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Preparing the Scapegoats for Slaughter

The president of an online school watches the government’s unfolding campaign against schools that seek profits, and is aghast.

By Richard Bishirjian

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July 30, 2010

Editor's note: Richard Bishirjian is president of Yorktown University, an Internet-based school whose undergraduate programs are rooted in the liberal arts and whose graduate programs focus on business and government.

The Obama administration, working with congressional Democrats, has rolled out a concerted effort to change American postsecondary education.  As with health care and finance, the administration has a consistent method: Focus on a felt need, find a scapegoat, and use the full force of coercive state power to effect radical change. 

Today’s scapegoats are the proprietary higher education companies. In addition to offering online education, some of those firms are starting to purchase near-bankrupt nonprofit colleges and convert them into platforms for Internet-based courses. If they are allowed to proceed in that, American higher education will become more diverse, less expensive, and more consumer-oriented.  But the Obama administration apparently believes that profits are resources better distributed by government agencies than by the marketplace. 

The U.S. Department of Education has begun a multi-pronged attack on for-profit schools.  One offensive consists of proposed regulations. The “gainful employment” rule, for example, would cut off proprietary colleges from access to federal tuition assistance unless they can show that their graduates earn enough to pay off student loans. Another thrust is to prevent accrediting agencies from allowing for-profit investors to purchase traditional schools (even when those schools are failing financially). We are already seeing a response to that pressure from the Higher Learning Commission of the North Central Association of Colleges and Schools.

Yorktown University, which I head, has followed these unfolding developments with acute interest. We are accredited by the Distance Education and Training  Council (DETC), a national accreditor. We hope to obtain regional accreditation as well, so that our students can transfer the credits they earn at Yorktown to regionally accredited institutions; these schools will not accept transfer of credits from schools that have “only” national accreditation. 

In April, I attended a seminar conducted by the Higher Learning Commission. This was the second such seminar I have attended in order to prepare Yorktown for applying for regional accreditation.

Until recently, the Higher Learning Commission was a trendsetter, the only regional accrediting association willing to accredit institutions that teach mostly or entirely over the Internet; until 2008, no excessive barriers to accreditation were placed on Internet-based applicants. A few months before the election of President Obama, however, Sylvia Manning became president of HLC, and the policy changed. 

At the April 2010 seminar I attended, Karen L. Solinski, vice president for legal and government affairs, informed the seminar that not only must all accredited institutions be incorporated in one of the states in the region but they must have a state license in each state in which they have a “substantial presence.”

During the break I asked Ms. Solinski to specify what constitutes “presence” in a state. In good lawyer-like fashion she asked me, “Do you have representatives in any states?” I said “no.” Her raised eyebrows suggested that I did, and I thought, well, we do have instructors who reside in and instruct our students from states other than Colorado, where Yorktown University is incorporated.

She then asked, “Do you have proctors in states?” I replied, “Yes, but surely you aren’t saying that the use of a proctor triggers a state licensing requirement?”  She said that it would. Proctors supervise the exams taken by students in online courses. Solinksi seemed to be saying that merely having a student taking an exam, and thus having a proctor monitor it, whatever the state, would require the university to have a license in that state. In addition to the cost of multiple state licenses, each state has its own regulations. Some states require annual fees, others require a hefty surety bond, and Virginia even taxes authorized shares of stock companies.  Keeping track of them would be costly, time-consuming, and difficult.

During a break, I asked Solinski, “Do you mean that HLC intends to enforce state licensing regulations?” She said, “Yes.” This means that HLC, a private organization, is taking on the responsibility of enforcing regulations promulgated by the state. Not only is this inappropriate but it is probably unconstitutional.

I called to Solinski’s attention a Federal Trade Commission finding that it is a restraint of trade for states to require out-of-state optometrists to be licensed if they sell contact lenses in the state. The example seemed to be exactly parallel. To my comment, Ms. Solinski replied, “Education is a special responsibility of the states.” Okay, education has historically been responsible for education (the U.S. Constitution doesn’t mention education), but regulating private companies from other states is not a recognized state responsibility, whether the companies are in education or not.

During this seminar I was sitting at a table along with two representatives of an institution also accredited by DETC. They were shocked by this exchange.  I explained to them that the inspector general of the Department of Education had informed the Higher Learning Commission last December that its charter could be revoked. According to InsideHigherEd.com, HLC had endangered its status “because it granted accreditation to a for-profit university despite a single flaw that the inspector general deemed to be serious.”

Apparently, HLC has decided that by promoting and emphasizing state licensing, it is making clear that it will no longer accredit solely Internet-based distance-learning institutions.  That may save it from censure or revocation of its charter by the Department of Education.

But it will also harm numerous institutions, both profit-making and non-profit. There are two methods of attaining regional accreditation:  earn it or buy it. In June, the Higher Learning Commission denied the application for change of ownership to two proprietary companies that were seeking to purchase regionally accredited institutions, Dana College in Nebraska and Rochester College in Michigan.

The message is coming through loud and clear that the Department of Education simply doesn’t want for-profit institutions to exist.  On April 28, Robert Shireman, deputy undersecretary of education, gave a speech emphasizing the large amount of federal aid that is channeled to the for-profits.

And on June 30, U.S. Senator Dick Durbin (D-Il) gave a speech to the National Press Club in which he stated that purchasing colleges for their accreditation should be banned, and he outlined a comprehensive plan for reining in proprietary education companies. 

Sen. Durbin referred to testimony by Wall Street arbitrager, Steve Eisman, that proprietary education companies are analogous to mortgage companies that created the subprime credit crisis. Since then, it has become known that short-sellers, a group to which Eisman belongs, have been working with Durbin—and probably others, including the Department of Education—to discredit for-profits in order to reap the rewards of declining share prices.

Durbin then outlined a broad plan to attack for-profits, by the following steps:

  • Denying access to federal grants and loans to schools that have defaults of 30 percent over three years or 40 percent in one year
  • Restricting “institutions that receive federal student aid from paying their admissions recruiters on the basis of enrollment numbers”
  • Instituting “new regulations that would require for-profit colleges to disclose job placement rates”
  • Relating student loans to “gainful employment.”  If degree programs do not lead to good jobs that enable student to repay student loans, then the institutions offering those degree programs will lose access to federal tuition assistance programs (this regulation has been proposed).
  • Lowering the 90-percent threshold that allows schools to receive up to 90 percent of their income through federal programs
  • Restricting the use of federal financial aid dollars that can be used for  “slick advertising,” such as “billboards, television commercials, and advertisements on the sides of buses”
  • Controlling how much these institutions lend to their own students
  • Stopping the practice of buying accredited institutions.

Sen. Durbin’s assault raises severe constitutional questions. Restricting normal advertising violates the First Amendment of the U.S. Constitution. Requiring state licensing of companies not domiciled in that state violates the commerce clause of the Constitution. And singling out for-profit education for using Title IV funds without including non-profit colleges violates the due process clause.

On these constitutional grounds alone, the Obama administration attack on for-profit education should be rejected.

But other consequences are equally objectionable. By deterring the purchase of accreditation, for example, the administration will challenge the ability of marginal nonprofit institutions—including institutions with large minority populations—to survive. And whether the for-profits can survive this assault is an unanswered question. My worst fear is that for profit education delivered via the Internet will experience the fate of the nuclear power industry after Three Mile Island.

The adage that “federal money brings federal control” is proving to be true. It confirms the suspicion of some that President Lyndon Johnson knew that if he could control the financing of higher education he could control the content of higher education. That control is now in federal hands.

 

 

 


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