid Rules

For-profit colleges more than doubled spending on lobbying and hired six former members of the U.S. Congress this year to fight regulations that threaten the industry.

Ten education companies and their trade association spent $3.8 million on lobbying in the first nine months of 2010, up from $1.5 million in the comparable period last year, according to reports filed with Congress.

For-profit colleges are resisting a U.S. Department of Education proposal to restrict funding and objecting to a law that limits their revenue from government sources. The proposed restriction, called “gainful employment,” would tie eligibility for federal student-aid programs to graduates’ incomes and loan repayment rates.

“The stakes are extremely high,” said Harris Miller, president and chief executive officer of the Association of Private Sector Colleges & Universities, the Washington-based trade group trying to blunt the regulations. “It’s the biggest fight I’ve been in since coming to the industry.”

Miller’s group spent $630,000 on lobbying in the first nine months of 2010, more than three times the $167,692 total a year earlier, according to filings with the Senate and House. Education Management Corp. spent $410,000 on lobbying in the first nine months, up eightfold from $50,000 a year earlier. That company was 39 percent owned by New York-based Goldman Sachs Group Inc. as of Nov. 5, according to data compiled by Bloomberg.

Black Caucus

Pittsburgh-based Education Management hired former U.S. Representatives Tom Loeffler, a Texas Republican, and William Gray, a Pennsylvania Democrat, according to the filings. Gray belonged to the Congressional Black Caucus, whose members signed letters to the Education Department this year, saying the gainful-employment rule would hurt minority students.

“What they bring is a Rolodex,” said Craig Holman of Public Citizen, a Washington-based advocacy group that calls for curbs on lobbying. “They worked with members who are still there, who know them well and know their senior staff. When they make a phone call to ask for a visit, they get it.”

Career Education Corp., based in Hoffman Estates, Illinois, spent $540,000 from January through September, compared with $210,000 in the same period in 2009, and hired former Connecticut Democratic Representative Toby Moffett.

Kaplan’s Lobbying

Washington Post Co., owner of the Kaplan education business, spent $470,000 in the first nine months, compared with $120,000 a year earlier, according to filings, and hired former California Democratic Representative Vic Fazio. Fazio is a senior adviser at Akin Gump Strauss Hauer & Feld LLP, a law firm based in Washington. Post Chairman and CEO Donald Graham has also lobbied against Education Department regulations.

“There’s been considerable misinformation generated about for-profit colleges in recent months, and it’s important that lawmakers understand that Kaplan is in the business of helping people succeed,” Rima Calderon, a Kaplan spokeswoman, said in an e-mail. “We have retained people to help us tell that story, and we hope lawmakers are listening.”

Jeff Leshay, a spokesman for Career Education, and Jacquelyn Muller, a spokeswoman for Education Management, didn’t return calls seeking comment.

Campaign Contributions

For-profit colleges have also contributed to political campaigns. Two for-profit colleges were among the 14 biggest donors to the re-election effort of John Boehner, an Ohio Republican who now will be the speaker of the House, according to the Center for Responsive Politics, a Washington-based research group. Employees of Corinthian Colleges Inc., based in Santa Ana, California, and Apollo Group Inc., owner of the University of Phoenix, gave $18,250 and $14,000 respectively, according to the center.

Representative John Kline, the Minnesota Republican who will take over leadership of the House Education and Labor Committee next month, received $56,500 from educators and their families, his fourth-biggest source of campaign contributions during his re-election campaign, according to the center.

Kline said Dec. 16 that he would try to block the Education Department’s gainful-employment proposal, saying he preferred greater disclosure of costs, debt and quality by colleges.

Biggest Spender

The biggest spender on lobbying among publicly traded colleges in the first nine months was Corinthian Colleges, which hired Richard Gephardt, a Missouri Democrat and the former House majority leader. Corinthian spent $570,000, about twice the company’s lobbying bill a year earlier, according to filings. A telephone call to Gephardt’s office seeking comment on Dec. 21 wasn’t returned.

“The Department of Education and numerous members of Congress have been looking at significant changes that would affect our organization and our students,” said Kent Jenkins, a Corinthian spokesman, in an e-mail yesterday. “We added additional resources to address these issues.”

Capella Education Co., based in Minneapolis, spent $100,000 on lobbying in the first nine months, five times as much as in the same period last year, and hired former Minnesota Republican Representative Vin Weber, now managing partner of Clark & Weinstock, a lobbying firm in Washington.

Weber, who is also a board member at ITT Educational Services Inc., a for-profit education company based in Carmel, Indiana, didn’t return a call to his office.

Rule Delays

The Education Department delayed issuing the gainful- employment rule until early next year after receiving a record 90,000 comments, many from staff and students at for-profit colleges. The rule is scheduled to go into effect in 2012.

Education companies are permitted by law to get as much as 90 percent of their revenue from federal student aid, and some are close to the limit. The companies want to change the law or extend an exemption on some revenue that currently expires in 2011.

Apollo Group, based in Phoenix, and Corinthian Colleges have each said that close to 90 percent of their revenue comes from government grants and loans, and that they’re in danger of violating the rule next year. Apollo, the biggest U.S. education company, spent $340,000 on lobbying in the first nine months of 2010, down from $440,000 a year earlier. Chad Christian, a company spokesman, didn’t return a call seeking comment.

Losing Access

Colleges that violate the 90/10 rule two years in a row can lose their access to government student aid. Under the current rules, for-profit colleges got $30.2 billion in government student grants and loans in 2009-2010.

An index of 13 for-profit college companies fell less than 1 percent today, as of 12:36 p.m. New York time. The index has lost 26 percent this year as the Education Department, the Government Accountability Office and Congressional Democrats said the industry was preying on students. Iowa Democratic Senator Tom Harkin, chairman of the Senate education committee, released a report Dec. 9 saying the colleges recruit military- service members and disabled veterans with sales pitches that misrepresent program costs and results.

For-profit colleges also hired three former U.S. lawmakers last year, according to Senate and House filings. DeVry Inc., based in Oakbrook Terrace, Illinois, hired Bob Carr, a Michigan Democrat; and San Diego-based Bridgepoint Education Inc. hired Al Wynn, a Maryland Democrat who belonged to the Congressional Black Caucus, and Tim Hutchinson, an Arkansas Republican.

To contact the reporters on this story: John Lauerman in Boston at jlauerman@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net.

To contact the editor responsible for this story: Jonathan Kaufman at jkaufman17@bloomberg.net

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