The Perfect Lobby: How One Industry Captured Washington, DC
This article is adapted from David Halperin's new e-book, Stealing America's Future: How For-Profit Colleges Scam Taxpayers and Ruin Students' Lives, available at Amazon.
Many of America's for-profit colleges have proven themselves a bad deal for the students lured by their enticing promises—as well as for US taxpayers, who subsidize these institutions with ten of billions annually in federal student aid.
More than half of the students who enroll in for-profit colleges—many of them veterans, single mothers and other low- and middle-income people aiming for jobs like medical technician, diesel mechanic or software coder—drop out within about four months. Many of these colleges have been caught using deceptive advertising and misleading prospective students about program costs and job placement rates. Although the for-profits promise that their programs are affordable, the real cost can be nearly double that of Harvard or Stanford. But the quality of the programs are often weak, so even students who manage to graduate often struggle to find jobs beyond the Office Depot shifts they previously held. The US Department of Education recently reported that 72 percent of the for-profit college programs it analyzed produced graduates who, on average, earned less than high school dropouts.
Today, 13 percent of all college students attend for-profit colleges, on campuses and online—but these institutions account for 47 percent of student loan defaults. For-profit schools are driving a national student debt crisis that has reached $1.2 trillion in borrowing. They absorb a quarter of all federal student aid—more than $30 billion annually—diverting sums from better, more affordable programs at nonprofit and public colleges. Many for-profit college companies, including most of the biggest ones, get almost 90 percent of their revenue from taxpayers.
So why does Washington keep the money flowing?
It's not that politicians are unaware of the problem. One person who clearly understands the human and financial costs of the for-profit college industry is President Obama. Speaking at Fort Stewart, Georgia, in April 2012, the president told the soldiers that some schools are "trying to swindle and hoodwink" them, because they only "care about the cash." Speaking off the cuff last year, Obama warned that some for-profit colleges were failing to provide the certification that students thought they would get. In the end, he said, the students "can't find a job. They default…. Their credit is ruined, and the for-profit institution is making out like a bandit." And, he noted, when students default on their federally backed loans, "the taxpayer ends up holding the bag."
On March 14, the administration released its much-anticipated draft "gainful employment" rule, aimed at ending taxpayer support for career college programs that consistently leave students with insurmountable debt.
This rule would have a real impact: it would eventually cut off federal student grants and loans to the very worst career education programs, whose students consistently earn far too little to pay down their college loans, or whose students have very high rates of loan defaults.
But advocates believe that the standards in the proposed rule are too weak; they would leave standing many programs that harm a high percentage of their students. The rule, they argue, doesn't do enough to ensure that federal aid goes only to programs that actually help students prepare for careers. But it isn't soft enough to satisfy APSCU, the trade association representing for-profit colleges, which denounced the rule as the flawed product of a "sham" process. The administration gave the public until May 27 to comment before issuing a final rule.
APSCU and other lobbyists for the for-profit college industry are now out in full force, hoping to extract from the gainful employment rule its remaining teeth. Supporters of stronger standards to protect students from industry predation—among them the NAACP, the Consumers Union, Iraq and Afghanistan Veterans of America, the Service Employees International Union and others (including, full disclosure, myself)—will push back, but they have far fewer financial resources for the battle. This is a crucial round in a long fight, one in which the industry has already displayed a willingness to spend tens of millions to manipulate the machinery of modern influence-peddling—and with a remarkable degree of success.
Because most of this lobbying money is financed by taxpayers, this is a story of how Washington itself created a monster—one so big that it can work its will on the political system even when the facts cry out for reform and accountability.
An Industry Buys Friends
Back in 2009, the Obama administration began its efforts to issue a rule that would finally implement a 1965 law stipulating that federal money go only to those career education programs that actually prepare students for "gainful employment." Despite ample evidence of their decades of abuses with taxpayer dollars, the for-profit colleges did not accept reforms. Instead, they hired the most well-connected establishment figures to The Perfect Lobby: How One Industry Captured Washington, DC | The Nation:
