American Independent, 7/27/2012 [Archive]

California Cracks Down on For-Profit Colleges

California Cracks Down on For-Profit Colleges

By Sarah Pavlus, The American Independent

California lawmakers recently dealt a blow to the for-profit college industry by disqualifying poorly performing schools from a key state financial aid program.

Despite aggressive industry opposition, California's new budget bars schools with high student loan default rates from participating in the state's generous Cal Grant program. The move eliminates some of the biggest for-profit colleges from the program, including the University of Phoenix.

The budget deal represents a remarkable reversal of fortune for the University of Phoenix and its parent company, the Apollo Group -- a nation-wide education company that has donated tens of thousands of dollars to California politicians and has a history of successfully lobbying against tougher state regulations.

Last year, University of Phoenix students received an estimated $20 million in Cal Grants. The funding-- which can cover tuition, fees, living expenses, and books -- was a vital part of the school's business model. In the past, the University of Phoenix has warned that losing access to Cal Grants could decrease its enrollment and jeopardize its ability to comply with federal regulations that limit the percentage of a school's revenue that can come from federal student aid.

Consumer advocates, who argue that valuable state dollars must be targeted to institutions that best serve students, are praising the tougher standards.

Debbie Cochrane, a financial aid expert at The Institute for College Access & Success, issued a statement saying the new performance standards "position California as a national leader in college accountability."

For-profit colleges say reformers in California and around the country have unfairly targeted them. The schools argue that their high student default rates result not from the quality of the education they provide but from the fact that they serve a non-traditional -- and financially riskier -- student population of older, working adults.

But critics say that rather than helping non-traditional students succeed, for-profit colleges often take advantage of them, providing an inadequate education that leaves students burdened with substantial debt.

Last year, the University of Phoenix successfully fought against tougher state regulations in California.

In response to the state's budget deficit, the California Student Aid Commission had proposed limiting participation in the Cal Grant program to schools with a student loan default rate of 20 percent or less.

The University of Phoenix's student default rate of 21.1 percent fell just above the Commission's proposed threshold.

According to state records, the Apollo Group spent more than $150,000 on lobbying in California from January 2011 through March 2012. The company lobbied on Cal Grants and related bills throughout that time period.

For a time, those efforts paid off. After intense negotiations, California lawmakers last year set the threshold at 24.6 percent -- damaging some for-profit colleges, but narrowly sparing the University of Phoenix.

Not only that, the agreed-upon legislation eased, rather than strengthened, the eligibility restrictions over time. The following year, the threshold would increase to 30 percent.

The school's lobbying team was not shy about its role in the negotiations.

"We cut the deal last year on 24.6 going to 30 percent," said University of Phoenix lobbyist Scott Govenar during a legislative hearing earlier this year.

University of Phoenix spokesman Ryan Rauzon said that by aggressively lobbying, the University of Phoenix was standing up for its students.

"In California, we've got 120 legislators, we've got the Student Aid Commission, we've got the governor, and we're going to try and reach all of them in as many different ways as we can within the law of political activity and argue heavily that you shouldn't cut University of Phoenix students out."

But in this year's budget fight, the University of Phoenix was unable to save its access to state aid. The legislature established rules requiring schools to have a six-year graduation rate above 30 percent and a student loan default rate below 15.5 percent in order to qualify for the Cal Grant program.

Still, in the face of tighter regulation, the school plans to continue making its case and has pledged to "work on behalf of our students to reinstate eligibility for Cal Grants."

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©Copyright 2012 The American Independent, distributed exclusively by Cagle Cartoons newspaper syndicate.

The American Independent is a nonprofit newsroom that funds and publishes independent investigative journalism, and can be reached at editor@americanindependent.com.

This column has been edited by the author. Representations of fact and opinions are solely those of the author.



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