The Washington PostDemocracy Dies in Darkness

For-profit colleges fight exclusion from Pell Grant increase in Biden’s spending bill

Birds fly near the U.S. Capitol in Washington. (Kevin Lamarque/Reuters)

For-profit colleges are fighting for their students to be eligible for increased federal financial aid in President Biden’s Build Back Better package after House Democrats passed legislation excluding the sector from new Pell Grant spending.

Restricting access to the federal government’s largest financial-aid program for college students would mark a significant change in the way the program works. Pell dollars are afforded to students based on their family income, not where they enroll.

Still, it is not unprecedented for lawmakers to use federal funding as a vehicle for regulating schools, and House Democrats employed that strategy in the $2 trillion spending bill.

How college students and their schools fared in Biden’s $2 trillion plan

The House advanced the package Friday with a provision boosting the maximum Pell grant by $550 in each of the next four years. That would bring the max to more than $7,000 this year, but an estimated 900,000 Pell recipients attending for-profit college would be excluded from the bump in funding. The new money is only earmarked for the roughly 5 million recipients enrolled in public and private nonprofit colleges and universities.

“It’s a clear attempt to dissuade people from going to for-profit schools,” said Jason Altmire, chief executive of Career Education Colleges and Universities, which represents for-profit colleges. “We’re talking about disadvantaging students [at for-profit schools] in a way that doesn’t address accountability.”

Democratic aides say the House Education Committee, which crafted the provision, targeted the limited available education money at areas where students can get the most value. They say for-profit college tuition is far more expensive than comparable programs at public institutions, and students at the schools tend to borrow at higher rates and too often are left working low-wage jobs.

A House aide pointed to research by George Washington University professor Stephanie Riegg Cellini that shows for-profit colleges raise tuition to match financial aid increases, eating up federal dollars designed to lower the cost for the neediest students.

“There is substantial evidence that the tuition at the low-quality for-profit schools far exceeds the value of the education they provide,” said Rep. Robert C. “Bobby” Scott (D-Va.), chair of the House Education Committee. “Enrolling students is not the same as serving students.”

Scott said “fraudulent and deceptive practices” at certain for-profit institutions have already cost taxpayers more than $2.5 billion this year in student-loan cancellations for defrauded borrowers.

Democratic lawmakers have long sought to curb federal money going to for-profit colleges, a segment of higher education they say has a track record of predatory practices dating back to the creation of the G.I. Bill in 1944.

Congress makes student debt forgiveness tax-free, limits revenue that for-profit colleges get from enrolling veterans

Proprietary schools are already excluded from institutional funding supplied by the federal government. What’s more, the 90/10 rule prohibits for-profit schools from getting more than 90 percent of their operating revenue from federal student aid.

“For-profits have over many decades been associated with scandals and students being ripped off,” said Robert Shireman, a senior fellow at the Century Foundation, a liberal think tank. “Every time the government tries to institute controls, the for-profit institutions claim they are being targeted, they fight it or undermine it by adding loopholes.”

The Biden administration has signaled its intention to hold for-profit colleges more accountable for student outcomes. The Education Department has resurrected an enforcement unit charged with rooting out fraud and is drafting a new version of the Obama-era gainful employment rule that threatens to cut off financial aid dollars to career training programs whose graduates consistently have more debt than they can afford to repay.

“There is going to be a debate on the regulatory side and the legislative side about the role of for-profit higher education. [Pell] is not the place to have that debate,” said Altmire of Career Education Colleges and Universities.

The former Democratic congressman is confident that some Senate Democrats agree with him, though he would not name names. A couple of moderate members of the caucus have proprietary institutions in their backyards.

Sen. Kyrsten Sinema (D-Ariz.) represents a state that is home to the University of Phoenix, while Sen. Joe Manchin III (D-W.Va.) has American Public Education in his state. Manchin’s office declined to comment and Sinema’s did not respond.

More than a dozen House Democrats, including Maryland congressman Anthony G. Brown, had urged House leadership to stand down on the provision, which they said “hurts students, not institutions.”

“The proposal will have a disparate impact on minority and first-generation students, which runs contrary to the policy goals of the Build Back Better agenda,” wrote the group of 17 lawmakers in the Nov. 18 letter. “We need to do more to bring accountability to all sectors of higher education; however, punishing students does not accomplish that objective.”

The lawmakers said the policy could also add to the administrative burden for schools, citing concerns raised by the National Association of Student Financial Aid Administrators. The trade group’s president Justin Draeger says the quality of for-profit schools is best addressed through regulation directed at the institution, not adding complexity to a financial-aid system “on the verge of much-needed simplification.”

Despite their objections, all of the House Democrats who signed the letter voted in favor of the legislation that passed Friday.

As the bill heads to the Senate, Democrats in the chamber are confident the exemption will survive, according to aides. When the bipartisan FAFSA simplification bill passed last year, for-profit colleges were excluded from receiving Pell grants from newly eligible formerly incarcerated students. If that provision could proceed, aides say there is a good chance the latest exemption will make it.

“The Build Back Better package is a historic opportunity to expand access to quality higher education,” said Sen. Patty Murray (D-Wash.), chair of the Senate Education Committee. “That’s why I fought to include an increase to the max Pell grant award for all public and private non-profit schools, and make it easier for students across the country to attend a college or university that will put them on the path to success.”