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Federal Scrutiny of For-Profits Spurs State Action

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As the for-profit higher education industry continues to fight federal regulation, states are starting to pay more attention to the fast growing sector. The National Conference of State Legislatures (NCSL) reports that, as of May, twenty states have introduced at least 34 bills aimed at regulating or supporting for-profit higher education. NCSL reports that eight of these bills have already passed, six have failed or been vetoed, and twenty remain in play. They provide a summary of each piece of legislation, as well as a webpage that centralizes information on this topic from various sources.

Meanwhile, Senator Harkin continues to investigate the sector, and a 10 state joint investigation into the practices of for-profit institutions remains ongoing. It appears that one result of all this scrutiny is that the industry has been pressured to begin to take preemptive action toward restructuring and increased transparency.

For previous OPBlog posts on this topic see:

Oregon Institutions Gain Flexibility Alongside State Funding Cuts.

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Last week, Oregon Legislators signed a state budget that, among other things, cut funding for public higher education by 17 percent. It is unknown whether this cut will necessitate tuition increases above those already approved earlier this month by the Oregon State Board of Higher Education, including an 8.8 percent increase at Oregon State University and a 7.3 percent increase at the University of Oregon for resident students.

In the meantime, the Oregon Legislature is expected to pass a bill intended to help Oregon public higher education achieve greater long-term stability by ending state agency status for the institutions, enabling new flexibilities in managing and spending resources. In addition to freeing institutions from state processes guiding building projects and repairs, contracting, and employment, the bill ensures that institutions keep all interest earned on tuition revenue, and adds three members to the State Board of Education. In exchange, the institutions must meet agreed upon performance targets regarding enrollment, graduation, and other measures.

Harkin Holds What Could be Last Senate Hearing on For-Profits

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Days after the Department of Education released its finalized Gainful Employment rule, Senator Tom Harkin held his fifth Senate hearing investigating the practices of the for-profit higher education industry. Senator Harkin focused the hearing on the high levels of student borrowing and outsized loan default rates for students at for-profit institutions. Previous hearings and reports have revealed that:

  • Less than 10% of postsecondary students are enrolled in for-profits, yet they receive 23% of federal aid, and account for 44% of all loan defaults.
  • 95% of all students at for-profits borrow money to attend, compared to less than a quarter of community college students, 64% of students at public four year institutions, and 72% at private four year institutions.

Additionally, Harkin grilled Department of Education Under Secretary Martha Kanter on whether the softened gainful employment rule released by the Department would do enough to help reign in exploitative practices of the for-profit higher education industry, noting that stock prices in the industry increased significantly upon publication of the revised rule whereas previous iterations had sent prices down. Kanter, who was attending in place of Secretary Arne Duncan, defended the regulation as a step forward.

Harkin concluded that while the Department of Education regulations were ‘better than nothing’, he continues to believe that Congressional action via legislation may be necessary.

No Republican members of the committee were present, and no further hearings on the topic are scheduled at this time.

For previous OPBlog posts on this topic see:

Department of Ed Finalizes (and Softens) Gainful Employment Rule

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After much debate, public comment, intense lobbying, a lawsuit, and the threat of political action to block them, expansive new US Department of Education higher education regulations are set to go into effect on July 1st.  While the Department has made revisions to and provided implementation guidance for most of the new rules, it had several times delayed finalizing the most controversial regulation, known as Gainful Employment, which was formally published on June 2nd.

The rule  establishes thresholds for loan repayment rates and debt to income ratios for graduates of for-profit and non-degree career oriented programs, with the ability to cut off federal financial aid funding for entities that do not meet the standards, among other penalties. The final rule was significantly revised from earlier versions, including a delayed implementation year, altered criteria and formulas making it more difficult to find an institution in violation of the rule, and a host of other changes that are widely seen as having softened the rule in response to the pressure applied by the for-profit industry and its political supporters.

Although the gainful employment rule is limited in scope and does not currently apply to degree programs at traditional institutions, as we have previously stated, and both The Chronicle and Inside Higher Education are reporting, the regulation is a watershed moment with important implications for federal regulation of higher education into the future.

Open, Accessible Courseware Issue Gains Ground

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In an effort to lower instructional costs and increase the quality of class materials in community colleges, President Obama has started a program to promote the creation and use of open educational resources (OERs). OERs are defined as “high-quality” educational materials, such as books, lectures, exams, study guides, and syllabi, which are published under a Creative Commons license and can be freely accessed on the Web. The material can be presented as an entire course, or it can be broken up into individual lessons or tutorials.

The Department of Education has hired Hal Plotkin, a prominent journalist and community college trustee, to expand the prevalence and recognition of OERs worldwide with $2 billion of government funds.

MIT and Carnegie-Mellon each pioneered open courseware programs a decade ago, in order to make their educational materials more accessible to those outside the university. Since then, new services like Khan Academy, a tutorial website, and iTunes U, a collection of free lectures from prestigious institutions, have steadily gained recognition and importance.

Plotkin hopes that the additional funding for OERs will help community colleges offer courses and class materials at a lower cost and improve accessibility for non-traditional students. Federal support for OERs also focuses resources and attention on an e-learning system infrastructure. Plotkin intends to continue the growth and recognition of OERs in order to benefit thousands of interested learners.

The OER movement is gaining ground in Washington State, as well. The Bill & Melinda Gates Foundation recently awarded Washington State Board for Community and Technical Colleges more than $6 million dollars to launch the Washington State Student Completion Initiative. Part of this money will go towards creating an Open Course Library of over 80 high-demand introductory courses at Washington community and technical colleges intended to reduce educational materials costs and encourage free access to common course packs, online lectures, and library materials.

To read more about OERs and the specific program Plotkin manages, check out the Kevin Carey’s summary of the new policy and Plotkin’s own guidebook called “Free to Learn.”

Update on Upheaval in Texas Higher Ed

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Two major developments have unfolded in the days since we posted about recent controversies gripping public higher education in Texas:

  • The UT system released a massive file of faculty ‘productivity’ data that was compiled at the request of a Task Force created by the Regents and subsequently subject to an open records request from a local newspaper. There are questions about the accuracy of the data, as well as concerns about how the information might be used out of context.
  • Meanwhile, controversial Texas A&M chancellor and former chief of staff for Governor Rick Perry, Mike McKinney, has announced that he will retire on July 1 after five years in the job. E-mails obtained through open records requests show that McKinney was heavily criticized from multiple sides regarding the divisive reforms currently championed by a conservative think thank, the Governor and the Regents. The e-mails reveal that Chancellor McKinney not only faced criticism for doing the bidding of these external stakeholders at the expense of the institution, but was also assailed by the would-be reformers  for implementing the changes they are advocating neither strongly nor swiftly enough.

Momentum Building to Reign in For-Profits

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It was speculated that Republican gains in Congress last November could stall the Senate’s aggressive investigation of the for-profit higher education industry and sweeping new Department of Education regulations that are set to go into effect July 1. While bipartisan action in the House did attempt to block some of the regulations, particularly the controversial gainful employment rule, they survived the final 2011 budget deal.

Meanwhile, as federal efforts to better regulate this run-away industry, which enrolls 10 percent of total students, eats up 24 percent of federal aid and accounts for 45 percent of  student loan defaults while making billions of dollars of profit annually, continues, several states, including Florida and Illinois, have launched their own investigations. Today, it has been reported that Attorneys General from at least 10 states will embark on a joint investigation of the industry.

Adding to pressure facing the industry is widespread media coverage, including investigative efforts from the New York Times, ABC News, and Frontline, among others. Even Stephen Colbert has addressed the topic.

While the for profit higher education industry lobbying effort is massive (likely paid for with the federal student aid dollars that, on average, make up over 90 percent of the annual operating budgets for these institutions), mounting scrutiny has already had effect as some of the industry’s largest actors have begun ‘maturing’ some of their practices ahead of anticipated regulations.

For past OPBlog posts on this continuing story see:

Turmoil in Texas Over Higher Ed Reforms

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Recent higher education reform efforts in Texas, developed by the conservative think tank Texas Public Policy Foundation (TPPF) and championed by Governor Rick Perry, have many wondering how much damage might be done to one of the country’s largest and best public university systems.

The ‘solutions‘ proposed by TPPF, and marketed heavily by  board member and major Rick Perry campaign donor Jeff Sandefer, would dramatically shift even the state’s top research campuses away from research and toward teaching. They cast the student in the role of consumer, basing professor pay and tenure decisions primarily on teaching evaluations, replacing state support to institutions with direct grants to students, creating contracts between students and institutions, and maintaining a distinct line between teaching and research activities and funding.

Mike McKinney, Texas A&M Chancellor and former Rick Perry chief of staff, has already drawn national criticism for creating and publishing a ‘balance sheet‘ that measured the revenue generation of each individual faculty member based on salary, teaching, and grant awards. This exercise, promoted by the Governor and TPPF, resulted in a swift rebuke from the Association of American Universities (AAU).

Next, Governor Perry announced that he wanted institutions to create a BA degree that would cost only $10,000 (compared to the current average cost of over $31,000 at Texas public universities). Widespread skepticism of the ability to create a quality degree that would cost so little did not stop the state’s Higher Education Commissioner from embracing the idea.

Then, a senior fellow at TPPF was given a controversial $200,000 consulting position with the UT System. His appointment lasted 50 days before the concerns of the public, legislators and institutions led to his dismissal.

Now, UT System regents’ chairman Gene Powell has circulated a memo that calls for increasing UT enrollment by 10 percent per year for four years and halving tuition at the same time, moves he claims would make UT the best public institution in the country. These recommendations are in direct opposition to a blue ribbon panel that recommended enrollment at UT Austin be reduced to improve the quality of the undergraduate education there. Judith Zaffarini, chairwoman of the state’s Senate Higher Education Committee, has issued sharp criticism of Powell’s suggestions, saying that his goals are “mutually exclusive”  and “detrimental to the pursuit of excellence.”

As this battle rages, others in Texas are weighing in against the reforms, including  alumni and university boosters. Meanwhile, all of higher education is watching to see if Texas will allow one of the nation’s top public institutions, UT Austin, be so radically undermined.

Fast Track to Graduation: WA Senate Bill 5442

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In an effort to give more students the opportunity to earn a bachelor’s degree and enter the workforce early, the legislature passed SB 5442, “Requiring the development of three-year baccalaureate degree programs.” The bill, which was delivered to the Governor for approval on April 12th, requires institutions of higher education to provide degree programs that enable academically qualified students to graduate in three years. The bill does not explicitly define “academically qualified students,” thereby leaving it up to the higher education institutions to make their own rules. According to the bill, qualified students must not be required to enroll in summer school or take a more than full-time credit load in any term in order to graduate early. They must also be able to take classes in their major starting in their first term. The legislature hopes this will have a positive effect on graduation rates, as well as lower the cost of a baccalaureate degree for both the state and the student.

Of course, the idea of three-year degree programs is not new. In fact, students coming into the UW with 45 credits or more can already, with attentive advising and careful planning, earn a bachelor’s degree in three years. However, the degree must still meet the same university requirements as those earned in four years. While legislators want to make it easier to apply existing credits to students’ degrees, those students must still earn at least 180 credits total and meet all distribution requirements. With more and more students coming into the UW with AP and IB credit, this option has become increasingly attractive to students eager to graduate and enter the work force. However, others have actually found that the push to graduate in three (or fewer) years is detrimental to their college experience. This prompted the ASUW Senate to pass a resolution giving students the right to waive excess AP and IB credits if they so choose. Either way, students’ options for shaping their educational experience, be it three years or four, are likely increasing.

Tuition-Setting Authority Coupled with Accountability: Two Bills Propose Reforms

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Preserving the access to and quality of higher education is paramount in the face of massive budget cuts. Two bills, HB 1795 (Enacting the higher education opportunity act) and SB 5915 (Regarding higher education funding and performance), seek to achieve this goal by:

1.       Giving tuition-setting authority to universities

2.       Reforming Financial Aid

3.       Strengthening accountability

Legislators hope this will preserve the quality of higher education while protecting affordability for students and their families. The House Higher Education committee passed a substitute version of HB 1795 in February, while SB 5915 just had its first hearing in the Senate Ways & Means committee on April 6th. While HB 1795 has not been altered since its hearing more than a month ago, the issues that it seeks to address are still relevant, and we anticipate both bills to remain in play. Please click on the table below to see a summary of the similarities and differences between the two bills.