They may not have ivy-covered campuses or rowing teams, but for-profit colleges that award degrees in nontraditional studies such as herbal sciences and golf management have hired the Ivy League of lobbyists to wage a high-dollar battle against federal rules that they claim could put them out of business.
“There has been an all-hands-on-deck,” said one lobbyist hired by a for-profit school, joking that there were so many lobbyists roaming Capitol Hill on the issue that “they are stumbling over each other.”
“There may well be a shortage of lobbyists if they keep up the pattern of hiring every former Member of Congress and K Street lobbying shop,” said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers.
Nassirian has been an outspoken critic of for-profit colleges, which he and others argue are making handsome profits by encouraging students to go deeply in debt with federally backed loans for programs that are of disputed merit.
Last year the Education Department moved to clamp down on for-profit colleges by drafting rules that would cut off federal loans to programs where students had high default rates and debt compared to projected annual income.
The schools have responded that the “gainful employment” rule was unfairly designed and could force them to shutter programs. They furiously lobbied Congress, prompting the House, with bipartisan support including Minority Leader Nancy Pelosi (D-Calif.) to approve a rider to this year’s budget that would have barred the department from implementing the rules.
However, in the final negotiations, Congressional leaders dropped the provision, which was opposed by powerful Senate Democrats, including Majority Whip Dick Durbin (Ill.) and Health, Education, Labor and Pensions Chairman Tom Harkin (Iowa), whose panel held a series of hearings on for-profit colleges.
Among the influential opponents of these for-profit colleges is Steve Eisman, the equity trader who foresaw the subprime mortgage crisis and profited by short selling those stocks. Eisman, who was profiled in Michael Lewis’ best-selling book “The Big Short,” testified before Harkin’s committee last year about his concern that the for-profit college industry boom, driven by easy access to federal loans, could be as destructive as the mortgage meltdown. The for-profit colleges have responded that Wall Street traders such as Eisman are attacking these schools to depress their stocks so these short sellers can make more money. The Education Department inspector general is looking into those charges at the request of two Senators.
Officials from these education companies say their next step will likely be determined by how extensively the administration revises the rule on student loans. Education Department spokesman Justin Hamilton said Friday that regulations would be published soon.
“Everyone in this town seems to have a lobbyist fighting for them, except for these students,” Hamilton said. “We need to make sure that they are getting what they are paying for, skills for a good-paying job.”
The debate includes other Wall Street players that now own for-profit colleges. For example, Goldman Sachs has a financial interest in the Pittsburgh-based Education Management Corp., which runs for-profit colleges. Its board chairman is former Maine Gov. John McKernan (R), the husband of Sen. Olympia Snowe (R-Maine).