Democratic lawmakers sought to tighten oversight of the troubled industry. Then the lobbying began.
Just a few months ago, California’s Democratic-controlled legislature seemed poised to pass the nation’s toughest restrictions on for-profit colleges. School owners publicly fretted that they’d have to shut down.
Supporters of the seven-bill package, which sailed through the Assembly, hoped California could help close a gap in oversight as the Trump administration has backed away from policing quality in a sector that relies heavily on public money but has been plagued by fraud and poor outcomes. But as the legislative session draws to a close, nearly all of the bills have died or been significantly weakened, felled by a costly lobbying blitz and the complexity of crafting a state-based solution to a nationwide challenge.
Their demise marks a victory for an industry that has in recent years been beset by scandals and school closures — and a setback for consumer and veterans groups that supported the legislation.
“The experience we’ve had moving this package forward highlights the role of money and what that buys as far as influence in the Capitol and in state capitols around the country,” said Assemblyman David Chiu, a San Francisco Democrat.
Chiu’s bill would have conditioned the right of career education programs to enroll Californians on proof that their graduates earn enough to pay back their student loans. It’s a version of the so-called “gainful employment” rule created under President Barack Obama and repealed by the Trump administration.
Other bills would have limited how much for-profit schools can rely on federal and state financial aid, prevented admissions staff from earning bonuses based on how many students they recruit, and cracked down on colleges that officially convert to non-profit status but turn most of their earnings over to a profit-driven management company. The bills’ authors said they were meant to root out fraud and abuse in the industry, while allowing good schools to thrive.
But many schools saw the legislation as an existential threat and spent heavily to defeat it. For-profit colleges, vocational schools and online education companies poured more than $800,000 into lobbying California legislators in the first six months of 2019.
That’s nearly the same amount of lobbying cash that Pacific Gas & Electric spent defending its role in the state’s wildfire crisis over the same period — and more than four times the money spent by the consumer and veterans groups backing the for-profit college bills.
“The sector is under a sustained assault by certain individuals and we don’t expect them to stop,” the California Association of Private Postsecondary Schools, an industry association, wrote in an email to members about the bills, which it dubbed “The Terrible 7.”
The association’s lobbying muscle was on display during the bills’ first hearing in April. While former students and recruiters at for-profit colleges testified about the schools’ aggressive recruiting tactics, dozens of current students opposed to the bills flooded the halls outside the hearing room, some wearing scrubs and nametags that read simply, ‘Student.’
A few spoke passionately about receiving a quality education at a for-profit college. Patricia Stanley, a Navy veteran, said that she chose the occupational therapy program at Stanbridge University for its small class size and “family feel.”
“We aren’t forced or persuaded or preyed upon,” Stanley said. “We definitely made the choice and sought out these schools.”
Other students, however, said they attended the hearing because school officials asked them to, and had told them that they would lose their financial aid if the bills passed. CAPPS president Robert Johnson did not respond to messages requesting comment about the association’s lobbying efforts.
Tens of thousands of dollars in campaign contributions also flowed from for-profit colleges to the Democratic Party and lawmakers that would make decisions on the bills. ICEPAC, the association’s political action committee, invited donors to a $1,000-a-head April fundraiser at the sleek Sawyer Hotel for the reelection campaign of Senate Education Committee chair Connie Leyva.
Just days before the Senate Education and Business, Professions and Economic Development committees were set to vote on the bills, one vocational college chain donated to the campaigns of Leyva, Business and Professions chair Steve Glazer, and five other senators who sat on the committees, in five cases contributing the maximum allowable under state law.
Glazer’s committee went on to convey concerns to two of the bills’ authors. One withdrew her bill and the other made significant changes. Leyva’s committee approved that bill.
Glazer’s chief of staff, Dan Weintraub, said the senator’s decisions “were driven by the facts and his concerns for the students who are enrolling or considering enrolling in this kind of a program, and nothing else.” A Leyva spokesperson said that “no contribution influences Senator Leyva’s decisions,” adding that Leyva “also strictly follows all fundraising reporting requirements.”
But Ramond Curtis, the state policy manager for the advocacy group Veterans Education Success, said he felt outgunned. His group supported Assembly Bill 1343 by Asm. Susan Eggman, aimed at closing a loophole in federal law that lets for-profit colleges subsist almost entirely on public financial aid dollars if the money includes military education benefits. Lowering the ceiling on financial aid to 85% of revenue and including GI Bill funds, many veterans groups believed, would remove an incentive for schools to target servicemembers with predatory recruiting.
But like other groups supporting the bill, Veterans Education Success is tax-exempt, does not make political contributions and spends little on lobbying. “We’re dealing with an issue of resources,” Curtis said. “We don’t have the money to oppose them.”
Schools had argued that to comply with the financial aid cap in Eggman’s bill, they’d either have to raise tuition or shut down. Committee chair Sen. Glazer shared that fear, said Weintraub.
“He believes that there were unintended consequences in AB 1343 which actually could have hurt the veterans that the bill was trying to help,” Weintraub said.
Chiu’s gainful employment bill was also amended: Schools would have to report information on their graduates’ earnings and debt levels, but those with high debt-to-income ratios wouldn’t be barred from operating. Three more of the for-profit college oversight bills later quietly perished in the Senate Appropriations committee.
The bills were hamstrung in part by a legacy of problems at the state agency charged with overseeing for-profit colleges. CalMatters reported last year that the Bureau for Private Postsecondary Education was sitting on a backlog of nearly 1,200 unresolved student complaints, and inspecting schools less than half as often as it was required to by law.
Since then, the bureau says that it has hired more investigators to handle the complaints, shrinking the average caseload from 77 cases to about 20. But its outdated computer system — scheduled to be replaced in 2021 — still cannot perform basic functions such as tracking the status of complaints. A bill analysis found that putting the bureau in charge of enforcing the gainful employment standard would cost $12 million, an increase of more than 50% to the agency’s budget.
Glazer doubted the bureau’s capacity to “gather all that data and compare it with wage data, and to do that in a high stakes environment,” Weintraub said.
The bills’ fate points to a dilemma faced by consumer advocates who want to tighten state-level oversight of for-profit colleges in response to U.S. Education Secretary Betsy DeVos’s laissez-faire approach. State officials in Washington, Oregon, Massachusetts and New York are considering such measures. But states lack the budget of the federal government, and most haven’t developed an infrastructure to effectively monitor schools.
“This is a moment where state attorney generals and legislatures are saying, ‘What can we do for consumer protection within our own state?’” said Howard Lurie, a higher education analyst with the research firm Eduventures.
California legislators could take up that question again when the bureau undergoes a review of its performance next year.
In the meantime, Chiu hopes that gathering information on which for-profit vocational programs effectively prepare graduates for careers will help students make better decisions, and regulators identify red flags. His bill is scheduled for a vote on the Senate floor sometime next week.
“Our hope is the data will give us a road map to address bad apples in the for-profit world in the near future,” Chiu said. “We’ll have a pretty good sense of how many schools are failing our students and who they are.”
This story and other higher education coverage are supported by the College Futures Foundation.