Biden tightens regulation of for-profit colleges
leader among proposals close a loophole that excludes military and veterans’ education benefits from the 90/10 rule, which prohibits for-profit colleges from obtaining more than 90% of their operating revenue from federal government funding help for students. Veterans groups say for-profit colleges are aggressively recruiting military members to circumvent the rule. The Government Accountability Office (GAO) found that almost a third of GI Bill tuition went to for-profit schools in 2017.
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A bipartisan group of congressional lawmakers won a provision in the 2021 U.S. bailout to close the loophole, delaying implementation of the change of two years. This gave the Department of Education time to negotiate the rules with a panel of higher education experts.
Under the proposed rules, for-profit schools must include all federal education assistance in their revenue calculation, and they cannot delay the drawdown of federal financial aid funds past the end of the fiscal year to play the calculation.
“Predatory and deceptive practices that target veterans and the military have no place in higher education, period,” Education Secretary Miguel Cardona said Tuesday. “Educating our veterans and service members should be about honoring their contributions to our country, not exploiting them for financial gain.”
For-profit colleges have argued that the income rule is not a good measure of the quality of education provided by colleges. Jason Altmire, chief executive of Career Education Colleges and Universities, which represents for-profit colleges, called the rule “misguided” but praised the department’s approach.
“While we fundamentally disagree with this flawed measure of accountability, we commend the Department for adopting the consensus language agreed upon during the negotiated rulemaking process,” Altmire said in a statement Tuesday. “We look forward to working with the Department to implement the rule so that it is fair to students and institutions.”
Another proposed rule aims to prevent former for-profit colleges from posing as nonprofits to avoid regulations such as the 90/10 rule while reaping the financial benefits of operating as proprietary institutions.
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This would clarify the definition of a non-profit organization to prevent a former owner or other affiliates of a college from making money with the school, as well as lower the threshold for reporting ownership changes.
Becoming a non-profit school means relinquishing ownership and placing control in the hands of trustees who operate without financial benefit and in the interests of the public good. But a 2020 GAO report raised concerns that insiders remained involved with converted universities.
The GAO identified 59 for-profit college conversions that occurred from January 2011 to August 2020, almost all of which involved the sale of the college to a tax-exempt organization. In about a third of these transactions, the former owners were involved in creating the nonprofit or maintaining the chair after the sale. The GAO has concluded that insider involvement in a conversion poses a risk that insiders could improperly benefit by inducing the tax-exempt purchaser to pay more for the college than it is worth.
The third proposed settlement released Tuesday would make incarcerated people eligible to use Pell Grants, a form of federal aid for students from low-income households, to pursue higher education behind bars. clarifying requirements for providers of prison education programs, among other changes.
Ministry officials aim to have the rules in place by November, meaning they would come into effect the next time around. July. People can submit comments on the proposed rules within the next 30 days.
Tuesday’s package of regulations comes weeks after the Biden administration proposed rules to overhaul loan forgiveness programs. Although student advocates welcomed the arrival of the latest proposals, many were also anticipating the release of a new plan to reduce monthly payments for federal student loan borrowers. The Department for Education said an income-tested reimbursement proposal will be released at a later date, but will still come into effect next July.