MEMO Protecting Higher Education from more Government Regulation Department of Defense s Tuition Assistance Program and State Authorization of Schools

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1 MEMO Protecting Higher Education from more Government Regulation Department of Defense s Tuition Assistance Program and State Authorization of Schools GAO s recently released report on the Military's Tuition Assistance Program calls for more oversight of the for-profit education sector and is a dangerous attempt to inject more government regulation into higher education. Background On Wednesday, March 2, the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security held a hearing entitled Preventing Abuse of the Military's Tuition Assistance Program. The Department of Defense s Voluntary Education Tuition Assistance Program (TA) was under scrutiny for its lack of oversight and among the panel of witnesses was Senator Tom Harkin (D-Iowa) who has been leading the investigation into the for-profit education sector in the Senate HELP Committee. Coinciding with the Senate hearing, the Government Accountability Office released a report on DOD s TA program on March 1. The report concluded that DOD s oversight of the program was not sufficiently risk-based, meaning it did not focus on programs with a large number of complaints and service members enrolled, had limited coordination with accreditation organizations, and failed to adequately use education quality review systems. In 2009, the Department of Defense spent $517 million on the Voluntary Education Tuition Assistance Program (TA), which allows service members to pursue postsecondary education while off-duty. TA benefited over 376,000 service members, providing $250/credit hour and a maximum of $4500/year. The GAO report recommends: Creating a centralized tracking system of complaints against schools Employing a 3 rd party review system of educational quality of classes Focusing on programs where abuses are more likely to happen, including distance learning programs Requiring state authorization of all institutions The GAO report argues that DOD should increase oversight to prevent waste and abuse. Without more oversight, the report speculates that institutions may participate in improper or questionable marketing practices. Despite its own observation that most of the complaints it receives are administrative in nature, and only a few complaints involve improper or questionable marketing practices. The report s findings, then, are inconsistent with its speculative conclusion. 1

2 DOD is now proposing rules of guidance for programs participating and getting federal funding, including a requirement to sign a Memorandum of Understanding with DOD and working with the Department of Education to develop program review systems. These oversight policies will not take effect until DOD is also currently negotiating a third party monitoring contract to expand its oversight to online education, which accounted for 71 percent of courses taken in FY Commenting on the status of the for-profit education sector more generally, Senator Harkin stated in his testimony that in percent of students were enrolled in a forprofit institution and received approximately 23 percent of all Federal Pell grants and student loans, more than $23 billion. Enrollment, he acknowledged, has grown by 225 percent over the past 10 years but he attributed this growth to for-profit schools being dependent on federal subsidies, like Pell and student loans, as well as military and veterans benefits. 1 The hearing and examination of DOD s TA program is part of a larger strategy to continue the investigation into the for-profit education sector. The controversy over the for-profit schools reached a climax when, on July 26, 2010, the Department of Education proposed 14 new regulations for the for-profit schools, including new rules on gainful employment and state accreditation of schools, which are currently being finalized. According to the rules published in the Federal Register, the gainful employment rule includes three tests that a program must pass in order to be fully eligible for Title VI funds: debt-to-earnings ratio, which must be better than eight percent, debt-todiscretionary income ratio, better than 20 percent, and the loan repayment rate, better than 45 percent. Shortly after that on August 4, 2010, GAO released a report titled Forprofit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices, but this report was then revised and re-released on November 30, 2010 in response to strong criticism of the report. Critics rejected the report, citing manipulated and mishandled data. Senator Harkin s investigation continued on March 10, 2011when the Senate Health, Education, Labor and Pensions Committee conducted the fourth in a series of hearings targeting for-profit schools. The hearing focused on allegations of improper student recruitment and poor graduation rates, using Bridgepoint Education, Inc. as a case study. Senator Harkin pointed out how Bridgepoint is aggressively pursuing military student enrollment and claimed that Bridgepoint and others in this mold have put profit over students. 2 Ranking Republican member, Senator Mike Enzi stated, Unfortunately, by only focusing these hearings on individual examples of a problem in one sector of higher education, we have no understanding of the true extent of the problem, nor have we heard any constructive solutions for solving that problem. Enzi called these hearings the most 1 Harkin Testifies on For-Profit Colleges Recruiting of Military Service members March 2, 2011at 2 Full Committee Hearing - Bridgepoint Education, Inc.: A Case study in For-Profit Education and Oversight, March 10, 2011at 2

3 biased and poorly executed hearings in my nearly 15 years in the Senate. Allegations of false testimony and substantial reporting errors marred the proceedings. 3 Though TA is just one program at DOD, there are larger consequences and implications of this unprecedented federal overreach into higher education, and this can be most clearly seen as these regulations address state authorization of schools. State Authorization Proposal Currently, in order to receive TA funds, DOD requires institutions to be accredited by an accreditation agency approved by the Department of Education and it is then periodically re-evaluated every 3 to 10 years. DOD communicates with accrediting agencies through the Servicemember Opportunity Colleges (SOC), which confirms accreditation and reports complaints about schools. The new proposal would require that states verify that all schools receiving TA funds are authorized by their state. How states would determine that or how much it would cost is not mentioned in the report. The new regulations would take effect in July 2011, and would require states to have a process of reviewing and addressing complaints about institutions authorized by the state. It would also require state-authorized institutions to meet any state requirements even if it is offering postsecondary education through distance learning. If state authorization of a school is denied, then regional accreditation is also denied, which means that federal funding would likewise be denied. State Authorization Implications More state and federal regulation of higher education. The GAO report claims that due in part to inconsistencies with states authorization requirements, the Department of Education clarified what is required for institutions of higher education to be considered legally authorized by a state. Requiring states to authorize schools could become a vehicle for allowing the federal government to regulate higher education. This adds yet another layer of bureaucracy on top of the regional accreditation will come state authorization, and on top of that, federal guidelines for schools. Increasing student costs and state burdens. More regulatory restrictions could raise school costs for students and hinder educational opportunity even further. Requiring states to authorize schools would also add another regulatory burden to already strapped states undergoing painful budget cuts to education funding. No guarantee of improvement of education quality. There is no evidence to support that state authorization would improve or ensure the quality of for-profit education institutions. Though the current independent accreditation process is flawed, with reports showing that it is ineffective and costly, adding another layer of authorization at the state level will not help but effectively aggravate what is already a weak system. According to Anne Neal, President of the American 3 Enzi Criticizes Flawed Investigation Of For-Profit Schools, Press Release, March 10, 2011, at 3

4 Council of Trustees and Alumni, accreditation is nothing more than an outdated industrial-era monopoly whose regulations prevent colleges from cultivating the skills, flexibility, and innovation that they need to ensure quality and accountability. Adding another regulatory mandate on top of regional accreditation is not the solution. Lowering of standards. State control over authorization could lead to lower quality institutions being accredited in order to secure federal funding. As the Heritage Foundation observed, states could find it advantageous to authorize any institution that the public supports. Because of this incentive, state governments are poorly positioned to uphold high standards. This could lead to a lowering of standards at schools while giving states the power to authorize schools on subjective political or non-education related factors. 4 Politicization of Higher Education. State authorization would involve state officials who could politicize the issue of postsecondary education and subject academic institutions to political grandstanding. Bill Armstrong, former U.S. Senator and current president of Colorado Christian University, wrote a letter to Education Secretary Arne Duncan on July 30, 2010 asserting the new Department of Education rule to require state accreditation of schools was an all-out politicization of American higher education, endangering academic freedom, due process and First Amendment rights. Armstrong adds that this is part of an unprecedented power grab in which government has already moved to dominate such industries as automobiles, energy, health care, banking, home loans and student loans - and now seeks dominance over the colleges and universities themselves. 5 Armstrong writes in another article that this is an invitation for pressure groups to seek legal mandates requiring colleges and universities to implement their pet theories about curriculum 6 Government regulation of academic content. Involving centralized regulation of authorization could affect the influence that states have on academic content. The American Council on Education (ACE), the Association of American Universities (AAU), the American Association of Community Colleges (AACC), the American Association of State Colleges and Universities (AASCU), the National Association of Independent Colleges and Universities (NAICU), and the National Association of State Universities and Land Grant Colleges (NASULGC) prepared and circulated a document on the accreditation regulation that is still being finalized, stating it would, compromise the ability of colleges and universities to set and pursue their educational missions and would impose new federal mandates related to core academic matters. 7 4 Denhart, Matthew Federal Overreach into American Higher Education, Heritage Foundation, November 4, 2010 at 5 Thomas, Cal, Extra Credit: Academic freedom: Obama edition, Athens Banner-Herald, September 27, 2010 at 6 Armstrong, Bill and Brown, Hank, Stop plan to put colleges under political supervision The Denver Post, September 20, 2010 at 7 Department of Education Considering Significant Steps to Increase Federal Control Over Accreditation, The American Council on Education (ACE), the Association of American Universities (AAU), the American Association of Community Colleges (AACC), the American Association of State Colleges and Universities (AASCU), the National Association of Independent Colleges and Universities (NAICU), and the National Association of State Universities and Land Grant Colleges (NASULGC) at 4

5 Alternatives Informing the consumer rather than punishing the producer. Rather than increasing federal regulation and scaling up the government s role in higher education, the potential for misleading communication and recruitment can be mitigated by initiating an aggressive information campaign in which more information, data, and analysis can be disbursed to military service members who are considering enrollment at a for-profit educational institution. This would involve informing students about the costs and benefits of enrollment, explaining how to approach their decision, and disseminating the most up to date information to students about any financial risks and rewards involved in enrolling. This literature campaign coupled with one of GAO s recommendations for schools to provide distance learning tutorials is a strong proposal which can ensure that students are proficiently informed before and during their pursuit of a postsecondary degree. Less centralization of authorization and better use of information and assessment systems. Rather than centralizing the responsibility of authorization at the state level, DOD should better utilize and coordinate with the Department of Education s compliance data to oversee schools that are receiving TA funds. They can also better utilize the Department of Education s monitoring reviews to assess schools and programs for their students. The GAO report refers to these recommendations as being able to provide DOD with insights into a school s ability to provide a quality education and service to students. Prosecute the schools that are guilty of poor practices and fraud, not the entire system. The American Council of Trustees and Alumni suggests banning schools that have been found guilty of fraud and malfeasance from receiving federal funds for a period of years rather than forcing all schools to participate in a state authorization system. 8 This is an attempt to expand federal regulation of higher education beyond the Department of Education, to the Department of Defense, as well as add another layer of state regulation. More bureaucratic regulation and oversight is a form of soft despotism that needs to be checked. splay.cfm 8 Why Accreditation Doesn t Work and What Policymakers Can Do About it, American Council of Trustees and Alumni, July 2007, at 5