On Thursday (June 19, 2014), the Obama Administration announced proposed regulations aimed at addressing concerns about sexual violence on college campuses. All institutions of higher education will be required to comply with new campus safety and security related requirements intended to reduce sexual assault, domestic violence, dating violence and stalking. In some ways proprietary schools generally do not pose the same risks with respect to sexual violence because students at these schools usually do not live on campus. However, in certain areas and programs proprietary schools face unique challenges with respect to sexual violence crimes and prevention. Many proprietary schools are located in urban areas that may pose safety and security risks, and some programs such as cosmetology are traditionally dominated by female students.
A second development was the introduction of bi-partisan legislation in response to the Department of Education's proposed gainful employment regulations. Representatives Matt Salmon (R-AZ) and Alcee L. Hastings (D-FL), along with 16 co-sponsors, introduced the Transparency in Education Act on June 18, 2014. As stated in Representative Salmon's press release, the bill would require the Department of Education to respond to repeated calls for real transparency and accountability in its attempts to promulgate the proposed 841-page gainful employment regulation. In short, the bill would prevent the Department from issuing final gainful employment regulations until 90 days after the Department publishes a complete data analysis on the impact of such rules on all postsecondary education programs and students, including the impact on students who receive Pell grants, minority students, students over the age of 24, independent students and dependent students.
The third significant development occurred on Thursday (June 19, 2014) when one of the nation's largest proprietary school operators warned that that it may have to close after the Obama Administration restricted its access to student Title IV funds. The Department of Education placed Corinthian Colleges Inc. on an increased level of financial oversight. Corinthian is the parent company of the Everest Institute, Everest College, WyoTech and Heald schools, which enroll 72,000 students nationwide. According to the Department's press release, the increased oversight occurred after Corinthian failed to address concerns about its practices, including falsifying job placement data used in marketing claims to prospective students and allegations of altered grades and attendance. Corinthian filed a notice with the Securities and Exchange Commission that the Department's actions will result in a significant shortfall to the company's operating cash flows, and that without interim financing may jeopardize the company as a going concern.
So what do this week's developments mean to proprietary school owners and administrators?
The proposed regulations, along with the recent statutory changes made with the Violence Against Women Act, will require schools to make significant changes to their campus safety policies and procedures. These policies will need to include descriptions of the school's primary prevention and awareness programs for all incoming students and new employees. The policy must also include a description of its ongoing prevention and awareness campaigns for students and faculty. Schools will need to develop and publish policies regarding their institutional disciplinary actions. Schools are also required to provide annual training of officials on issues related to dating violence, domestic violence, sexual assault and stalking as well as training on how to conduct disciplinary proceeding investigations and hearings.
The Transparency in Education Act shows that the fight over the proposed gainful employment regulations continues. The public comment period for these proposals may have ended on May 27, but interested parties will continue efforts to influence the final rules. For those seeking to restrict or limit the gainful employment regulations, the good news is that this bill was truly a bi-partisan initiative sponsored and/or co-sponsored by 18 representatives. Given the Obama Administration and the Department's efforts in pursuing the gainful employment regulations over the past five years, it will still take a lot of work to get this legislation enacted.
With respect to Corinthian Colleges, it will be very interesting to see how the situation develops over the coming days and weeks. The immediate concern is the education opportunities for the current 70,000+ students. If Corinthian is forced to close, there is no precedence for this number of students being displaced all at one time. The Department's efforts to enforce cash management restrictions and its unwillingness to provide relief in response to Corinthian's going concern warning seems to indicate that no proprietary schools are too big to fail. It also seems that even without the gainful employment regulations in effect, the Department still has tools available to address proprietary school performance issues.
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