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U.S. House Votes to Ease Restrictions on For-Profit Colleges

Feb. 28 (Bloomberg) -- The House voted to lift some federal restrictions on U.S. aid to students who attend for-profit colleges and universities.

House members in a 303-114 vote today passed the bill, opposed by President Barack Obama’s administration, which would cancel an Education Department requirement that college campuses receive state authorization to participate in federal student loan and aid programs. The rules are scheduled to take effect in July 2014.

Under current Education Department regulations, a college’s satellite campus in another state can participate in federal aid programs, without state authorization, as long as its home campus has been accredited. Apollo Group Inc.’s University of Phoenix, the largest for-profit university in the U.S., has used that provision for schools in California, Colorado, Hawaii and New Mexico, according to its annual report issued Aug. 31, 2011.

The rule was among a broad set of regulations the Education Department issued in October 2010 to ensure that only eligible students and programs receive federal aid. The rules also would affect public and other non-profit universities, though the target of the regulations is the for-profit schools.

The regulations would “stall the efforts in our country to make higher education more accessible and affordable to everyone,” Virginia Foxx, a North Carolina Republican, said during the floor debate.

The Education Department in 2010 cited above-average loan default rates at for-profit colleges, saying 43 percent of defaults were from students who attended for-profit colleges, though they represented 26 percent of federal loan recipients and 11 percent of higher education students.

‘Students Deserve’

“In a global economy, our students deserve to get what they pay for,” Representative Ruben Hinojosa, a Texas Democrat, said in opposition to the House bill.

The Education Department said in May 2011 it won’t enforce the federal-aid ban on schools making “good-faith efforts” to obtain state authorizations by July 2014.

Today’s bill also would repeal rules defining a credit hour, the unit used for calculating federal student aid. Other regulations issued in 2010 wouldn’t be affected by the measure.

Prospects for the legislation’s advancement are dim in the Senate, where Iowa Democrat Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee, has sponsored a measure to reduce the amount of aid designated for active military personnel and veterans that for-profit schools can receive.

The Obama administration “strongly opposes” the House bill, the Office of Management and Budget said in a statement yesterday. Congress shouldn’t prevent the Education Department from “responsibly administering these programs and ensuring that consumers and taxpayers are protected from fraud, waste, and abuse,” according to the statement.

The bill is H.R. 2117.

To contact the reporter on this story: Derek Wallbank in Washington at dwallbank@bloomberg.net

To contact the editor responsible for this story: Katherine Rizzo at krizzo5@bloomberg.net

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