House Panel Holds Hearing on Regulations Governing Proprietary Institutions

Members of the U.S. House Committee on Education and the Workforce heard differing opinions about whether current federal regulations that govern the financial-aid eligibility of for-profit postsecondary institutions should be relaxed. At issue are rules that require at least 10 percent of a proprietary institution's revenue to come from sources other than federal student-aid programs and that prevent institutions from offering more than half of their instruction through distance education.

David Rhodes, president, School of Visual Arts in New York City, argued that proprietary institutions were seeking “simply recognition of reality — the reality of the changes in higher education in the last 30 years and the reality that an institution's corporate structure does not determine its status as an institution of higher education.”

Nicholas Glakas, president, Career College Association, charged that the "60 Minutes" report that prompted the hearing was grossly unbalanced. Glakas argued that the issues raised in the report do not indicate an industry-wide problem and that  "until an investigation has been concluded, no conclusions should be drawn since no charges have been made."

Thomas Carter, deputy inspector general, U.S. Department of Education, told the panel that recommendations from the Office of the Inspector General for the reauthorization of the Higher Education Act would reduce fraud and abuse across all postsecondary institutions, not just proprietary schools. Those recommendations include:

• Increasing the validity of cohort-default rates.
• Providing a statutory definition of a credit hour.
• Requiring accrediting agencies to have quantitative standards.
• Denying access to federal student financial aid to persons convicted of fraud against federal student-aid programs.

Carter urged lawmakers to proceed cautiously in considering changes in regulations regarding for-profit institutions.

On the other side of the issue, Rep. Maxine Waters, D-Calif., a longtime critic of the proprietary-education sector, argued that restrictions on the eligibility of proprietary institutions for federal student aid should be enhanced. She also criticized enforcement of the current rules by the U.S. Department of Education and complained that accrediting agencies were doing a poor job as gatekeepers of institutional eligibility.

House Republicans have introduced legislation that would eliminate the so-called 90/10 and 50-percent rules, which they contend are unfair to students at proprietary institutions.