FOR-PROFIT ONLINE EDUCATION RECEIVES A BOON

Academe, May/Jun 2006 by Bradley, Gwendolyn

Colleges and universities will no longer be required to deliver at least 50 percent of their courses in person to quality for federal student aid, after Congress eliminated the so-called 50-percent rule in February. The change is a boon for purveyors of distance education, and particularly for the for-profit sector. While many institutions offer some courses online, those with predominantly online courses tend to be for-profit.

Many traditional nonprofit institutions, concerned that lifting the restriction would invite abuse, opposed the change. The rule was instituted in 1992 to deter fraud carried out by for-profit institutions that raked in student aid money while offering little education. For-profit institutions have lobbied heavily for a rule change and have formed political action committees that make campaign donations, particularly to members of the House and Senate education committees, according to the New York Times. The Bush administration has largely favored lifting the rule. Sally Stroup, the assistant secretary of education and the top official overseeing higher education at the time of the rule change, is a former lobbyist for the University of Phoeuix, the nation's largest for-profit institution. (Stroup subsequently announced that she was stepping down from the education department to accept a position as deputy staff director of the U.S. House of Representatives Committee on Education and the Workforce.)

The Department of Education has conducted an eight-year trial in which the 50-percent rule was waived for several dozen colleges. Several experienced enormous growth in enrollment after receiving the waivers. One, the Masters Institute, subsequently collapsed and was determined by the education department to have engaged in fraud in its handling of student aid funds. The department said, however, that the fraud was unrelated to the waiver.

The Department of Education estimated that the change will cost the government $697 million over ten years.-G.B