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For-Profit Colleges Gain Beachhead in Trump Administration

Posted on Mar 20, 2017

By Annie Waldman / ProPublica

 

    U.S. Secretary of Education Betsy DeVos. (Gage Skidmore / CC BY-SA 2.0)

Until June 2016, Taylor Hansen lobbied for the largest trade group of for-profit colleges. At the forefront of its agenda: eliminating a rule known as “gainful employment,” which can take away federal funding from for-profit colleges if their graduates fail to earn enough to repay student loans.

Recently, that goal started to become a reality. The U.S. Department of Education delayed the deadline for colleges to comply with certain provisions of gainful employment, saying it plans to review the rule.

By then, Hansen was watching from the inside, benefiting from the Trump administration’s ethics policies that allow former lobbyists to work for agencies they have recently tried to influence. He told ProPublica that, about a month ago, the Trump administration hired him to join the Education Department’s “beachhead” team. It’s a group of temporary employees, often with political connections, who do not require U.S. Senate approval for their appointments.

Hansen said that he isn’t working on gainful employment regulations. Still, his hiring shows how closely the Trump administration is in sync with the for-profit education industry, which has long been criticized for loading students with debt that they struggle to pay off. The sector’s market value and enrollment plunged under the Obama administration, which instituted the gainful employment rule, and chains such as Corinthian Colleges and ITT Educational Services shut down. Now, it anticipates a resurgence under President Donald Trump.

“It’s guaranteed that they will be more friendly,” said Steve Gunderson, president and CEO of Career Education Colleges and Universities, or CECU, the for-profit college trade group where Hansen used to work. “We have an administration that is happy to talk with us and respond to our questions and comments.”

In contrast to its distant relationship with Obama’s education leadership, CECU has already been in close contact with the Trump administration, including face-to-face encounters, phone calls and emails, Gunderson said.

CECU “started talking to the transition [team] shortly after the November election,” he said. “In defense of the Trump administration, the people we have met with thus far are all very careful of ethics protocols.”

The three-month delay announced last week for colleges to submit appeals and publish disclosures about high debt loads under the gainful employment rule “signifies a recognition within the department that there are real problems with the regulations as they’ve been designed and implemented,” Gunderson added.

Both Trump and his education secretary are familiar with for-profit colleges. Trump owned a for-profit education company, and paid $25 million last November to settle Trump University students’ allegations of high-pressure sales tactics and unqualified instructors. His education secretary, Betsy DeVos, has been a champion of privately run schools and has invested in at least one company with for-profit college holdings.

Marcella Goodridge-Keiller, an assistant general counsel at the Office of the General Counsel/Ethics at the Department of Education, said that all department hires are required to participate in an ethics briefing. The Education Department did not respond to requests for comment on Hansen’s appointment and on its relationship with for-profit colleges.

From December 2013 to July 2016, Hansen worked as the director of legislative and regulatory affairs for CECU, formerly known as the Association of Private Sector Colleges and Universities. For the first half of last year, he was registered as one of its lobbyists.

CECU has spent about $3.5 million over the past five years on lobbying on behalf of its more than 600 member institutions, which include a handful of nonprofit career colleges. Gunderson said that lobbying was not one of Hansen’s primary responsibilities. “Looking at his timesheets, we probably never should have registered him, but we err on the side of being careful,” he said, adding that Hansen mainly worked with the trade group’s member schools. After leaving CECU, Hansen briefly joined the Center for Education Reform, an advocacy group that promotes charter schools and voucher programs.

Under Obama administration policies, which banned lobbyists from joining any agency they had recently lobbied, Hansen would have been ineligible to work for the Education Department. Robert Shireman, a senior fellow at the Century Foundation and a former deputy undersecretary of education under Obama, said that the rules helped prevent conflicts of interest.

“I remember people complaining that the rules went too far and kept experts out of the administration,” he said. “It was more important to err on that side and end up with a cleaner administration.”

During his campaign, Trump promised he would “drain the swamp” and suggested that he was open to banning lobbyists from working in his administration. Shortly after his inauguration, however, Trump signed an ethics order that weakened the rules put in place during the previous administration.

The order allows lobbyists to work at any agency, as long as they do not become involved in any “particular matter” that they lobbied on in the past two years. For Hansen, that would mean he’s barred from implementing or reshaping the gainful employment rule.

Hansen’s “beachhead” position at the Education Department lasts up to four months, he said, and could lead to a permanent role. His appointment is by no means an exception. As ProPublica has previously reported, dozens of the administration’s new hires have formerly worked as lobbyists and industry consultants, some of them within the past year.

“The beachhead teams get to operate in obscurity and carry out the cabinet secretaries’ wishes,” said Jeff Hauser, executive director of the Revolving Door Project, which scrutinizes potential political conflicts of interest. “There is no accountability.”

Hansen declined comment on whether his former lobbying role could raise a potential conflict. Michael Dakduk, executive vice president and director of government relations for CECU, told ProPublica that the trade group hasn’t “met with Taylor Hansen or engaged with him in terms of the Department of Education.”

Taylor Hansen’s father, William, also worked at the department, as deputy secretary of education from 2001 to 2003. During his tenure, he participated in weakening regulations on for-profit colleges. William Hansen’s former chief of staff at the department, James Manning, led the Education Department’s landing team during the transition, and has reportedly stayed on at the department after the inauguration. (Landing teams were responsible for facilitating the changeover from the Obama administration, while beachhead teams are supposed to provide leadership until key appointees are chosen and confirmed.) The department did not respond to questions about Manning’s current role there.

From 2006 to 2009, after leaving the department, William Hansen worked as a lobbyist for Apollo Group Inc., the parent company of University of Phoenix, a for-profit college chain. He is currently president and CEO of Strada Education Network, formerly known as USA Funds, which at one point was the largest student loan guarantor in the country. William Hansen declined to comment.

Between 1990 and 2010, the for-profit college sector roared. Hundreds of thousands of students, many of them older and looking for part-time learning opportunities, enrolled at for-profit colleges. The industry earned billions of dollars from tuition payments, much of it coming from the spigot of federal student aid. About 13 percent of college students in the U.S. attend a for-profit institution, but they account for a quarter of all recipients of student loans and a third of all defaults.

To boost revenue, some colleges used predatory and fraudulent practices to recruit and retain students, leading to numerous federal investigations and lawsuits. Amid the increased scrutiny, the industry deflated.

But since Trump’s election, for-profit college stocks have again begun to climb: DeVry shares are up over 43 percent and Grand Canyon and Strayer are both up more than 37 percent.

Part of the rally may stem from the anticipated demise of the gainful employment rule. The rule, which was finalized in 2014, sets debt-to-earnings benchmarks for graduates of vocational college programs, many of which are for-profit.

For example, the rule requires programs to keep annual loan payments of their graduates under 12 percent of their yearly earnings and 30 percent of their income after taxes. The Education Department announced in January that more than 800 college programs had failed to reach that standard.

The Obama administration fought for years to enact the gainful employment rule, in the face of intense opposition from the for-profit sector. In 2011, CECU filed a lawsuit against the department that led a federal court to strike down parts of the rule.

After the department updated the rule in 2014, the trade group sued again. The case was dismissed in 2015, with the court upholding the department’s right to implement the rule. The group lost an appeal in March 2016.

Repealing the rule would be difficult. It would require either a court decision, or a new and lengthy round of rule-making. “The open question is will [the department] find some way to invalidate the spirit of the rule while keeping the text on the books,” said Ben Miller, senior director for postsecondary education at the Center for American Progress and a former senior policy advisor at the department.

When Sen. Elizabeth Warren, D-Mass., asked DeVos at her confirmation hearing in January if she would uphold the gainful employment rule, DeVos would not make a commitment.

“We will certainly review that rule and see that it is actually achieving what the intentions are,” DeVos told Warren.

“Swindlers and crooks are out there doing backflips when they hear an answer like this,” Warren responded.

Spotted at DeVos’s side after the hearing was Lauren Maddox. She’s a former registered lobbyist for CECU and the for-profit college company Career Education Corp.

ProPublica is a Pulitzer Prize-winning investigative newsroom.

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