For-profit colleges on edge awaiting new rules, guidance

Deputy undersecretary Robert Shireman has lots to say on for-profit schools

 The fast-growing sector of  for-profit colleges is nervously awaiting the outcome of  new rules President Barack Obama is considering for how they operate.  A story today on InsideHigherEd helped shed light on why the publicly traded sector is on edge, at a time when Obama is pushing degree completion for all Americans. 

Some 3,000 for-profit career and trade colleges in the U.S. offer alternatives to crowded community colleges and come with the promise of programs that lead to jobs, personal attention and lucrative federal student aid packages that have helped fuel their growth. But the schools have also been highlighted and criticized for leaving students in debt and without realistic job prospects. 

One issue,  according to the story, can be traced to remarks made earlier this week by Robert Shireman, the deputy U.S. undersecretary of education, comparing the for-profit schools to Wall Street firms  “whose behavior led to the financial meltdown.” 

The remarks appeared to have an immediate impact on stock prices at the publicly traded schools, according to a Dow Jones newswire story. 

The story on InsideHigherEd described how Shireman called the schools out individually “one by one, for the vast and quickly increasing sums of federal student aid money they are drawing down,”  during a meeting of  private school administrators.  The account was not firsthand. 

The story, however, summed up exactly why the schools are nervous about Shireman, who was formerly head of The Institute for College Access and Success (TICAS). 

“Many supporters of the education companies feared his appointment because they believed his track record as an advocate for low-income students and a foe of student debt would result in a crackdown on the institutions, whose students are needy,”  and who often go into great debt to finance their education, the story noted. 

It also pointed out that Shireman has avoided singling out institutions as they watch his every word, “looking for snippets that might threaten the publicly traded companies’ stock prices. ” 

The U.S. government has  proposed imposing sanctions on programs where the student debt-to-earnings ratios exceed eight percent, something the Career College Association has opposed. The rules are still being discussed.  Shireman, meanwhile, has also made it clear that for-profit colleges can play a strong role in helping more Americans get degrees. 

Liz Willen

POSTED BY ON April 29, 2010