Biden Has Promised to Crack Down on Troubled For-Profit Colleges. Some Are Already in Peril.

By nearly every measure, the chain of colleges operated by the nonprofit Center for Excellence in Higher Education has big problems.

The colleges, previously part of the for-profit-college empire of Carl Barney, have all been put on probation by their accreditor since 2018 because of low graduation and job-placement rates and of questions about the accuracy of information provided to the accreditor. All but two of the chain’s 15 locations are in the process of shutting down.

The center and its colleges are under investigation by the federal Consumer Financial Protection Bureau, which has also filed a lawsuit in the matter. Last year a Colorado court found the center and its leadership guilty of consumer fraud and fined it $3 million.

Despite all that, the colleges remain eligible to receive tens of millions of dollars in federal student aid under a temporary agreement with the U.S. Department of Education. But the deal could come to an end, experts say, under a presidential administration bent on bringing more scrutiny to proprietary colleges. And without the flow of federal dollars, the colleges could be forced to close.

The center’s colleges are among more than 130 institutions, nearly all for-profits, that operate under a provisional, or month-to-month, agreement with the department because of questionable operations or a proposed change of ownership, according to a recent report by the Century Foundation. The arrangements give the department wide-ranging authority to kick colleges out of the federal student-aid program, said Yan Cao, a senior fellow at the foundation and one of the report’s authors.

President Biden has said his administration will seek to “stop for-profit education programs from profiteering off of students,” and his appointees are poised to renew several regulations that would hold those institutions accountable for their graduates’ earnings and would limit access to federal dollars for colleges that violate those rules.

While those regulatory efforts will take years to carry out, Education Department officials could terminate provisional agreements much more quickly.

They’re “low-hanging fruit,” said Amy Laitinen, director of higher education at New America, a left-leaning think tank. “I would be surprised if they weren’t considering things like this.”

Likely Targets

Eric S. Juhlin, chief executive of the Center for Excellence in Higher Education, plays down its challenges. He said its colleges are “on solid financial footing,” with strong enrollments of around 10,000 students in total, and he called probation “a tool of the accreditor,” not a negative action. The center is also appealing the fraud conviction, which he called “a completely wrong decision.”

But Juhlin said he is concerned about the department’s regulatory agenda. “It’s already clear that this department is looking to reverse or rescind some actions from the previous administration,” he said.

Many new appointees to the Education Department served under President Barack Obama, when the agency rolled out several new regulations meant to hold proprietary colleges accountable. Those measures included the so-called gainful-employment rule, which compared the earnings of career-college graduates to their student-loan debt, to see if they were being saddled with unpayable debt, and created a way for borrowers to recoup their student loans if their college closed suddenly or defrauded them.

The former Education Secretary Betsy DeVos, who served under Biden’s predecessor, undid those rules, which a judge had already partly struck down, and worked to shield proprietary colleges as part of a broad agenda to deregulate higher education.

Under DeVos, the department also gave Barney, the for-profit mogul, permission to convert his colleges into nonprofit institutions, a step that would allow them to receive more than 90 percent of their revenues from Pell Grants, for low-income students, and federal student loans.

Now, under the new education secretary, Miguel A. Cardona, the department has said it will seek to renew the Obama-era regulations, but the process to do so is lengthy and will almost certainly face political pushback and legal challenges. Even if the regulations take effect, it will be several more years before any institutions face consequences.

That’s why the colleges operating under provisional agreements are likely targets.

Once colleges are placed on provisional status to receive federal student aid, the department can immediately revoke their access to it, said Dan Zibel, vice president and chief counsel for the National Student Legal Defense Fund. Such a revocation remains in place even as a college appeals the decision to the department and in the courts, said Zibel, a former lawyer at the agency.

For the department, revocation is a much more efficient way to enforce accountability on colleges with poor student outcomes, shaky finances, or federal-rules violations. And it’s a tactic used often under Obama.

In the final three years of the Obama administration, the department reported that it had cut off federal aid to some 30 colleges that had been operating under temporary arrangements — essentially, a death knell for dozens of campuses that could not stay in business without the flow of federal dollars.

Helping Students

The list of colleges now under temporary agreements with the department includes some of the largest institutions in the for-profit sector. Among them is Walden University, currently under investigation by the Department of Justice over whether it deceived nursing students about the availability of clinical placements and other issues. Its owner, Laureate Education, is seeking to sell Walden to Adtalem Global Education Corporations, whose investors are suing to halt the sale. A spokesman for Laureate said the company was “optimistic” that the sale would be completed in the second half of the year.

Another prominent for-profit, American Intercontinental University, owned by the Perdoceo Corporation, was on a provisional agreement that expired at the end of March. In 2019 the company, formerly called the Career Education Corporation, settled an investigation by all 50 state attorneys general by paying more than half a billion dollars for using inflated job-placement rates to recruit students.

Perdoceo has closed or consolidated several campuses, and even deferred taking federal dollars, to comply with federal rules that limit the percentage of federal aid that proprietary colleges may receive, according to an analysis by BMO Capital Markets.

The company did not respond to a request for comment.

Advocates for the proprietary-college industry say the Education Department has a responsibility to oversee the federal student-aid programs, but shouldn’t simply target the for-profit sector.

“It would be inappropriate for the department to politicize the eligibility and certification process simply based on an institution’s tax status,” said Nicholas Kent, senior vice president for policy and regulatory affairs at Career Education Colleges and Universities, an association that represents mostly proprietary colleges.

For Cao, of the Century Foundation, the bottom line is that colleges are not automatically entitled to federal student-aid funds and the department has a duty to protect the people who actually receive the money.

“The idea of Title IV,” she said, “was that the funds would only be available to schools to help students.”

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