[Congressional Record Volume 163, Number 72 (Thursday, April 27, 2017)]
[Senate]
[Pages S2594-S2597]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
For-Profit Colleges and Universities
Mr. President, during the Senate's consideration of Betsy DeVos to be
Secretary of Education, I asked a basic question: As Secretary of
Education, would she side with corporate and other for-profit interests
or would she be on the side of the students and their families?
I was concerned that the record of Secretary DeVos indicated that she
was on the side of corporate interests, looking for opportunities to
profit off of students and often exploiting them in the process.
Months into the job, now that she was approved by a historic
tiebreaking vote by the Vice President, we are beginning to see which
side the Secretary is on. A recent Chicago Tribune article entitled
``Targeted by Obama, DeVry and other for-profit colleges rebounding
under Trump'' put it this way:
Less than 100 days into Trump's presidency, the Department
of Education under Secretary Betsy DeVos has delayed
implementation of gainful employment rules . . . withdrawn
key federal student loan servicing reforms . . . and signaled
a less onerous regulatory environment for the essentially
taxpayer-financed career education [or for-profit] sector.
A group of State attorneys general, including Lisa Madigan of
Illinois, warned of a return to ``open season'' on students in a letter
to Secretary DeVos if she rolled back all of these protections.
I ask unanimous consent that the full text of that letter from the
State attorneys general be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Office of the Attorney General,
February 22, 2017.
Re How For-profit Schools Have Harmed Student Borrowers: the
Need for the Gainful Employment Rule, Vigorous Federal
Oversight of Accreditors, and the Borrower Defense to
Repayment Rule
Hon. Elisabeth DeVos,
Secretary, U.S. Department of Education,
Washington, DC.
Speaker Paul Ryan,
Speaker of the House, House of Representatives,
Washington, DC.
Hon. Mitch McConnell,
Senate Majority Leader, U.S. Senate,
Washington, DC.
Hon. Nancy Pelosi,
House Minority Leader, House of Representatives, Washington,
DC.
Hon. Charles E. Schumer,
Senate Minority Leader, U.S. Senate,
Washington, DC.
Dear Secretary DeVos, Speaker Ryan, Senator McConnell,
Congresswoman Pelosi, Senator Schumer: We, the undersigned
Attorneys General of Illinois, Connecticut, Delaware, Hawaii,
Iowa, Kentucky, Maryland, Maine, Massachusetts, Minnesota,
New Mexico, New York, North Carolina, Oregon, Pennsylvania,
Rhode Island, Vermont, Washington and the District of
Columbia, as well as the Executive Director of the Office of
Consumer Protection of Hawaii, write to express our support
for recent federal protections for students and taxpayers in
higher education. We are deeply concerned that rollbacks of
these protections would again signal ``open season'' on
students for the worst actors among for-profit post-secondary
schools. As the chief consumer law enforcement agencies in
our states, our offices handle thousands of complaints
concerning higher education every year. We also enforce laws
to protect consumers from unfair and deceptive practices
perpetrated by higher education providers.
I. Background: The Need for Rules to Protect Students and Taxpayers
from Unfair and Deceptive Practices by For-Profit Higher Education
Providers
Over the last ten years, student loan debt has soared from
$450 billion to nearly $1.4 trillion. A major driver of this
increase has been for-profit colleges. Of the top 25 schools
where students hold the most student loan debt, over half
were for-profit schools in 2014. This is up from only one
for-profit institution in the top 25 in 2000.
In addition to driving the increase in student loan
borrowing, for-profit institutions also have significantly
more loan defaults than other types of institutions. Since
2013, for-profit institutions accounted for 35% of all
federal student loan defaults, but enrolled just 27% of all
borrowers. Many for-profit schools are almost entirely
dependent on federal grants and loans. In December 2016, the
U.S. Department of Education (``ED'') found that nearly 200
for-profit schools derive more than 90% of their income from
federal sources. The only reason that many of these
institutions are in compliance with the federal 90/10 Rule is
that certain categories of federal money, including GI Bill
money, are excluded from the rule and thus count toward the
10% that is supposed to be non-federal money.
Over the past fifteen years, millions of students have been
defrauded by unscrupulous for-profit post-secondary schools.
With accreditors asleep at the wheel, State Attorneys General
Offices have stepped in to stop some of the worst abuses. The
list of State Attorney General investigations and enforcement
actions against for-profit colleges is long, including
actions against: American Career Institute; Ashford
University/Bridgepoint Education, Inc.; Corinthian Colleges,
Inc.; Career Education Corporation; Education Management
Corporation; Daymar College; DeVry University; ITT Tech;
National College of Kentucky; and Westwood Colleges, among
others. These schools, and others like them, engaged in a
variety of deceptive and abusive practices. Some promised
prospective students jobs, careers, and further opportunities
in education that the schools could not provide. Many schools
inflated job placement numbers and/or promised career
services resources that did not exist. Many nationally-
accredited schools promised that their credits would
transfer, even though credits from nationally-accredited
schools often do not transfer to more rigorous regionally-
accredited schools. Many students were placed in loans that
the schools knew from experience their graduates could not
pay back. The schools were overseen by accreditors who failed
to take action to protect students or the taxpayers who
funded their federal student loans, despite ample evidence of
these and other problems. In short, the entire for-profit
education system was failing students and taxpayers. As
investigations and prosecutions initiated by our offices shed
light on these problems, ED began to take steps to remedy
these harms, issuing new regulations and reformulating
policies to help protect students and taxpayers.
Three of these recent steps--the Gainful Employment Rule,
the policy of vigorous federal oversight of accreditors, and
the Borrower Defense to Repayment Rule--are essential to
protect both consumers and taxpayers from fraudulent actors
in the for-profit education sector. The Gainful Employment
Rule is a measure of graduates' debt-to-income and is
designed to ensure that programs produce graduates that are
able to pay back their student loans. Prospectively, the
federal government recognizes accreditors who have standards
sufficient to show that the schools they accredit provide a
quality education and should have access to federal student
loans and grants. Finally, where other protections fail and
students are defrauded by bad actors, the Borrower Defense to
Repayment Rule provides a formal process for students to
assert a defense to repayment of their federal student loans.
II. Corinthian Colleges: An Example of the Harm Faced by Students and
Taxpayers
The egregious conduct of Corinthian Colleges illustrates
how each of these three policies is necessary to avoid harm
to both students and taxpayers. In March 2016, after an
extensive review of published job placement rates at
Corinthian campuses nationwide, the Department of Education
found that the job placement rates were fraudulent for
hundreds of cohorts from 2010-2014. Corinthian was telling
the world that far more of its students obtained jobs than
actually did, inducing students to enroll. Many of these
students were left without jobs in their field of study.
Without these jobs, many are saddled with debt they cannot
repay, defaulting on loans funded with taxpayer dollars.
Had the gainful employment regulations been in place,
Corinthian's programs that weren't producing jobs for
students would have been shut down because the median debt-
to-income ratio would have shown that students were not
making enough money to pay down their loans. Had Corinthian's
accreditors reviewed the school's self-reported job placement
data on a regular basis, the fraud would have been discovered
and stopped much earlier, saving students and taxpayers
billions of dollars.
The absence of policies in place to protect prospective
students from Corinthian's fraudulent practices also
demonstrates the
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need for an effective process for students to assert a
defense to loan repayment. This defense was established in
the 1990s when Congress passed legislation allowing students
to assert claims against their schools as a defense to
repayment of their federal student loans. There was little
detail, however, on the process for asserting such claims.
The regulations set to take effect on July 1, 2017 give
borrower defense to repayment set processes so that students,
schools, and taxpayers have an orderly process, and a degree
of certainty, moving forward.
Without the Gainful Employment Rule, meaningful oversight
of accreditors, and an orderly borrower defense process, we
face the prospect of for-profit schools continuing to line
their pockets with taxpayer dollars while students and
taxpayers experience another crushing wave of defaulted
student loan debt.
III. The Gainful Employment Rule
ED's gainful employment regulations are designed to further
a simple idea--that students who attend career training
programs should be able to repay their federal student loans
once they graduate. The Rule allows prospective students to
compare debt-to-income ratios across schools. By doing this,
the Rule creates an incentive for schools to make good on
their promises to students, and protects students from
programs that will leave them saddled with debt and without
job prospects in the careers for which they trained.
The Rule generally applies to vocational programs at for-
profit institutions and to non-degree programs at community
colleges. If graduates' annual loan payments exceed 30% of
discretionary income and 12% of total earnings in two out of
three consecutive years, the program loses access to Title IV
federal student loans and grants. A program can also lose
access if graduates' annual loan payments exceed 20% of
discretionary income and 8% of total earnings for four
consecutive years.
Data released on January 9, 2017 indicate that over 800
programs fail the Department's Gainful Employment metrics.
For-profit institutions are responsible for 98% of the
failing programs. But these 800 programs are only a portion
of the for-profit school programs that have failed their
students. With the Gainful Employment Rule pending, for-
profit institutions have already eliminated hundreds of
programs where students did not make enough money to cover
their debt obligations, sometimes closing entire institutions
that would have failed to provide students with gainful
employment under the regulations.
It is essential that the Gainful Employment Rule be kept in
place. Removing the Rule would open students and taxpayers up
to the worst excesses of the for-profit higher education
sector. It would greatly increase the regulatory and
enforcement burden on states and accreditors by removing a
central protection from the federal leg of the triad that
oversees higher education in the United States.
IV. Vigorous Oversight of Accreditors by ED
The federal government and states need strong partners with
specialized knowledge of higher education to provide
prospective quality assurance of schools in order to protect
students and taxpayers. Accreditors are the organizations
tasked with this role. Our experience, however, has shown
that without substantive oversight by the federal government,
some accreditors are negligent in their role.
The primary example of this dereliction of duty to students
and taxpayers is the Accrediting Council for Independent
Colleges and Schools (ACICS). As noted in our April 8, 2016
comment to the National Advisory Committee on Institutional
Quality and Integrity (NACIQI) opposing ACICS's application
for renewal of recognition, a recent study found that only
35% of students enrolled in ACICS accredited programs
graduate, the lowest rate for any accreditor.
NACIQI, a bipartisan panel, voted to revoke ACICS's
recognition in June 2016. The Senior Department Official at
ED agreed with NACIQI and revoked ACICS's recognition as an
accreditor in September, 2016. ACICS appealed the decision to
the Secretary of Education, and in December 2016, the
Secretary denied ACICS's appeal.
An accreditor's failure to verify program quality at its
accredited institutions jeopardizes the effectiveness of
state enforcement efforts and regulations, exposing each
state's students to subpar educational programs that provide
little value, but for which each student may borrow tens of
thousands of dollars in student loans, that are nearly
impossible to discharge in bankruptcy.
A prime example of the harm that stems from lax
accreditation was brought to light by state action against
Westwood College. The Illinois Attorney General's Office sued
Westwood College for systematically misrepresenting the
ability of its criminal justice graduates to pursue careers
in law enforcement. Thousands of Westwood students in
Illinois borrowed up to $75,000 each for careers they were
unable to pursue because many police departments in Illinois,
including the Chicago Police Department and the Illinois
State Police, did not accept credits from nationally-
accredited schools. Graduates of Westwood's criminal justice
program have a median salary below the median salary of a 25-
year old with a high school diploma, in part because they
were locked out of the career they had been promised. This
combination of high debt and limited job prospects is a
crushing blow not only to students, but to taxpayers who bear
the burden of defaults on these loans. Despite the Illinois
Attorney General's January 2012 suit against Westwood, ACICS
accredited Westwood up to the day it closed its doors in
March 2016.
Similarly, on September 8, 2016, a Hennepin County Court
found that the Minnesota School of Business and Globe
University systematically misrepresented their criminal-
justice program as allowing students to pursue careers as
Minnesota police officers or probation or parole officers.
The Minnesota School of Business and Globe University were
accredited by ACICS throughout the time period of the fraud
determined by the Court, and their Chief Operating Officer
during that time was in fact the Chair of ACICS's board of
directors. Terminating ACICS's recognition is a responsible
action that will protect students and taxpayers for years to
come.
V. The Borrower Defense to Repayment Rule
In order to fairly and efficiently redress the harms
suffered by for-profit college students, the borrower defense
to repayment rule promulgated by ED must be allowed to take
effect on July 1, 2017. As we noted in our August 1, 2016
comment to the proposed rule, students need a fair and
transparent process to apply for borrower defense to
repayment, and that process is missing from the existing
regulation. The regulation finalized by ED also contains
significant protections for taxpayers, including the
requirement that schools cannot use arbitration agreements to
bar students from bringing borrower defense claims directly
against the school in court.
It is important to note that these regulations do not
create a new defense to repayment. Congress established the
borrower defense to repayment in the 1990s. Furthermore, over
the last two years, ED has created substantial documentation
of what constitutes a valid borrower defense claim under the
existing regulation. Not only will the defense continue to be
available, but it is likely that claims will continue to be
asserted, particularly if regulations surrounding for-profit
institutions, such as gainful employment, are loosened,
allowing the bad practices of the past to return. Because the
defense will continue to exist, a formal, transparent process
to assert the defense, as reflected in the new repayment
rule, is essential.
A basic sense of justice requires that the borrower defense
to repayment rules be allowed to take effect. Millions of
students paid tens of thousands of dollars each in federal
student loan money to for-profit schools and received
worthless degrees in return. Federal student loan debt is
non-dischargeable in bankruptcy. These students cannot be
left without a clear recourse. The new borrower defense to
repayment regulations provide that recourse and should be
allowed to take effect.
Our extensive experience in the higher education field, and
our participation in the process of developing these recent
policies and regulations, gives us unique insight into the
abusive and deceptive practices of for-profit schools over
the last ten years. We cannot overemphasize the harm to
students and taxpayers that a rollback of federal protections
would cause. Our offices hear from former for-profit students
on a daily basis; sadly, many are hopeless. They have little
hope of paying off their student loans without the career
prospects promised by their schools. They have little hope of
continuing their educations without the ability to transfer
their credits from the many nationally-accredited for-profits
to more rigorous regionally-accredited schools. Allowing for-
profit schools unfettered access to federal student loan
money without reasonable oversight and accountability is a
mistake that American students and taxpayers should not be
made to pay for again.
Sincerely,
Lisa Madigan, Illinois Attorney General; Matthew Denn,
Delaware Attorney General; Tom Miller, Iowa Attorney General;
Brian E. Frosh, Maryland Attorney General; Maura Healy,
Massachusetts Attorney General; Hector Balderas, New Mexico
Attorney General; George Jepsen, Connecticut Attorney
General; Douglas S. Chin, Hawaii Attorney General; Andy
Beshear, Kentucky Attorney General; Janet T. Mills, Maine
Attorney General.
Lori Swanson, Minnesota Attorney General; Eric
Schneiderman, New York Attorney General; Josh Stein, North
Carolina Attorney General; Josh Shapiro, Pennsylvania
Attorney General; TJ Donovan, Vermont Attorney General; Karl
A. Racine, District of Columbia Attorney General; Ellen F.
Rosenblum, Oregon Attorney General; Peter Kilmartin, Rhode
Island Attorney General; Bob Ferguson, Washington State
Attorney General; Stephen H. Levins, Executive Director,
Hawaii Office of Consumer Protection.
Mr. DURBIN. Mr. President, we know what open season means when it
comes to these students. Gilbert Caro of Chicago can tell us. He was
profiled in the Chicago Tribune article that I mentioned. Gilbert
received his master of business administration degree from DeVry
University. It is possibly the second largest for-profit college in the
United States.
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He took on nearly $100,000 in debt for his master of business
administration degree. He believed that debt was worth it because it
was going to unlock the door to a high-paying job and financial
security.
Do you have any idea what Gilbert Caro is doing now with his DeVry
master of business administration degree? He is a prison guard in
Joliet, IL.
While Gilbert has a good job, he certainly didn't need $100,000 in
debt to be a prison guard. It is far from what he was promised by DeVry
when he signed up. Gilbert, like so many other students who go to for-
profit colleges, was lured in by an amazing marketing campaign, flashy
advertisements and empty promises.
In 2016, DeVry University, a for-profit school, agreed to a $100
million settlement with the Federal Trade Commission for misleading
``prospective students with ads that touted high employment success
rates and income levels upon graduation.''
DeVry is not alone. For-profit college giants like Corinthian and ITT
Tech collapsed after they were caught engaging in similar deceptive,
disgusting practices. The predatory practices of these and other for-
profit colleges have left tens of thousands of students across the
country, just like Gilbert Caro, with worthless degrees and a mountain
of debt.
In fact, during the early part of this century, when for-profit
colleges acted with near impunity, just the students from the for-
profit colleges and universities accounted for 47 percent of all
student loan defaults. Ten percent of the students coming out of high
school went to for-profit colleges, and 47 percent of the student loan
defaults were those same students--10 and 47. Why? Because they were
overcharged for worthless degrees. That is why.
The University of Phoenix students held almost $35 billion in
cumulative debt. When I look at their flashy advertising and the
commercials about how life is going to be perfect if you sign up at the
University of Phoenix, it is hard for me to imagine how many of those
students are burdened with debt they will never be able to repay.
We also know what open season means for the for-profit college
industry and its executives and investors. Between 1998 and 2008,
enrollment at for-profit colleges exploded by 225 percent--a lot of
advertising, a lot of marketing, a lot of recruiting. With it came
exploding profits for these schools.
By 2009, the seven largest publicly traded for-profit college
companies were worth a combined $51 billion--2009, $51 billion.
In 2010, the University of Phoenix alone enrolled nearly half a
million students, more than the combined enrollment of all the Big Ten
universities.
When former Senate HELP Committee Chairman Tom Harkin released his
seminal report on the industry in 2012, for-profit colleges had grown
to take in an incredible $32 billion a year in Federal taxpayer
dollars, 25 percent of all Federal aid in education, despite enrolling
only 10 percent of the students that went to college after high school.
For-profit colleges and universities are the most heavily subsidized
private businesses in America that exist. No one rivals them. No other
industry is even close, and 80, 85, 90, 95 percent of the revenue of
these so-called private, for-profit universities ends up coming out of
the Federal Treasury.
John Murphy, the cofounder of the University of Phoenix, talks about
those days by saying that what started off as a serious venture to
educate students soon became too focused on ``chasing stock prices.''
To pump up those stock prices, companies needed students and they
needed Federal student aid dollars. They proved that they would do and
promise nearly anything to get ``the juice,'' as Mr. Murphy, the
cofounder of the University of Phoenix, called it.
Boy, is this industry itching for the Trump administration to return
to those bad old days. The Chicago Tribune reports that since the
November 8 election, the stock prices of DeVry University, a for-profit
college, have increased 52 percent.
In a recent New York Times article by Patricia Cohen entitled ``For-
Profit Schools, an Obama Target, See New Day Under Trump,'' the paid
spokesman for the for-profit college industry, former Congressman Steve
Gunderson, said he ``has repeatedly spoken with members of Trump's
transition team . . . White House domestic policy advisers . . . and
congressional Republicans.''
He is truly an insider. Mr. Gunderson promised: ``We're going to get
some regulatory relief.''
Sadly, it looks like he is right. Take for example the delay of the
gainful employment regulation. The Obama administration spent years
writing and rewriting regulations to ensure that career training
programs meet the statutory requirement to prepare students for
``gainful employment.''
Is that a radical idea--that if the Federal Government is going to
provide grants and loans for a student to go to a school, the school
should provide education and training that would lead to ``gainful
employment''?
My colleague from Oklahoma was on the floor a little while ago
talking about overregulation, too many rules, and the impacts on small
business. I would say that I am prepared to stand up and defend what
the Obama administration did in saying that if you were going to lure a
young man like Gilbert Caro into a school and put him $100,000 in debt
for a master's of business administration, he ought to at least end up
with a job that is consistent with his education.
Today, Mr. Caro is a prison guard with $100,000 of debt and a
business administration degree of no value to him.
The gainful employment rule cuts off title IV funding for programs
where graduates' ratio of student debt to earnings is too high.
Literally, the students are too deeply in debt.
Prior to leaving office, the Obama Department of Education released
the first set of gainful employment data. It showed that the graduates
of public undergraduate certificate programs, like community colleges,
earn $9,000 more than their for-profit counterparts on average.
Think about that. You go to the virtually free community college, get
a certificate, and you are going to earn $9,000 more than if you get
deeply in debt at one of the for-profit schools seeking the same
degree. Of the programs that saddle students with too much debt
compared to the income its students receive after their program, 98
percent of the violators were for-profit colleges.
This is not just a chance occurrence. It is a pattern. The rule is
meant to protect students from taking on debt to attend programs that
don't lead to a good-paying job. The rule is also meant to prevent
billions in taxpayers' dollars on worthless programs.
Many for-profit colleges receive more than 90 percent of the revenue
straight from Federal taxpayers. My Republican colleagues are committed
to the free market system. So am I. I am committed to capitalism. I
believe in it. Though, I think there is need for us to have regulation
when it gets out of hand. That is why we have an antitrust division,
for example.
In this circumstance, to argue that these are just private companies
that are doing what ordinary people do when they start a business is to
ignore the obvious. These for-profit colleges could not exist if they
weren't receiving 80, 85, 90, and 95 percent of their revenue directly
from the Federal Treasury.
In recent testimony before a House subcommittee, the Department of
Education inspector general agreed that the gainful employment
regulation ``is a good rule in terms of protecting [students] and
protecting taxpayers.''
I sent a letter--along with Senators Patty Murray, Elizabeth Warren,
and nine other colleagues--expressing our concerns to Secretary DeVos
about her delaying this rule. In our letter, we made clear that these
delays undermine the rule and are going to be a danger to students and
taxpayers.
It is also a betrayal of students not to ensure that they are treated
fairly after they have been taken advantage of by for-profit schools.
Today, POLITICO reported that the Trump administration has
dramatically slowed, if not stopped, processing applications from tens
of thousands of students seeking to have their Federal student loans
discharged after they have been defrauded by for-profit colleges.
Think about that. A student is about to sign up for a for-profit
school.
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Maybe he doesn't know much about higher education. His parents say:
Listen, if you can get a Pell grant and a Federal student loan, this
must be a really good school.
He is defrauded into signing up for a school that is too expensive
and offers a worthless degree, and then they turn around and that
school goes bankrupt. Now the student has the debt, no degree, and we
are left holding the bag. What has happened in previous cases is the
Federal Government stepped in and discharged the students from the debt
if they were defrauded into signing up for the college.
Secretary Betsy DeVos has decided to slow that down--to slow down the
discharge of these students' debt. Students who were misled or
defrauded by their schools are eligible for discharge of their Federal
student loans under the Higher Education Act--the law as it now exists.
Yet during her confirmation process, Secretary DeVos would not commit
to providing this relief to students--relief already specified in law--
and has now effectively stopped processing the claims.
On the day before President Trump took office, more than 3,200
Illinois students applied to the Department of Education for relief.
While the Department fails to process these claims, these students are
left in the lurch. It adds insult to injury that students taken
advantage of by for-profit colleges, nominally supervised and regulated
by the Federal Government, are now being ignored by the Federal
Government's Department of Education. That is unacceptable. It is
unfair, and the Trump administration should change it.
We've started to see the true colors of the administration and
Secretary DeVos when it comes to these students who have been
victimized. As feared, the Department has thus far put for-profit and
other commercial interests ahead of students and taxpayers.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Blunt). The Senator from Mississippi.