Dept of Ed ‘Predatory Colleges’ Program Could Harm HBCUs

Spurred by the Obama Administration’s effort to curtail student loan debt generated by predatory for-profit institutions, U.S. Department of Education officials today announced sweeping changes for the evaluation and punishment of schools with uneven post-graduate outcomes, changes which are causing concern for some presidents and advocates of historically black colleges and universities.

New rules, scheduled to take affect in July 2017, will create new federal standards for institutional underperformance, factoring cost, post-graduate employment, institutional financial standing and loan debt repayment as indicators of fraudulent, or “financially risky” institutions.

“It’s important to have common sense measures to protect students from bad practices,” said Education Undersecretary Ted Mitchell during a conference call with media members. “Together, these rules not only provide protections for borrowers, but encourage good behavior (from colleges) on the front end.”

Standards include:

  • Offers students debt forgiveness if they can prove institutional fraud, and forces schools to pay up to ten percent of Title IV funding received in prior year as student aid collateral if deemed to be in financial trouble
  • Will require watch-list schools to publicly disclose and warn all potential students about financial risk status
  • Clears the way for students, graduates to file class-action lawsuits against schools with questionable performance metrics

“This regulation has to be seen in context of gainful employment regulations – whether graduates can get jobs in their field and repay debt. Our college scorecard pays attention to cost, graduation rates, and loan repayment, so we have a multi-pronged strategy for implementing these rules,” said U.S. Secretary of Education John B. King Jr.

Since 2013, several HBCUs have received national headlines for downgrades in credit ratings, including public and private flagship institutions like Morehouse College, Howard University, Morgan State University, Alabama State University and Delaware State University.

A recent report from the Georgetown University Center for Education and the Workforce shows that African Americans are overrepresented in majors which yield the lowest earnings post-graduation earnings, and according to recent DOE data, more than 69 percent of all historically black colleges are comprised of student bodies with more than 70 percent receiving Pell Grant assistance, a key factor in measuring the impact of institutional costs.

According to officials, schools with active accreditation action may also be subject to review for financial sanctions. In December, Bennett College for Women and Saint Augustine’s University were placed on accreditation warning by the Southern Association for College and Schools’ Commission on Colleges. Virginia State University was kept on warning status during the same meeting.

In April, the Department of Education wrote to accrediting agencies requesting that they incorporate more data driven focus in assessing member institutions. But in a June 10 edition of the Chronicle of Higher Education, Southern Association of Colleges and Schools Commission on Colleges President Belle Wheelan co-authored an editorial on the pitfalls of aligning accreditation review standards with federal performance outcome standards.

  • Striving for common rate thresholds for outcomes could cause colleges to limit the access of underserved populations. Applying the same metric to all colleges could also lead the government to shut down or withhold resources from some institutions, such as historically black colleges and universities, Hispanic-serving colleges, and tribal colleges, serving some of the least advantaged students. And what about community colleges grappling with returning adult students who may never have envisioned themselves in college or who need help reacquiring learning skills? We need these institutions to train both the entry-level and transitioning work force and not be judged solely by an indicator of their graduation rates.
  • Student-loan repayments and defaults and job placements are important outcomes of college but are often beyond an institution’s control. They more often reflect economic conditions and employment trends than what colleges do to prepare people with degrees that have value in the real world.

Dr. Wheelan, who had not yet read the details of the DOE proposal, said that all guidance on institutional performance must consider “what is best for students, and within contexts of institutional mission, student profile and environmental factors which impact degree completion and career choice.”

DOE officials did not define terms for what would classify an institution as fraudulent or financially risky, but some HBCU leaders expressed concern for the new rules.

“Without a doubt, universities that do not operate with the utmost integrity, and take advantage of students who are seeking to enhance their quality of life by attaining a college education, must be held accountable for their nebulous and fraudulent actions,” said Shaw University President Tashni Dubroy. “However, ‘unintended consequences’ of the DOE’s proposed policy changes cannot be ignored, and must be hashed out before universities that are seemingly “unaffected” rush to support the same.

“There is subtle language in the recent DOE proposal that, while targeting predatory for-profit colleges, may affect small private institutions at large, and HBCUs in particular, in an adverse manner. How will the DOE measure “poor loan outcomes” of a student’s education, especially when educational ROI is intimately tied to the major a student chooses to pursue?”

“Higher Ed institutions remain a fiduciary partner of the DOE. Universities know first hand the barriers to student success and college completion,” she continued. “A discussion on financial aid accountability cannot be done in isolation of available state and federal support for higher ed.”

Officials from the United Negro College Fund also issued a statement on the proposed rule making, to be finalized in November after a public commentary period which ends in August.

“UNCF will need to study the details of the U.S. Department of Education’s“Borrower Defense” regulatory proposal released this morning. However, based on earlier versions that we have seen, we are greatly concerned that the Department’s proposals to expand certain financial requirements and disclosures to students could actually undermine the financial stability of historically black colleges and universities (HBCUs) and educational opportunity for their students.

Further, we believe that the proposed regulations could create a disincentive for other institutions to enroll low-income and other students perceived to be at greater risk.

Thus, UNCF plans to offer comments during the public comment period, urging the Department to thoroughly examine the potential negative impact of the regulations on the nation’s HBCUs. The Department should not repeat the grave mistake it made in 2011 when it changed PLUS Loan requirements without fully vetting the proposal for its impact on HBCUs.”

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