For-Profit Task Force No More

Inside Higher Ed

With interagency panel launched under Obama no longer active, observers see a Department of Education less interested in leading oversight of for-profit college sector. State regulators may become more important.

By Andrew Kreighbaum
May 9, 2017

In the midst of a push late in the Obama administration to crack down on abuses by for-profit colleges, the Department of Education launched an interagency task force to coordinate oversight of the sector with other governmental agencies.

The idea was that the Education Department and other federal agencies like Veterans Affairs, the Treasury and the Securities and Exchange Commission would be more effective at overseeing for-profit colleges with limited resources if they knew what work the other agencies were doing.

The task force’s role and scope were scrutinized by Republican lawmakers concerned about whether it was following due process when actions were taken on the basis of the panel’s discussions. In a 2015 letter to then Education Secretary Arne Duncan, Tennessee Senator Lamar Alexander and Arizona Senator John McCain, both Republicans, said they hoped the resources of the task force would be “directed toward a fair and transparent review of issues facing for-profit and nonprofit institutions, and not for a preconceived, political agenda to stir the pot of public perception.”

And its work went mostly under the radar — no major enforcement actions were linked directly to the task force by the department in press releases or comments from top officials.

But observers say the task force was key to promoting cooperation between both federal agencies and state attorneys general. And months into the Trump administration, the task force is apparently among the first casualties of the transition.

That’s reflective of a dynamic many observers see unfolding in regulation of higher ed; the department will be less aggressive in oversight activities, while states and some independent federal agencies play a more prominent role.

Liz Hill, the press secretary for the Department of Education, said to her knowledge the task force hasn’t been discontinued and still exists.

But that contradicts reports from multiple sources among higher ed advocates and on Capitol Hill who say the task force is basically done or has suspended any activities.

Proponents of more active oversight say they are disappointed, if not surprised, to see the task force go inactive. An aide for Sen. Richard Durbin, the Illinois Democrat who was a major supporter of the task force’s formation, said those concerned about for-profit colleges have been moving forward as if the task force is dead.

Because the task force was launched in the department and not as a White House or congressional initiative, it had little staying power, the aide said.

“It was housed in the department; it was led by the department. For that reason, it’s very easy for the current department just to let it drop,” the aide said. “That’s what most of us have assumed is happening, which is unfortunate.”

Proponents say the task force — which brought together officials from the Department of Education, Veterans Affairs, the Consumer Financial Protection Bureau, the Department of Justice and other agencies — was primarily an information-sharing body.

And while some in the for-profit sector or among congressional Republicans questioned whether it was actively coordinating investigations, its work never went that far.

Steve Gunderson, president and CEO of Career Education Colleges and Universities, said for-profits objected to a body set up to target their sector specifically.

“I think the current administration, to their credit, says, ‘we’re not going to target one sector,'” Gunderson said. “We’re going to look at the good, the bad and the ugly in all of higher education.”

But the task force, more than shaping the target of enforcement actions, was important in keying in various federal agencies on what entities or specific issues other government bodies were looking into. It never got as far as sharing notes on investigations — a concern of both GOP lawmakers and of the general counsels at the respective agencies involved. But it helped cement relationships between departments like Education and Veterans Affairs that are key to determining if a college qualifies for federal aid programs.

Shift in Oversight to States

Proponents of more active federal oversight who take the demise of the task force — as well as other recent developments — as indicative of the department’s new approach see a space opening for more active regulators at the state level. Ideally, there would be a strong core of federal protections for students, said Whitney Barkley-Denney, legislative policy counsel at the Center for Responsible Lending.

“In the absence of that, state enforcement action can and should be a way for states to actually be assertive and protect students,” she said.

Greg Ferenbach, a lawyer with Cooley LLP, who follows state higher ed policy issues, said many state attorneys general were active in enforcing consumer protection laws in higher ed under Obama.

“If anything, the Trump administration may energize them,” he said.

Ferenbach said some AGs have pushed for new rules at the state level. And he expects those officials to weigh in on federal policy if the administration seeks to change via negotiated rule making regulations promulgated by Obama officials.

Massachusetts Attorney General Maura Healey said in an interview that the regulatory outlook under the Trump administration informs the work her office does. She observed that stocks of for-profits colleges shot up after the November election and that Education Secretary Betsy DeVos appears to be much more friendly toward those institutions than previous secretaries.

“We can’t go backwards in terms of ending some of the predatory practices we’ve seen really wreak havoc with students and families across the country,” she said.

Healey said it’s not clear anyone in the administration is invested in oversight of for-profits or student loan servicers.

“As states we’re going to continue to work together,” she said. “I just wish we had a federal partner.”

The Massachusetts attorney general was a key partner of the Department of Education in the lead-up to the closures of Corinthian Colleges in 2015 and ITT Technical Institute last year. In the aftermath of the Corinthian closure, Healey’s office began devoting resources to assist former students in applying for loan discharge — a departure from the traditional law enforcement role of most AGs.

State attorneys general who played a hand in enforcement actions brought under the Obama administration have shown no sign of losing interest in for-profits, even after the closure of what for-profit critics deem some of the worst “bad actors.” In January, Healey was among a handful of AGs who intervened in the lawsuit of for-profit accreditor ACICS against the Department of Education, arguing that the department could not be counted upon to adequately represent their states’ interests.

But Abby Shafroth, an attorney with the National Consumer Law Center who focuses on student loan and for-profit issues, said there were drawbacks to states being leaders on enforcement. State regulators have fewer resources than the federal government and their jurisdiction is more limited, potentially creating a patchwork of oversight and enforcement actions.

“Folks in neighboring states may not be able to get any relief from action taken in California,” Shafroth said. “There’s certainly a lot of variety in how well resourced and how committed to these issues each state is.”

Challenges Beyond Regulation

Will Hubbard, vice president of government affairs at Student Veterans of America, said there weren’t any specific enforcement actions that he would credit to the task force.

“I’d like to see them stick around so they could accomplish something,” he said.

SVA has lobbied the Trump administration to maintain the borrower-defense rules finalized during Obama’s final months in office. Hubbard said it’s been tough to judge the approach the administration will take on some specific policy issues because so many personnel positions that could shape policy remain unfilled.

“We’re kind of just cautiously waiting to see what happens,” Hubbard said. “If we’re still sitting in this position a year from now, that would be concerning.”

Even with a potential shift in the regulatory environment for for-profits, structural challenges mean the sector won’t necessarily come roaring back, said Teddy Downey, executive editor and CEO of The Capitol Forum.

“They just face issues that are beyond regulatory in nature,” he said. “They face much more competition from nonprofits and traditional schools getting into the online space. They face more awareness from the consumer in terms of thinking about student debt.”

Downey also observed that the most significant enforcement actions targeting for-profits under the Obama administration were initiated by the CFPB and the Federal Trade Commission — not the department.

Several key decisions involving the sector are pending department approval, including applications for the sales of for-profit chains Kaplan and EDMC.

But Downey said the “gravy train” seen by the sector over the last decade won’t come by again.

“That’s just not happening again,” he said. “There are these other variables that have nothing to do with the government that are huge obstacles for the for-profits.”