For-Profit-College Backers Push House Measure Blocking Obama Regulation

For-profit colleges may get another delay in an Education Department proposal to limit their revenue from a U.S. House of Representatives budget measure.

An amendment the House may consider today would block funding for the Education Department’s “gainful employment” proposal, said Representative John Kline, a Minnesota Republican and education committee chairman. For-profit colleges have lobbied against the rule that would tie their eligibility for U.S. government student aid to students’ incomes and loan repayment rates.

Congress and state prosecutors have investigated sales practices and the use of federal funds by for-profit colleges. The industry doubled its spending on lobbying and mounted a letter-writing campaign last year that led the department to delay publication of the regulation. Some House Democrats and Republicans oppose the rule because it would limit opportunities for minority and low-income students who attend for-profit colleges, said Representative Alcee Hastings, a Florida Democrat.

“Our sense is that this will be a large bipartisan vote” in favor of the amendment, said Hastings, who spoke yesterday to reporters in Washington with Kline. “Nothing gets the attention of the bureaucracy like a bipartisan effort.”

The amendment may go to the House floor for debate today as part of a budget bill, and also would have to be adopted by the Senate to take effect, Hastings said. Senate Democrats haven’t supported for-profit colleges, making the amendment’s passage there “a high hurdle,” said Jarrel Price, an analyst with Height Analytics in Washington.

‘More Meaningful’

If the amendment were to pass in the Senate “it will be far more meaningful than a simple delay,” Price said in a telephone interview. “The proposed regulation has been primarily responsible for downward pressure on the space for a year and a half, and removing it would allow investors to confidently return. It could be perceived as the death of gainful employment.”

The Bloomberg U.S. For-Profit Education Index of 13 companies has declined 21 percent in the past 12 months led by a 64 percent drop by Santa Ana, California-based Corinthian Colleges Inc.

For-profit colleges get as much as 90 percent of their revenue from U.S. student grants and loans. The Education Department began drafting the gainful employment rule last year as data showed that for-profit college students were about twice as likely to default on student loans as the national average.

Senate Hearings

In hearings held by Senator Tom Harkin, an Iowa Democrat and chairman of the Senate education committee, videotapes showed for-profit college recruiters misleading government investigators posing as applicants. Harkin said he would fight the House budget amendment.

Gainful employment is “a common-sense rule to ensure that taxpayer-funded federal aid does not go to for-profit colleges or other career programs that consistently leave their students with debt they cannot repay,” Harkin said yesterday in an e- mail. “Blocking this rule would amount to willfully ignoring how billions of taxpayer dollars are used every year, shirking our responsibility to both the American taxpayers and the students who deserve a better education.”

Representative George Miller, a California Democrat, will oppose the amendment, Melissa Salmanowitz, a spokeswoman, said in a telephone interview.

Proposed Amendment

The House proposed amendment would block funding for the gainful employment rule for the remainder of the current fiscal year, which ends Sept. 30, and would provide more time to change the department’s plan, Kline said. The amendment also would stop government rules scheduled to go into effect July 1 requiring for-profit colleges to notify the department before offering new courses, he said.

“This gives us more time, or the department more time, to consider the language of the rules,” he said yesterday. “We know that there are proprietary schools that have had plans to expand and have stopped or laid off people in large part because of the threat of these rules.”

Apollo Group Inc., the biggest U.S. for-profit college and operator of the University of Phoenix, the Washington Post Co.’s Kaplan Higher Education unit, Hoffman Estates, Illinois-based Career Education Corp. and Corinthian have announced job cuts since November.

“Stopping gainful employment through this amendment is absolutely the right thing to do,” said Penny Lee, managing director of the Coalition for Educational Success, a Chicago- based industry group, in an e-mail. “Its passage will allow millions of students -- nontraditional students, active military and veterans -- access to a higher education and a pathway to a job.”

Talks on Proposals

Hastings said he and other representatives have met at least twice with Education Secretary Arne Duncan to discuss the rules. Kline said he has also spoken with Duncan about a rule that limits for-profit colleges to getting no more than 90 percent of their revenue from federal student grants and loans.

Kline got $56,500 from educators and their families’ last year, his fourth-biggest source of campaign contributions during his re-election campaign, according to the Center for Responsive Politics, a Washington-based research group. For-profit colleges hired at least six former members of Congress, including Richard Gephardt, a Missouri Democrat and the former House majority leader, to lobby for them last year.

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net.

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

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