For Profit Schools Unfairly Targeted by Department of Education
The for-profit education industry has been under attack. The Department of Education (DOEd) proposed “gainful employment” rules which require for-profit schools to prove their graduates are either paying back loans or are capable of doing so. If not, the schools will lose access to federal student aid. The hook is that it is only the for-profit schools that are required to do so.
Former special counsel to President Clinton Lanny Davis pointed out in a November 18, 2010 Huffington Post article, that DOEd is targeting only for-profit career colleges:
Now it appears that much more has been going on behind the scenes. The National Legal and Policy Center (NLPC) sent a letter which “asked the Securities and Exchange Commission (SEC) to investigate the activities of short sellers, including Steven Eisman, who profited from the collapse of share prices of companies that are in the for-profit education field.” The letter in part read, “A major feature of the short-seller effort has been to promote Department of Education policies that would result in draconian new standards for education loans applicable to students at for-profit schools. This intended slashing of funds would have the effect sought by the short-sellers: a collapse in the share prices of the listed for-profit trade school companies resulting in a direct monetary benefit to the shorts. It is also beyond debate that the tactics of the short sellers and their allies appear to have worked insofar as share prices of affected companies have lost billions of dollars.
Also, check out NLPC’s blog“Harkin-Orchestrated GAO Study on For-Profit Colleges Was Hatchet Job” about Sen. Tom Harkin’s (D-Iowa) role in the process.
Citizens for Responsibility and Ethics in Washington (CREW) has also weighed in on the issue with a March 1, 2011 press release: “Citizens for Responsibility and Ethics in Washington (CREW) sent letters to the Director of Enforcement for the Securities and Exchange Commission (SEC) and U.S. Department of Education Secretary Arne Duncan to share records CREW obtained through its Freedom of Information Act (FOIA) lawsuit against Education. These documents show high-level Education officials colluded with Wall Street short-sellers, improperly leaking the contents of highly controversial gainful employment regulations in advance of their publication.”
And, now it appears that somebody was listening. According to the Daily Caller on April 29, 2011, “The Education Department’s inspector general is investigating Wall Street short sellers’ role in strict new regulations of the for-profit college sector, sources confirm to The Daily Caller. The investigation could reveal the extent to which the investors, who are hoping to profit when the for-profit firms’ stock goes down, influenced the process or received advance knowledge about regulatory actions by the department.”
Time for DOEd to stop the witch hunt against for-profit schools.