New York's Association of Proprietary Colleges Submits Formal Objection to Proposed Federal Regulations

ALBANY, NY (09/16/2010)(readMedia)-- New York's Association of Proprietary Colleges today criticized proposed federal regulations that attempt to rein in student loan "default rates" and ensure graduates are securing "gainful employment" after attending a proprietary college.

The association, on behalf of its 27 members on 41 campuses across New York, submitted 43 pages of comments in response to the U.S. Department of Education's Notice of Proposed Rule Making (NPRM), calling the proposed regulations discriminatory and unrealistic – penalizing all proprietary schools and colleges for the misdeeds of a few and disregarding New York's unique regulatory environment.

"I must convey our deep and uniform concern that the proposed regulation will have a disastrous effect on our colleges and on the ability of New York students to pursue their education, contrary to the basic purpose of the federal student aid funding programs to expand educational opportunities for students from all sectors and sections of our country," said Stephen J. Jerome in the association's cover letter to the Education Department. Jerome is president of New York's Association of Proprietary Colleges and president of Monroe College in the Bronx and New Rochelle.

The NPRM would establish measures by which the DOE would determine whether certain educational degree programs lead to gainful employment in recognized occupations. They are based on three metrics: a loan repayment rate, a debt-service-to-income ratio and a debt-service-to-discretionary-income ratio.

"In the name of "gainful employment," the Department is proposing a rule that will reduce educational opportunities based on flawed data, a flawed analysis and a deeply mistaken reading of the Higher Education Act." Jerome wrote. "This is particularly troubling for our association because, in the State of New York, we believe that the comprehensive oversight by the Board of Regents ensures educational quality, but the proposed regulation will do nothing to advance that purpose and in fact will impede the regulatory system established under the Board of Regents."

The proposed regulation would penalize proprietary colleges for allowing students to incur too much debt from student loans – debt that some students are unable to repay. Specifically, the proposed definition of "gainful employment" would make for-profit colleges ineligible for federal aid if their students had high debt burdens combined with low rates of repayment.

Jerome was joined by the presidents of many member colleges, who voiced dissent toward the proposed rules.

Elizabeth S. Marcuse, president LIM College in Manhattan, wrote the following: In the proposed rule, the Department "exercises significant creative license extending this gainful employment standard and the associated proposed measurements to all degree programs at all levels in the for-profit sector without any basis to single out these programs. This clearly goes beyond the original intent of these guidelines and is, or will effectively and inappropriately, be designed to be unfairly punitive to these institutions and, by extension, their students"

In requesting the proposal be withdrawn entirely, John Staschak, president & CEO of Bryant & Stratton College, with campuses in Buffalo, Rochester, Syracuse and Albany, said, "We believe the Gainful Employment Rule is contrary to the Higher Education Act, violates due process based on the use of data to which colleges have no access, contains a large number of vague and seemingly inconsistent terms, contradicts the established systems the Department has in place to evaluate student loan repayments, and would have negative consequences that would foreclose educational opportunities for a great number of students, just as the country is struggling with a recession and needs expanded training opportunities more than ever."

An uneven playing field

The proposed rules blatantly discriminate against the entire for-profit sector of higher education by not applying the same rules to public and private, nonprofit colleges, many of which, especially the community colleges, have the same institutional mission as for-profit colleges – preparing people for work.

Programs, not institutions, would be judged on whether former students are repaying the principal on federal loans, and the relationship between total student loan debt and average earnings upon graduation. The proposed rule establishes three tiers of eligibility, with those in the middle tier facing enrollment restrictions and debt-to-income disclosure requirements, and the weakest tier losing access to federal student aid for new students.

Factors far beyond a college's control most often play into a students' ability to repay loans – from the repayment plan they enter to such factors as illness, work ethic, job market and economic conditions, and job loss. Similarly, family situations such as pregnancy, financial struggles, or time away from work to care for ill or injured relatives, impact one's ability to pay.

Jerome added, "These rules were established based on data from the past several years, which was the worst economic period since the Great Depression. Graduates from all sectors of higher education are experiencing the exact same difficulty repaying loans and securing high-paying jobs, yet our federal government is targeting one sector only."

APC recommended the proposal be modified in one or more of the following ways:

• Exempt New York from the regulations because colleges here are regulated by the State Board of Regents and the State Education Department;

• Students in federally accepted repayment plans should be counted as being in repayment under the Loan Repayment Rate Formula;

• Enforcement should not be imposed without a reasonable transition period of three to four years; and/or

• Be adjusted for the material differences in loan repayment rates between students who are eligible for Pell grants and those who are not.

"The U.S. Department of Education must understand that not all for-profit colleges are created equal and amend these rules accordingly," Jerome said. "New York's proprietary colleges are under significant scrutiny. Institutions should not be regulated into extinction without a chance to understand the new rules and incorporate corrective protocols to further ensure the government and the public of their commitment to ethical practices, quality education and graduate success."

APC is one of New York's four sectors of higher education, representing degree-granting, proprietary colleges. The association represents 27 member institutions on 41 campuses across the state. For more information, or to read the full text of APC's comments, visit www.apc-colleges.org.

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