Kevin Gilligan, CEO of a large for-profit college, has been doing a lot of politicking recently.
In recent months, Gilligan met personally with five members of Minnesota’s congressional delegation and twice with U.S. Secretary of Education Arne Duncan.
His company, Capella, has an enro
llment of 38,000 and paid $100,000 last year for lobbyists to talk to legislators and regulators.
The message from Capella, as well as for the entire for-profit college industry, has been the same: Stop new regulations that would withhold federal education loans and grants from for-profit col
leges with high student debt and low student loan repayments.
Critics contend that too many students of for-profit programs leave with useless degrees and heavy debt. Now, new rules would stop funding to individual programs when two-thirds of their students do not pay down the principal on education loans and do not earn enough to do so, a measure called “gainful employment.”
For all its lobbying, Capella does not appear at risk of losing federal funds. Its student loan default rate is 3.3 percent, less than a third of the overall average at for-profit colleges and lower than the averages for public and nonprofit private schools.
But the company, an industry leader that got 78 percent of its $335 million in revenue from government loans and grants in 2009, remains part of an expensive, time-consuming and sometimes acrimonious campaign by the entire for-profit college sector to safeguard billions of dollars it receives each year. Without that funding, the industry argues, thousands of students couldn’t afford to enroll.
In the 2009-2010 election cycle the industry donated millions of dollars to the campaigns and political action committees of nearly 100 Democratic and Republican congressional candidates.
In addition to campaign and PAC contributions, for-profit colleges spent more than $6 million on lobbyists in 2010. In recent months, a trade group funded television, print and radio advertising that urged viewers, readers and listeners: “Don’t let Washington get in the way.”
Gathering and disclosing to the government student income and debt information bothers many for-profit colleges, said Harris Miller, who heads the Association of Private Sector Colleges and Universities, which paid for the ads. His members would prefer performance benchmarks.
Miller’s group hired a consultant who estimated the new rules would displace 300,000 for-profit college students in the first two years after implementation, including a disproportionate number of poor and minority students.
The group has 1,500 member schools nationwide. It passed out $359,946 in political contributions to 91 candidates or their political action committees during the 2009-2010 election cycle.
Capella worries about “one- size-fits-all” regulations, said Mike Buttry, the school’s corporate communications director. Capella, Buttry said, differs dramatically from many other for-profit schools in that it has mostly graduate students, not students seeking certificates, associate or bachelor degrees.
“We’re not saying don’t do anything,” Buttry said of Gilligan’s meetings with politicians and regulators, “we’re saying get it right.”
Rep. Keith Ellison, D-Minn., who supports the new rules, along with groups such as the NAACP, the National Council of La Raza and the National Consumer Law Center, believes the education department did get it right.
“If your business model is not based on bilking the public,” Ellison said, “you’ve got nothing to worry about.”
That hasn’t stopped the controversy from taking a toll on the stock prices of publicly traded for-profit colleges. Shares of the Apollo Group, a $4.9 billion giant that owns the University of Phoenix, have lost a third of their value over the past year. Capella shares are down more than 20 percent in that period.
Still, with the industry lobbying furiously, the education department delayed putting the rules in place late last year. It now promises implementation sometime in early 2011.
Pressure to dilute, delay or even defeat the regulations seems to be gathering momentum.
Supporters of the proposed policies point to a Government Accountability Office audit that alleged deceptive, high-pressure sales tactics, as well as a study of 16 for-profit colleges by the HELP committee that found that 57 percent of students dropped out within a year, almost all carrying loans they would be hard-pressed to repay. These schools, the committee report concluded, “are more likely to offer their students debt without a diploma.”
Noting generally high profits among for-profit colleges, which now enroll roughly 2 million students, the committee report further concluded that “some for-profit schools are efficient government subsidy collectors first and educational institutions second.”
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