These are interesting times in the for-profit college world.
On October 30, the Department of Education issued long-awaited Gainful Employment rules designed to curb abuses by these schools. Then, following Tuesday’s Republican victories in the midterm races, the industry got a bounce back: In light of the elections, bank advisers on Wall Street told investors that for-profit schools might again become rich investment prospects.
What it ultimately means remains to be seen. But there are some things we know right now.
First, the new rules do put us in a (slightly) better place. Focused on tightening the debt-to-income ratio of for-profit graduates, the rules require schools to show that students’ annual loan payments don’t exceed 20% of their discretionary income or 8% of their total earnings. The Department of Education says that 1,400 schools nationwide will fail this new standard.
In the brutal matrices of the for-profit world, this marks an improvement.
As a member of the committee that recommended stronger rules to the Department of Education, I see much room for even more protection of students. For one, the administration could have put in place the rules committee’s recommendation that the fates of for-profit dropouts be measured as well as the fates of graduates of these schools.
This might seem like an academic distinction, but it has real implications considering the fact that most for-profit students never graduate. If we don’t factor in all students, we can never have a full measurement of how these schools do or don’t meet their promises.
RELATED: Democrats’ new villain: Student debt
In my position as an attorney at the Mississippi Center for Justice, I work with students who have attended these colleges, and it’s heartbreaking to hear their stories — and even worse to know these new regulations will provide them with little relief.
One such student is Tiffany Herritt, a 28-year-old mother of two in Gulfport, Miss. Herritt attended Miller-Motte College’s Gulfport campus to get a lab technician degree. What she got instead was a mountain of debt and a series of job interviews that went nowhere until she got a job in Mobile, Ala., 75 miles from her home. That’s because the licensure offered by her for-profit institution didn’t match the licensure Mississippi employers were looking for. In effect, the school failed to provide training that would actually prepare Ms. Herritt for available jobs.
“The stress has been incredible,” Herritt said. “My husband works in Louisiana. My job was in Mobile. Our kids are in Gulfport. It was just too much.”
Herritt has since enrolled in a community college to get the same degree she thought she earned at Miller-Motte. The difference is that a degree from the community college will provide her with the licensure she needs, something, and will cost a fraction of the Miller-Motte experience.
“Basically I have a piece of paper that cost $28,000,” Herritt said. “It has just been a horrible experience.”
Herritt’s experience was corroborated in an exhaustive 2012 Senate investigation showing that degrees from the 30 largest for-profit schools were dramatically more expensive than non-profit schools, and were largely worthless.
Many of these schools spent much more on advertising and executive salaries than on student instruction. “Admissions interviews” were often a farce, resembling high-pressure sales pitches rather than informational meetings. The largest for-profits hired default management agencies to push troubled students into expensive loan deferrals, sometimes offering them McDonald’s gift cards and other trivial perks to evade federal default rate standards used to gauge success.
Like subprime mortgage companies and payday lenders, for-profit college schools prey on the most vulnerable communities. Students at for-profit colleges are disproportionately minority, female, and low-income. Like Tiffany Herritt, they often are working class citizens who hope an education will provide a path to a better life. When a for-profit college promises students that they can get a medical assistant degree in nine months or a nursing degree in a year, they eagerly sign up.
Instead, what happens too often is a lifetime of unmanageable debt and no employment opportunity. At Virginia College in Jackson, Miss., a medical assistant degree will cost nearly $25,000, a staggering figure to enter a field where workers often make only about $10 per hour. And if the student can’t find a job, or drops out before finishing a degree, the situation becomes even worse.
But this story doesn’t stop with the students and the school.
We, as American taxpayers, are on the hook for this exploitation of our education finance system.
For-profit schools often get up to 90% of their money from federal student aid, though they account for only about 10% of student loan borrowers. And, incredibly, they generate nearly 50% of student loan defaults. The defaults, in turn, weigh like a millstone around the necks of the students, thanks to strict repayment rules, sinking students' hopes of advancement. When those families plunge further into poverty, this loss is shouldered by us all, while the federal loan and grant money is shoveled into the bank accounts of the for-profit college industry.
As for the rekindled romance between Wall Street and for-profit schools, we certainly saw this coming. If the Republican resurgence brings with it a negligent attitude toward for-profit schools and their abusive ways, thousands of students will suffer and millions of taxpayers will continue to fill the coffers of the one percent.
This, sadly, is standard operating procedure in the topsy-turvy world of for-profit schools.
The strong regulations proposed by the Department of Education committee on which I served would have come down hard on these predatory practices. Instead, we are left with a lighter touch by the federal government on a heavy-handed industry. Perhaps the new rules will protect more students like Tiffany Herritt.
Regardless, a watchful eye must remain on for-profit schools. We will see how many lawmakers take their jobs seriously when Congress is called to session next year -- and how many choose the profits of the powerful over the dreams of ordinary American families trying to get ahead.
Whitney Barkley is a former consumer protection attorney for the Mississippi Center for Justice, where the bulk of her work focused on for-profit schools.