For-profit colleges appear to have a tough road ahead in 2022, with stricter regulations and other challenges likely coming down the pike.
Some tailwinds appear to have turned into headwinds. Although for-profit colleges saw an enrollment boom during the pandemic’s first year, new enrollment figures show that trend didn't carry over into 2021.
The U.S. Department of Education is also poised to carry out President Joe Biden's promised crackdown on the sector after laying groundwork during his first year in office, when pandemic-related relief for colleges grabbed headlines.
The Education Department kicked off 2022 by conducting negotiated rulemaking, in which the agency convenes a group of stakeholders to offer recommendations on new regulations before they're issued. Ed Department officials are discussing a host of issues that could heavily impact the for-profit sector, including rules with potential to influence which students colleges recruit and whether their programs are eligible for federal funding.
Below, we rounded up and answered four questions that are top of mind for the proprietary sector in 2022.
What will the Biden administration's gainful employment rule look like?
The Biden administration has vowed to reinstate some version of the gainful employment rule, an Obama-era regulation that threatened to cut off federal student aid from career training programs whose graduates had high student debt payments relative to their incomes.
Just weeks before former President Donald Trump took office, the Ed Department released the first debt-to-earnings ratios for career education programs. They showed more than 800 programs failed the rule's standards, and the vast majority of those were offered by for-profit colleges.
However, the Trump administration repealed the rule two years later, with then-Education Secretary Betsy DeVos arguing the regulation unfairly targeted the for-profit sector.
The Biden administration is planning to craft a similar rule through the negotiated rulemaking process. But it's unclear how closely Education Department officials will hew to the Obama-era rules.
Julie Peller, executive director of the student outcomes-focused nonprofit Higher Learning Advocates, said the organization is hoping the Education Department will view the Obama administration's regulation as a starting point. Its first version, which courts later struck down, looked at both earnings and repayment to measure a program’s value.
"I hope that in focusing on gainful employment, the Biden administration will think about multiple measures of how to define, 'What is a bad program?'" Peller said.
Peller anticipates the discussion to focus on which college programs should be subject to the rule.
"I expect that there will be a desire by the for-profits to broaden the conversation to include more programs at nonprofit institutions and a desire by the nonprofit institutions to keep it as narrow of a scope as possible," she said.
What will 90/10 regulations look like?
Negotiated rulemaking is also addressing the 90/10 rule, which mandates that for-profit colleges receive no more than 90% of their revenue from Title IV federal student aid funds or risk losing access to them.
Historically, military education funds — such as those from the GI Bill — haven't been included in the 90% tally, which some policy experts argue has created an incentive for for-profit colleges to heavily recruit veterans. Indeed, proprietary schools have received an outsized share of GI Bill benefits, according to a 2019 report from the Government Accountability Office.
But lawmakers closed that loophole last year, when they changed the statutory language to include all "federal education assistance funds" rather than just Title IV funds. The tighter restrictions take effect in 2023.
In the meantime, higher education associations are asking the Education Department to carefully consider which sources of funding will fall under the new definition.
Some think tanks and advocacy groups have been urging the agency to not create any new carve-outs or exceptions in regulatory language, while Career Education Colleges and Universities, which represents for-profit schools, has been advocating for a narrow interpretation of the rules.
In a public comment submitted to the Education Department, CECU urged officials not to include federal job training funds and training contracts with the U.S. Department of Defense and other agencies.
While regulatory language is still being hammered out, for-profits are likely taking a close look at the new statute's requirements to understand whether they might need to make changes, said Kevin Kinser, a higher education professor at Penn State University.
"Some of the institutions that do a lot of military preparation are looking at this very, very carefully," Kinser said.
Will the fight over Pell increases continue?
Biden's signature legislative proposal, Build Back Better, was dealt a bruising blow late last year when Sen. Joe Manchin, a Democrat from West Virginia, went on Fox News to say he couldn't support it.
However, the Biden administration plans to revive talks on the $1.75 trillion spending package by paring down items like the child tax credit, Reuters reported. And this week, Biden said he believes he could pass chunks of the bill.
The proposal also includes a $550 increase to the federal Pell Grant, raising the maximum amount to $7,045. Yet for-profit colleges would be excluded from the increase — even though Pell awards have traditionally been the same across all sectors. Some higher education experts said this change could make it harder for students to know how much aid to expect because it would differ depending on which institution type they selected.
For-profit colleges have vociferously opposed their students being ineligible for the increase.
"We feel that that is an injustice," said CECU President Jason Altmire. "It's just a matter of equity — that the Pell Grant program is designed to be portable."
Seventeen Democratic lawmakers wrote to Congressional leaders in November, urging them to revise the proposal's language so that for-profit colleges aren't excluded.
"We need to do more to bring accountability to all sectors of higher education; however, punishing students does not accomplish that objective," they wrote.
Will for-profit colleges turn around flagging enrollment?
Enrollment woes have mounted in the for-profit college sector for years. But during the early days of the pandemic, some predicted the health crisis and ensuing economic downturn would drive students to proprietary schools.
"There was some talk last year that for-profits are well-positioned to be the institutions of choice for people in this economy," Kinser said. These institutions view themselves as being more nimble than public colleges, Kinser said.
Enrollment in four-year for-profit colleges increased 5.3% year over year in fall 2020, a reversal from a decade of declines. But that upswing didn't last long, with enrollment in these schools tanking 9.3% in fall 2021, according to final figures from the National Student Clearinghouse Research Center.
Eyes will be on the sector this year to see if enrollment improves.
"Is that just a see-saw?" Kinser asked. "Or is this representing more of a long-term effect?"