Republican plan for proprietary colleges draws fire

Black Issues in Higher Education, July 15, 2004 by Kristin Bagnato

Should for-profit, proprietary institutions be considered in the same way as traditional nonprofit schools? The House of Representatives Committee on Education and the Workforce held a hearing June 16 to consider how federal funding is doled out to proprietary schools under the proposed College Access and Opportunity Act, a Republican-backed measure.

As the law stands now, proprietary schools are ineligible for certain funds, and must meet other rules to continue receiving Title IV money, federally subsidized student loans. But the Republican plan would do away with these provisions.

Those in favor of the action argued that nontraditional students, who account for most of the enrollments at for-profit proprietary institutions such as the DeVry Institute, for example, need even more help than the average student in completing their studies. The separate rules are burdensome for the students, the proponents said, giving them less financial aid than their counterparts at public and nonprofit institutions.

"There is a problem when schools serving some of the neediest students are treated like second-class citizens," said Rep. John Boehner, R-Ohio, chairman of the committee.

The rules in question are the "90/10 rule" which applies only to proprietary schools and means that at least 10 percent of student tuition must come from means other than student-loan funds, and the "50 percent rule," which requires a proprietary school to offer no more than 50 percent of its courses online. These rules were enacted to address rampant fraud among proprietary schools in the 1970s and 1980s.

Supporters of the "single definition" rule say that proprietary schools are penalized for their status as for-profit, and thus are less able to help their students, even though they enroll more students at the lower end of the economic spectrum. For example, once a proprietary school nears its 90/10 limit, it would be required to turn away students needing federal aid.

"The 90/10 requirement is a disincentive," said Andrew Rosen, president and chief operating officer of Kaplan Inc., and president of Kaplan College in Boca Raton, Fla.

If a level playing field was created where all schools were treated the same, then "the money would follow the student," David G. Moore, chairman and chief executive officer of the Corinthian Colleges in Santa Ana, Calif., said before the committee.

Later in the hearing, Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, disagreed with that assertion, saying that money should not follow the student. Money should instead go to an approved institution, which would then draw students and provide them with the skills and education they need, he said.

"Do we want entire schools populated by (students who can't pay any of their own tuition)?" Nassirian asked, addressing the proprietary schools' assertion that they should be eligible for more funding because of the demographics they serve and the geographic areas in which the schools are located. "We simply say a dime on the dollar should come from sources outside of Title IV," he said.

Opponents also say that the change would just be one more way for an already profitable enterprise to make more money, while forcing already struggling community colleges, for instance, to cut back even further. Hearing witness Dr. Alice V. Letteney, director of the University of New Mexico-Valencia, said that community colleges could fill the needs proprietary schools do, at less cost.

"We dispute claims that for-profits provide services our community colleges do not," she said. "The American Association of Community Colleges cannot support this bill. It's been claimed that it's for the students, but it subsidizes corporates."

She added that not only would a change affect Title IV funding, but also other funding that is determined on the basis of the school's designation.

While some proprietary schools are generally accepted as legitimate and reputable, such as DeVry and ITT, many others are not, Nassirian said.

"How do we stop every Web site from becoming a school?" he asked the committee, referring to fly-by-night "schools" that would have easier access to funding if the 50/50 rule were struck down.

Proponents say that the rules are just plain unfair, and that it shouldn't matter whether the education comes from a for-profit or a nonprofit institution. Still, opponents say their mission is to provide access to education, while the mission of proprietary schools is to turn a profit.