BANGALORE (Reuters) - U.S. for-profit colleges, widely criticized for saddling students with big debts and not fully preparing them for the workplace, are kicking back as they garner public support.
Having seen their stock prices slump by a third since April as their business model has come under sustained attack from the Obama administration, education companies such as Apollo Group and Corinthian Colleges have begun a counterattack.
Corinthian has run a marketing campaign to raise awareness of the “unintended consequences” of the proposed rules, and has urged Washington to reconsider them.
Student unions, Republican senators and even some Democrats are lining up behind these schools in opposing the proposals that are seen crimping colleges’ growth and tightening enrollment policies.
The new rules would limit schools and the amount of help students could get, according to Dawn Connor, president of Students for Academic Choice, a student group that opposes the regulations.
“Default rates are up all over the place, that’s because the economy is down. I don’t think it should all be blamed on for-profit schools,” said Connor, who this week organized a student rally on Capitol Hill to protest the proposals.
The tough rules framed by the Department of Education could see fewer courses on offer and more students excluded from post-secondary education at a time when high unemployment and a slow recovery are bringing more people back to schools.
The department last week delayed releasing a final rule on the most controversial reform, citing the large number of critical comments, some 100,000, it had received.
The ‘gainful employment’ rule says the government would stop lending to college programs if more than 65 percent of ex-students fail to pay the principal on federal loans.
In August, the department released loan repayment rates of for-profit schools that showed most did not meet the required threshold to qualify for federal aid.
Morningstar analyst Todd Young said companies and industry groups were waiting to see the detail of the gainful employment proposals before firing back in earnest. These are now expected early next year.
“As the public comment period came to an end in September, the industry finally started its counterattack,” Young said.
Republicans also voiced their opposition to the proposed rules at a Senate hearing on Thursday.
“It’s naive to think these problems are limited to just the for-profit sector,” said Republican Sen. Michael Enzi, noting large debts owed by many law school graduates. “We’re just looking at this in a vacuum and that’s not fair.”
Democrats face the threat of losing control of one or both chambers of Congress in November mid-term elections amid voter anxiety over jobs and the slow pace of economic recovery.
The proposals could prompt 400,000 students out of post-secondary education each year, and trigger 90,000-100,000 job losses, according to a study by Parthenon Group — as schools will have to trim programs that don’t offer students solid job prospects.
“The government needs to think about access to education, how they can help students who want to get education but can’t afford loans and certainly can’t afford to get themselves into a lot of college-loan debt,” said Steve Loflin, executive director of The National Society of Collegiate Scholars, which provides scholarships to high-ranking students.
Some for-profit schools argue their default rates are high as they primarily serve some of society’s weaker elements.
“The biggest effect I see is the underserved population are going to be turned out again. I don’t think that’s a great result because those are the folks that are likely to need public assistance,” said Signal Hill analyst Trace Urdan.
But the schools are still coming under fire for charging high fees and running loose admission policies.
Rich Williams, higher education advocate at U.S. Public Interest Research Group, said for-profit colleges were still being irresponsible in their recruiting, and noted that they charge $15,000 for certification for programs like massage therapy — that costs about $520 at community colleges.
“If anything, these high-risk students should not be going to for-profit colleges,” said Williams, one of a 13-member team that helped the education department draft the new regulations.
Sara Fuller, a student at Apollo’s University of Phoenix, said she was never asked if she had a job or could repay loans before being enrolled on an associate degree in criminal justice.
“I called the university and was enrolled in classes on the same day,” said Fuller, who is pushing for tougher regulation as, even after investing over $12,000 in her degree, she’s not sure of getting a job.
Reporting by A.Ananthalakshmi and Megha Mandavia; Editing by Gopakumar Warrier