October 22, 2017

Higher Education Act Reauthorization Process to Begin Thursday

william blair

Global Services – Education Services and Technology


Timo Connor of William Blair Notes

  • Viewpoint: We expect the reauthorization of the Higher Education Act, the legislative framework for federal higher education policy, to be a hard-fought, multiyear process that will ultimately create some smoke for the for-profit colleges, but little fire. We believe gainful employment rule-making, a far more important near-term issue for the for-profit colleges, will remain a separate process, but believe many legislators will look to combine the two processes, which would be a significant win for the sector. As the range of potential negative regulatory outcomes for the sector gradually narrows in the coming years, we expect valuations in the space to rise in light of the significant policy “discount” the stocks currently carry.
  • Unlike gainful employment, reauthorization of the Higher Education Act is a legislative process, with final sign-off on all changes required from the Senate, House of Representatives, and the president. The Republican-controlled House is largely supportive of the for-profit colleges, and we believe any negative changes targeted at the for-profits are likely to be met with significant resistance from the House.
  • Passage of the prior reauthorization, in 2008, required five years, dozens of drafts, and 14 extensions and ultimately, the changes were rather benign, if not positive for the for-profit sector. While the current act technically expires at the end of 2013, the existing law would remain in effect and we expect reauthorization to drag into late 2014, and perhaps 2015.
  • We expect Senator Tom Harkin (D-Iowa), the head of the Senate Health, Education, Labor, and Pension (HELP) Committee and an outspoken critic of for-profit colleges, to introduce caps on college marketing spending, increased focus on default rate manipulation, and more restrictive interpretations of the “90/10” rule for the for-profits. We believe these efforts are unlikely to go anywhere in light of his failure to drive specific legislation on these issues beyond committee over the past few years.
  • We expect a broader trend toward simplification of federal education oversight in light of the current budget environment and the conflict between the compliance costs of an increasingly complex federal financial aid system and the public desire to limit skyrocketing public tuition levels (which have tripled in real terms over the last three decades).
  • Senator Harkin will not seek re-election in next November’s midterm elections, and we see no obvious heir apparent on the HELP committee panel to carry the torch in criticizing the for-profit sector. If reauthorization drags on beyond his retirement, we believe the odds of more-favorable legislation for the sector will increase.
  • On Friday, September 13, Senator Harkin announced the HELP committee will begin the process of reauthorizing the Higher Education Act. The first of a series of HELP hearings begins Thursday, September 19, at 10 a.m. ET with a panel of state school and accreditation representatives. The hearings are expected to cover the role of states/federal government/accreditors, college affordability, college quality and access, retention/graduation goals, and student financial aid. We do not expect the role of the for-profit colleges to be discussed in detail at any of the hearings, but expect Senator Harkin to remain generally critical of the space, as he has been since he championed an expansion of the Pell Grant program (of which nontraditional for-profit students make heavy use).

 Link to Full Report

Comments

  1. FOR APSCU MEMBERS

    On Thursday, September 19, the U.S. Department of Education is expected to announce in the Federal Register the intent to establish a negotiated rulemaking committee to prepare proposed regulations to address the changes to the campus safety and security reporting requirements in the Jeanne Clery Disclosure of Campus Security Policy and Campus Crimes Statistics Act (Clery Act), made by the Violence Against Women Reauthorization Act of 2013 (VAWA).
    The announcement solicits nominations for the negotiating committee which will be due within 30 days of official publication. The constituencies to be represented include: students; legal assistance organizations; consumer advocacy organizations; state higher education executive officers; state attorneys general and other appropriate state officials; institutions of higher education, with seats for minority serving institutions, two-year and four-year public institutions, private non-profit institutions, and for-profit institutions; institutional campus public safety officials; institutional student affairs divisions; institutional campus public safety officials; institutional centers for women, lesbian, gay, bisexual, and transgendered individuals; institutional attorneys; Indian tribal governments; and campus safety advocates.
    The negotiating committee will meet over three sessions:
    • Session 1: January 13 – 14, 2014
    • Session 2: February 24 – 25, 2014
    • Session 3: March 31 – April 1, 2014
    The negotiators will meet from 9:00 am – 5:00 pm at the U.S. Department of Education, 1990 K Street NW, Washington, DC. All meetings are open to the public
    The APSCU Regulatory Committee will be coordinating the nomination process on behalf of APSCU members. If you would like to be considered or if you would like to nominate someone to serve as a negotiator, please forward their name and contact information to tammy.halligan@apscu.org by Tuesday, October 1, 2013.

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