A Possible For-Profit Accountability Compromise?

In the midst of an absolutely bonkers week in the world of higher education (highlighted by a FBI investigation into an elite college admissions scandal, although the sudden closure of Argosy University deserves far more attention than rich families doing stupid things), the U.S. House Appropriations Committee held a hearing on for-profit colleges. Not surprisingly, the hearing quickly developed familiar fault lines: Democrats pushed for tighter oversight over “predatory” colleges, while Republicans repeatedly called for applying the same regulations to both for-profit and nonprofit colleges.

One of the key sticking points in Higher Education Act (HEA) reauthorization is likely to be around the so-called “90/10” rule, which requires for-profit colleges to get at least 10% of their revenue from sources other than federal financial aid (excluding veterans’ benefits) in order to qualify for federal financial aid. Democrats want to return the rule to 85/15 (as it was in the past) and count veterans’ benefits in the federal funds portion of the calculation, which would trip up many for-profit colleges. (Because public colleges get state funds and many private colleges have at least modest endowments, this rule is generally not an issue for them.) Republicans have proposed getting rid of 90/10 in their vision for HEA reauthorization.

I have a fair amount of skepticism about the effectiveness of the 90/10 rule in the for-profit sector, particularly as tuition prices need to be above federal aid limits and for-profit colleges tend to serve students with relatively little ability to pay for their own education. But I also worry about colleges with poor student outcomes sucking up large amounts of federal funds with relatively few strings attached. So, while watching the panelists at the House hearing talk about the 90/10 rule, the framework of an idea on for-profit accountability (which may admittedly be crazy) came into my mind.

I am tossing out the idea of tying the percentage of revenue that colleges can receive from federal funds (including veterans’ benefits as federal funds) to the institution’s performance on a number of metrics. For the sake of simplicity, let’s assume the three outcomes are graduation rates, earnings after attending college, and student loan repayment rates—although other measures are certainly possible. Then I will break each of these outcomes into thirds based on the predominant type of credential awarded (certificate, associate degree, or bachelor’s degree), restricting the sample to broad-access college to reflect the realities of the for-profit sector.

A college that performed in the top third on all three measures would qualify for the maximum share of revenue from federal funds—let’s say 100%. A college in the top third on two measures and in the middle third on the other one could get 95%, and the percentage would drop by 5% (or some set amount) as the college’s performance dropped. Colleges in the bottom third on all three measures would only get 60% of revenue from federal funds.

This type of system would effectively remove the limit on federal funds for high-performing for-profit colleges, while severely tightening it for low performers. Could this idea gain bipartisan support (after a fair amount of model testing)? Possibly. Is it worth at least thinking through? I would love your thoughts on that.

The Higher Learning Commission’s Accreditation Gamble

Accrediting bodies play an important role in judging the quality (or at least the competency) of American colleges and universities. There are six accreditors which cover the majority of non-profit, non-religious postsecondary institutions, including the powerful Higher Learning Commission in the Midwest.  The HLC recently informed Apollo Group, the owner of the University of Phoenix, that it may be placed on probation due to concerns about administrative and governance structures.

Part of Phoenix’s accrediting concerns may be due to a philosophical shift at the HLC, emphasizing the public purposes of higher education. As noted in an Inside Higher Ed article on the topic, Sylvia Manning, president of the HLC, stated the priority that education be a public good. The new accrediting criteria include the following statement:

“The institution’s educational responsibilities take primacy over other purposes, such as generating financial returns for investors, contributing to a related or parent organization, or supporting external interests.”

This shift occurs in the midst of questions about the purposes of the current accreditation structure. While colleges must be accredited in order for students to receive federal financial aid dollars, the federal government currently has no direct involvement in the accreditation structure. Accrediting bodies also focus on degree programs instead of individual courses, something which has also been questioned.

Given the current decentralized structure of accreditation, Phoenix could easily move to another of the main regional nonprofit accrediting bodies—or it could go through a body focusing on private colleges and universities. The latter would likely be easier for Phoenix, as it would have to answer to more like-minded critics. While these bodies are viewed as being less prestigious than the HLC, it is an open question whether students care about the accrediting body—as long as they can receive financial aid.

The Higher Learning Commission is taking a gamble with its move toward placing Phoenix on probation, partially due to the new criteria. They need to carefully consider whether it is better to have oversight over one of the nation’s largest and most powerful postsecondary institutions or to steer them toward a more friendly accrediting body. Traditional accrediting bodies should also consider the possibility that the federal government will get into the accreditation business if for-profits leave groups like the HLC. If the HLC chooses to focus on Phoenix’s control instead of its academic competency, a chain reaction could be set off which may end up with them being replaced by federal oversight.