September 24, 2021

GOP budget would block key Obama higher ed regulations

gop

Take your higher education regulations and shove them, Obama administration.

Republicans in the House of Representatives didn’t use exactly those words in the 2016 spending bill for the Department of Education they released Tuesday, but the message they delivered couldn’t have been much clearer.

The bill drafted by Republican leaders of the House Appropriations subcommittee that oversees spending for education, health and labor programs would bar the Education Department from using any of its appropriated funds to carry out existing regulations related to “gainful employment” for graduates of vocational programs, state authorization, teacher preparation, and the credit hour, and to implement President Obama’s envisioned system to rate colleges and universities.

Essentially, it would block virtually all efforts by the Obama administration to hold colleges more accountable for how they use federal funds, which Republican lawmakers (and many college officials) have opposed as overreaching, misdirected and unlikely to work. Republicans have opposed most of the initiatives previously, but now that they control both houses of Congress, they are in a better position to actually block some of them — or at least force President Obama to horse-trade for some of them in negotiations over the spending measures.

Full Article Inside Higher Ed: https://www.insidehighered.com/news/2015/06/17/house-spending-bill-would-block-higher-ed-rules-and-ratings-hold-spending-flat

Unfair targeting of For Profit Colleges

forbesa

For-profit colleges have been targeted by government officials, including President Obama and California Attorney General Kamala Harris, who claim these schools take advantage of low-income students, burdening them with student debt and limited job prospects upon graduation (if they graduate at all). Yet, these same officials are unfairly aiming their crosshairs at for-profit institutions while applying weaker standards and greater accommodation with not-for-profit schools.

For-profit schools enable low-income and racial minority students, including many who are non-traditional, to gain practical, skills-based training that better equips them for the marketplace relative to many traditional academic paths. As Manhattan Institute adjunct fellow Judah Bellin points out, New York State’s two-year, degree-granting, for-profit colleges graduate a higher percentage of their students than any other higher education sector, including private non-profit colleges.

A generation ago, for-profit schools awarded virtually no bachelor’s degrees. Today, for-profit colleges account for 20 percent of associate’s degrees and 7 percent of bachelor’s degrees. As STEM careers become ever more important, critics should take note that for-profit colleges produce 51 percent of associate degrees in computer science and information technology, according to research by Harvard University.

The article continues to shed light on the vast benefits and results provided:

Link to article: http://www.forbes.com/sites/carriesheffield/2015/05/29/in-defense-of-for-profit-colleges/

 

Time to Decouple Accreditation from Federal Funding?

accredited

By Jay Schalin

It often appears as if the country’s six regional accrediting agencies are the federal overseers of all things higher education. It’s time to put an end to their expansive role; doing so would very likely set off a great chain of positive reform. This is especially important now, as Congress is getting ready to update and reauthorize the Higher Education Act, which governs accreditation, in 2014.

The six agencies are the Middle States Association of Colleges and Schools (MSACS), the New England Association of Schools and Colleges (NEASC), the Western Association of Schools and Colleges (WASC), the Southern Association of Colleges and Schools (SACS), the North Central States Association of Colleges and Schools (NCA), and the Northwest Commission on Colleges and Universities (NWCCU).

They provide a seal of approval—accreditation—that indicates schools are meeting minimal industry standards. Primarily, they ascertain that the colleges and universities are financially sound and function as educational institutions and not merely as  “diploma mills.”

The agencies’ main source of power is their ability—granted by the original Higher Education Act in 1965—to determine whether schools are eligible for federal funding, particularly the student financial aid that is the life’s blood for private institutions. That role has permitted the agencies to make the transition from essentially trade organizations intent on cooperatively improving industry practices—as they were originally conceived—to quasi-governmental regulatory bodies with the authority to impose huge costs, policy shifts, and penalties.

Allowing the regional agencies to continue as they are will likely continue higher education’s slide into mediocrity and dogmatic conformity. They currently impose burdensome costs and regulations, stifle innovation, discourage competition and, most egregiously, allow substandard schools to continue operations while sucking up massive amounts of federal aid.

Full article: http://www.popecenter.org/commentaries/article.html?id=2934#.U44pUPldWa8

No Resolution for Gainful Employment, as Expected

ed_mn_logoUpdate from William Blair’s Timo Connor

• On Friday, December 13 the final Gainful Employment 2.0 hearing ended with no
resolution, as expected. With no consensus from negotiators on what the rules
should look like, the Department of Education (ED) will proceed unilaterally in
publishing final rules. The ED has until November 2014 to get them published in
the Federal Register in order to go effective in 2015.
• We believe recently released draft rules will be weakened significantly in the
final version, much like they were when Gainful Employment 1.0 rules were
published in 2011 (e.g., debt-to-income thresholds were increased from 8% to
12%).
• We believe that no matter what the final rules look like, they are likely to face
significant legal and legislative challenges from the industry and legislative
supporters of the industry. We note that Gainful Employment 1.0 rules were
challenged in court, and a federal judge struck down the rules on the basis that
some of the quantitative thresholds were “arbitrary.” We also note that a
Republican House is largely supportive of the private-sector colleges and could
mount a legislative challenge of gainful employment through the ongoing Higher
Education Act reauthorization process or through the budget process by
challenging the funding of ED.

In addition, gainful employment data is reported on a multiyear lag, and we
believe that significant changes to improve student ROI made by private-sector
schools over the past few years will greatly improve regulatory metrics over
time. While we continue to expect regulatory scrutiny of the sector, a gradually
narrowing range of potential negative regulatory outcomes should support
multiple expansion for the postsecondary stocks in the coming years.

Recapping the Gainful Employment Process
ED held a series of Negotiated Rule-Making hearings this fall discussing draft gainful employment rules. The first three-day
session began Monday, September 9, the second three-day session began November 18, and the third and final one-day
session took place on December 13.
• The previous iteration of the rule, finalized in 2011, was challenged by an industry group and vacated in 2012 by a
federal judge who found the metrics “arbitrary,” so ED was forced to start the process over. Because no consensus was
reached by the negotiating panel, ED will move forward with new rules, which would likely go into effect in 2015,
potentially eliminating Title IV student loan eligibility for programs at some schools in 2019 and beyond.
• The draft language, though very similar to the prior rule, appears more onerous for the sector this time around;
however, the initially proposed rules from the previous gainful employment NegReg were watered down significantly
in the final language, with debt-to-income ceilings rising from 8% to 12% and repayment floors falling from 45% to
35%, for example.
• In particular, the use of “and” rather than “or” forces the schools to pass all metrics, not just one; the re-introduction
of a “caution zone” for programs close to failing; the elimination of an extended debt amortization schedule for
bachelor’s and graduate programs; and the elimination of a transition period in which generally higher BLS incomes
could be substituted for actual earnings are negative changes for the schools in the space. The table at the end of this
note offers the details on the new rule and the school’s debt-to-income and CDR exposures.

• The schools have already begun adapting to potential rules by freezing or cutting tuitions or the number of credits
required for graduation as well as reducing exposures to low-salary fields like criminal justice or certain fine arts
studies, while also screening out unprepared students who are more likely to default or not repay loans. As a result,
we believe regulatory metrics will likely improve in the years leading up to the instatement of any potential rules.
• We believe the political climate has shifted significantly since the gainful employment NegReg process began in 2009,
and believe there is more political support for the private-sector schools, particularly among Republicans, who now
view further ED regulations as anti-business. Although NegReg remains a non-legislative process, Congress controls
funding for ED, and we believe the rules are significantly more likely to be softened than toughened following this
fall’s sessions and the ensuing public comment period. We also note that the schools successfully appealed the prior
rules and are likely to appeal again, so it could be a lengthy process to put the rules in place (if they’re put in place at
all).
Source: Timo Connor, CFA William Blair & Company, L.L.C. Link to report

Draft Gainful Employment Data Noisy, as Expected

gainful employmentViewpoint: Draft “Gainful Employment 2.0” data from the Department of Education (ED)
released on December 11 was predictably noisy for the private sector colleges, but we
continue to believe that the final rules are likely to be significantly weakened and will
face significant legal and legislative challenges. In addition, we note that gainful
employment data is reported on a multiyear lag, and believe that significant changes to
improve student ROI made by private sector schools over the past few years will greatly
improve regulatory metrics over time. While we continue to expect heightened
regulatory scrutiny of the sector, a gradually narrowing range of potential negative
regulatory outcomes should support multiple expansion for the postsecondary stocks in
the coming years.
Key Points (supporting data tables located at the end of this note):
• Individual institutions were not identified, but ED’s data indicated that 13% of all
programs would fail the proposed metrics and an additional 7% of all programs
would be caught in the debt to income “caution zone,” requiring debt-to-income
improvement. This compares unfavorably with the 6% of all programs that
would have failed under the 2011 final rule (“Gainful Employment 1.0”).
• Six percent of programs would fail the debt-to-income standards, the same as in
the 2011 rule.

Fourteen percent of all programs would fail (exceed the 30% default threshold)
the recently introduced program-level cohort default rate (pCDR) metric. We
note that 8.3% of the failing programs belong to not-for-profit colleges (for
which certificate programs are subject to gainful employment regulations). Notfor-
profit colleges account for 17.1% of the total population of reported default
rates, so the proportion of failing programs is roughly half of that of private
sector colleges, but still meaningful enough to ring alarm bells among
constituents of not-for-profit colleges who, to this point, have largely viewed
gainful employment as a “for-profit issue” only. We believe pCDR will ultimately
be an out for schools (included as an “or” rather than “and” metric in the final
rules).
• The concept of a repayment rate threshold, introduced before the last set of
hearings, was eliminated in this draft. We believe providing quantitative support
for the “right” level of repayment will prove challenging for ED, particularly in
light of ED-approved programs like loan forbearance, deferment, hardship, or
income-based repayment, which encourage students to delay or reduce loan
payments. We are uncertain if a repayment threshold will be included in the final
rule, but if so, believe this will also be an “or” metric.

Recapping the Gainful Employment Process
On December 11, ED released a third draft of gainful employment rules for this fall’s negotiated rulemaking (NegReg) sessions.
The first three-day session began Monday, September 9, with a panel of experts discussing draft rules; the second three-day
session began November 18; and the third (and likely final) one-day session will take place on December 13.
• The previous iteration of the rule, finalized in 2011, was challenged by an industry group and vacated in 2012 by a
federal judge who found the metrics “arbitrary,” so ED was forced to start the process over. If no consensus is reached
by the panel, ED will move forward with new rules, which would likely go into effect in 2015, potentially eliminating
Title IV student loan eligibility for programs at some schools in 2019 and beyond.
• The draft language, though very similar to the prior rule, appears more onerous for the sector this time around;
however, we note that the initially proposed rules from the previous gainful employment NegReg were watered down
significantly in the final language, with debt-to-income ceilings rising from 8% to 12% and repayment floors falling
from 45% to 35%, for example.
• In particular, the use of “and” rather than “or” forces the schools to pass all metrics, not just one; the re-introduction
of a “caution zone” for programs close to failing; the elimination of an extended debt amortization schedule for
bachelor’s and graduate programs; and the elimination of a transition period in which generally higher BLS incomes
could be substituted for actual earnings are negative changes for the schools in the space. The table at the end of this
note offers the details on the new rule and the schools’ debt-to-income and CDR exposures.

The schools have already begun adapting to potential rules by freezing or cutting tuitions or the number of credits
required for graduation as well as reducing exposures to low-salary fields like criminal justice or certain fine arts
studies, while also screening out unprepared students who are more likely to default or not repay loans. As a result,
we believe regulatory metrics will likely improve in the years leading up to the instatement of any potential rules.
• We believe the political climate has shifted significantly since the gainful employment NegReg process began in 2009,
and believe there is more political support for the private sector schools, particularly among Republicans, who now
view further ED regulations as anti-business. Although NegReg remains a nonlegislative process, Congress controls
funding for ED, and we believe the rules are significantly more likely to be softened than toughened following this fall’s
sessions and the ensuing public comment period. We also note that the schools successfully appealed the prior rules
and are likely to appeal again, so it could be a lengthy process to put the rules in place (if they are put in place at all).

 

Timo Connor, CFA

William Blair & Company, L.L.C.

link to report

Key Points From the Fourth Day of Gainful Employment 2.0 Negotiations

Timo_Connor

Key Points From the Fourth Day of Gainful Employment 2.0 Negotiations
The fourth day of negotiations for gainful employment 2.0 offered little news or common
ground from the public- and private-sector college participants, and we expect the
Department of Education to proceed with unilateral action and produce a set of studentloan-
debt-to-income-and-repayment thresholds that will look similar to the first version
of gainful employment, released in 2011 but subsequently struck down by a federal judge
following a private-sector industry appeal.
Key Points
• Consensus remains unlikely to be reached through negotiation given the wide gap
between the private sector and public college representatives in attendance. Both
sides appeared to be positioning as if they expect the Department of Education (ED)
to proceed on its own in writing a final rule, particularly given the wide variance in
the draft rules proposed thus far and the lack of data and objectivity supporting the
process to date. We believe ED remains committed to releasing a final rule in 2014
that will go into effect in 2015. While it is unlikely that ED will combine gainful
employment rule-making with Higher Education Act (HEA) reauthorization, we
believe private-sector participants (with Republican support) will likely mount both
a legal challenge of the rules as well as a legislative challenge through the HEA
reauthorization process, which began in October but will likely take years to finalize.
• Public college advocates in particular appear more interested in derailing the
negotiating process than reaching a consensus, likely because they view a
unilateral approach to rule-making by ED in the likely event consensus is not
reached through negotiation as a positive scenario for most public colleges.
• Private-sector advocates, realizing their voice is being largely ignored at the
negotiating table, are pushing for a broadening of the rule to include all colleges
and are trying to raise questions on the legitimacy of ED’s major assumptions and
the quality and availability of the data supporting these assumptions. This is the
likely foundation for a formal legal challenge.
• Advocates of community colleges, for which certificate programs are subject to
gainful employment rules, appear to be gradually realizing that these rules could
harm their schools as well, and we expect this realization to become a potential
sticking point for ED in implementing a punitive rule (closing even a few
community college programs would be politically unpopular).
• The major wrinkle in the latest proposals from ED is the reinclusion of student loan
repayment metrics, which were included in the final rule proposed in 2011, but not
in the initial draft rules for gainful employment 2.0, released in August.
November 18, 2013

Based on commentary in the hearings today, we believe ED is now focused on including some form of a default/repayment metric as well as a debt-to-income metric. We note that the repayment test included in the

previous set of rules did not withstand legal review and was the major reason the initial set of rules was overturned,
so we are a bit surprised ED is heading back in this direction and believe it will need to show stronger quantitative
support for the metric to withstand another legal challenge.
• We believe the rules will likely be softened in the final iteration, as they were the first time around, with ED unlikely to
want to go through another extended legal battle with the private-sector colleges. And even though rule-making is not
a legislative process, a take-no-prisoners approach seems unlikely given the administration’s continued focus on
increasing the number of college graduates in the United States and the damage to the private sector that has already
been inflicted by the threat of the rules (enrollment is down 20% to 30% across the sector).

Author:  Timo Connor,
William Blair & Company, L.L.C.

Timo Connor, CFA, joined William Blair & Company in 2010 and focuses on education services and technology. Previously, he worked as a fixed-income analyst at Bank of America and BNY Mellon. Mr. Connor received a B.A. in economics from Northwestern University.

second session of gainful employment negotiated rulemaking is rescheduled for November 18-20

dept of education

 

 

 

 

 

The U.S. Department of Education has announced that the second session of gainful employment negotiated rulemaking is rescheduled for November 18-20, 2013. The negotiated rulemaking committee will convene from 9:00 am to 5:00 pm on each of the three days of the session at the Department’s offices on 1990 K Street, N.W. in Washington, D.C.

The Department postponed the second session, originally scheduled for October 21-23, 2013, because of the shutdown of the Federal government.

As you know, the government closure impacted the schedule of the negotiated rulemaking sessions. After round one of these negotiations, the Department created a series of working groups on specific issues. The Department is expected to combine some of the input from the first round of discussions with some of the recommendations from the working groups to create a revised draft regulation. With the second round of negotiated rulemaking scheduled for November 18-20, we anticipate a revised draft regulation to be released prior to those meetings. The next draft will send an important signal of how much the Department is willing to engage around the proposed regulation.

Gainful Employment negotiated rule-making is rescheduled for November 18-20, 2013

dept of education

The U.S. Department of Education has announced that the second session of gainful employment negotiated rulemaking is rescheduled for November 18-20, 2013. The negotiated rulemaking committee will convene from 9:00 am to 5:00 pm on each of the three days of the session at the Department’s offices on 1990 K Street, N.W. in Washington, D.C.

The Department postponed the second session, originally scheduled for October 21-23, 2013, because of the shutdown of the Federal government.

The Old Guard Shut Down Ivy Bridge…

IvyBridge_logo

Paul we feel for you!  It’s a sad day when innovation gets thwarted because of success, fear & political Bull S%$@

Buzzfeed has a good article on the sorry state of our political system and how the publicly stated goals of our president’s administration are being blocked by the very same party pitching them.

 

 

Last Week, President Barack Obama was speaking to students in Scranton, Pennsylvania.

“We’re going to encourage more colleges to innovate, try new things, do things that can provide a great education without breaking the bank,” he told the cheering kids, and the nation’s nervous college administrators. “For example, a number of colleges across the country are using online education to save time and money for their students.”

Across the country in San Francisco that same day, Paul Freedman, the founder of a company that had won a grant funded by the Gates Foundation to do roughly what the president described, got a FedEx package from the federal government.

This was not a letter of commendation. It was a notice from President Obama’s Department of Justice that his company, Altius Education, is under federal investigation. The notice was the culmination of a more than two-year battle between Altius and the Higher Learning Commission, one of two members of the 118-year-old North Central Association of Colleges and Schools, which controls accreditation — the vital credential that gives college degrees value — for over 1,000 colleges and universities in 19 states. The HLC’s university backers have an obvious interest in avoiding the sort of low-cost competition that reformers, and now the president, seek. And commission documents that have not been released publicly, but were provided to BuzzFeed by Altius, paint a picture of a regulator that punished the company specifically for doing something — trying to reinvent a low-cost new college education — that are core goals of federal policy. And so even as Obama trumpeted innovation from the stage in Scranton, Freedman’s attempt to put it into practice seemed to have hit a wall.

For more

Read it: http://www.buzzfeed.com/matthewzeitlin/how-the-old-guard-shut-down-an-experiment-in-education

 

 

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