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For-Profit Schools Balk At Stricter Regulations

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For-Profit Schools Balk At Stricter Regulations


For-Profit Schools Balk At Stricter Regulations

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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

The world of higher education is preparing for a crackdown on its fastest growing sector: for-profit colleges and universities. The Department of Education is proposing to tighten rules on just how much debt students at these schools can rack up. Students at for-profits are more likely to get in over their heads than those at not for-profit schools.

As NPR's Larry Abramson reports, for-profit schools are fighting hard against the new rule because it would threaten their bottom line.

LARRY ABRAMSON: Last month, the Department of Education released a proposal that would say to for-profit schools: Your graduates must earn at least enough to start repaying the federally-backed loans we're giving you. If they can't, you could lose access to those loans. The reaction in the stock market was immediate.

Mr. JEFFREY SILBER (Senior Analyst, BMO Capital Markets): Volatility is actually an understatement.

Jeffrey Silber, with BMO Capital Markets, says that stock prices for the parent companies of the University of Phoenix, Strayer University and others have been crashing. Investors fear tighter regulation will bring an end to skyrocketing growth.

At the same time, Silber says, there's worry that an improving economy will slow enrollment in disciplines that have steadily added students during the recession.

Mr. SILBER: You know, certificate non-degree programs - becoming a medical assistant, et cetera - those folks, if the job market is good, will go right into the job market without this training.

ABRAMSON: A growing number of traders are betting on a crash in stock prices. William Duff Gordon, of a firm called Data Explorers, says some companies have become targets for short traders who hunt for stocks that are expected to fall.

Mr. WILLIAM DUFF GORDON (Managing Director, Data Explorers): From a good Strayer education, you know, maybe only 5 percent of its shares were for (unintelligible) purposes, you know, two years ago compared to 25 percent today.

ABRAMSON: The for-profit education business has responded with an aggressive education campaign, at least that's what they call it. They've been urging students to write letters to the government during the comment period on the rule. One for-profit company, Education Management Corporation, has hired a Washington lobbying firm to mount a campaign against the rule. The company has even offered to cover postage for employees who want to send a letter to the Department of Education.

Many companies see this rule as a threat to their survival - some depend on federally-backed student loans for nearly 90 percent of their revenue.

Harris Miller, of the Career College Association, makes no bones about the fact that his members are urging people to pressure the government.

Mr. HARRIS MILLER (CEO and President, Career College Association): We think it's not only ethical, but we think it's appropriate and necessary to educate people who might and should be concerned about this regulation to submit comments.

ABRAMSON: The for-profit education business has also launched its own research institute to try to counteract negative impressions the public has about schools that make a profit.

Harris Miller says, the government's own numbers underscore that for-profit education is here to stay and can't be treated as some sort of marginal phenomenon.

Mr. MILLER: The Department of Education released data that showed that our sector has continued to grow overall to the point where we're now about 12 percent of all students in higher education as opposed to about nine and a half percent the previous year.

ABRAMSON: Proponents of the new rule say they're not interested in driving for-profits out of business. They just want to stop students from borrowing more than they can afford to repay.

Pauline Abernathy, of the Institute for College Access and Success, says the information battle shows just how much money is at stake here.

Ms. PAULINE ABERNATHY (Vice President, The Institute for College Access and Success): That they can hire companies to write comments for students and employees in order to try to defend the school's access to the federal student aid.

ABRAMSON: The public comment period on the new regulations ends this week. The impact of the rule on students and on for-profit schools won't be clear until the new rule is issued in November.

Larry Abramson, NPR News, Washington.

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