A push for tougher government oversight of for-profit colleges is fostering tension between Maryland lawmakers and the state higher education commission.
This week, the Maryland General Assembly held hearings on legislation that would require for-profit colleges to reimburse students the cost of attendance if the school closes. The bill, introduced by State Sen. Paul G. Pinsky (D-Prince George’s) and Del. Shelly L. Hettleman (D-Baltimore County), also calls for those schools to provide prospective students information about costs, ability to transfer credits and loan default rates.
This is the second time in recent years that state lawmakers have asked the Maryland Higher Education Commission to establish the tuition guarantee fund. Though the commission wrote and implemented regulations related to 2016 legislation that went into effect in January, lawmakers say the regulations do not reflect the intent of the legislature.
Rather than assessing an annual fee on for-profit schools, the commission said institutions could pay a one-time fee equal to 25 percent of tuition revenue or provide a financial guarantee from a bank assuring the availability of money. Pinsky, who sponsored the 2016 legislation, said that model could leave the fund without enough money.
“We want to make sure that in any given year if the largest of the six for-profit colleges in Maryland goes under, all of the students are protected,” said Pinsky, vice chairman of the Education, Health and Environmental Affairs Committee. “We want to make it explicit what that fund is and how much for-profit schools have to pay, so [the commission] can’t dance around it and try to promulgate other regulations that avoid our intent of the law.”
Pinsky said he tried to hammer out an agreement with Maryland Secretary of Higher Education James D. Fielder Jr., but they reached an impasse and the commission moved ahead with the regulations.
Fielder has argued that the model Pinsky proposed would leave students bearing the burden of financing the fund. If for-profit colleges were assessed an annual fee, the expense could be passed on to students through higher tuition and fees. But by allowing for-profit institutions to provide a financial guarantee, schools — not students — bear the risk, he said.
“The new regulations keep a watchful eye on the financial health of for-profit colleges and universities and protect students,” Fielder said, in an email. “Moving forward, I hope members of the General Assembly will work collaboratively and productively with [the commission] and the administration, which is ultimately in the best interest of Maryland’s higher education students.”
Pinsky said that if for-profit colleges were to pass the cost on to students, the disclosure component of his latest bill would increase transparency so prospective students could make a more informed decision.
The higher education secretary’s vision for the for-profit fund resembles the state’s guarantee fund for private career training schools. But Hettleman said the nature of for-profit colleges, with tuition often double or triple that of vocational schools, makes a different model necessary for the new fund.
“There’s a whole lot more money on the line because some of the tuitions at for-profit schools are in the tens of thousands of dollars,” she said. “We need to make sure that we have a fund that can cover that amount of money. When it comes to the career schools, the numbers are just smaller, so the bill has to reflect that reality.”
Steve Gunderson, who heads the trade group Career Education Colleges and Universities, called the latest proposed legislation “deeply flawed, highly partisan . . . a duplication of efforts already being made by the federal government” to address student debt relief.
“Between 2015 and the end of 2017, the federal government provided $450 million in student debt relief. This should be adequate proof that we don’t need state activities to protect students’ rights related to the federal financial aid program,” he said.
Maryland is among nearly two dozen states that reimburse tuition to college students whose schools close or who are defrauded by their college, according to the National Consumer Law Center.
The U.S. Department of Education will cancel the federal loans of borrowers whose college closed as long as they do not complete the same degree at another institution. But that discharge does not apply to out-of-pocket expenses, grant aid or GI Bill benefits. And though the law also permits federal loans to be cancelled when schools use deceptive tactics to persuade people to borrow money for college, few have been successful in pursuing what’s known as borrower defense to repayment.
“The federal government will cover a certain amount of student expenses, but we want to make sure that the institutions that are failing are the ones who cover the rest,” Hettleman said.
The limitations of federal loan forgiveness became evident following the collapse of for-profit giants Corinthian Colleges and ITT Technical Institute. Students who wanted to complete their studies elsewhere were shut out of the closed-school discharge option, while those who filed borrower defense claims are still awaiting decisions.
“We have people who are carrying enormous debt loads without degrees, so we need to be doing a much better job to help them,” said Marceline White, executive director of the Maryland Consumer Rights Coalition. “And because of all of the changes at the federal level, we need to be more vigilant about protecting the rights of our students and consumers.”