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Why Does America Keep Falling for “Sham Schools”?

The country has a long, maddening history with for-profit colleges—and the blame is bipartisan.

Alex Wong/Getty Images

Julian Schmoke was the villain this week. Outrage erupted following the news that the Trump administration has picked the former for-profit college dean to run a division of the Education Department—and not just any division, but the Student Aid Enforcement Unit, which polices fraud by higher education institutions. For-profits are notorious for fraud, and between 2007 and 2012 Schmoke worked in various academic positions at one of the schools most responsible for that notoriety: DeVry University. Last year, DeVry settled for $100 million in a federal lawsuit alleging that it engaged in false advertising, spreading overblown claims about the success of its graduates. So it’s no wonder that news of Schmoke’s appointment was met with alarm. “This is like the fox guarding the hen house,” Senator Dick Durbin tweeted. Other Senate Democrats piled on, in what appeared to be coordinated hen house messaging. Senator Chris Murphy chose an even more evocative metaphor:

As The Atlantic’s Alia Wong was quick to point out, “Schmoke himself has not been accused of any wrongdoing, nor implicated in those alleged practices by any public report.” But neither does he have any experience in enforcement. He’ll be running this unit even though his former employer, in Wong’s words, “engaged in some of the very abuses the unit is charged with eliminating.” Worse, Schmoke’s position is being downgraded to focus on maintaining school “compliance” as opposed to pursuing the more aggressive and investigatory enforcement role carved out for the unit when it was created by the Obama administration last year.

“They’re effectively eliminating the enforcement unit without having to announce that’s what they’re doing,” said Maggie Thompson, executive director of Generation Progress, the youth engagement arm of the Center for American Progress. Bob Shireman, a senior fellow at the Century Foundation who served as a deputy undersecretary of education early in the Obama administration, agreed. Essentially the enforcement division is out of business,” he told me.

All of this is part of a pattern under President Donald Trump, who famously ran his own for-profit school scam, Trump University. As Politico reported, “For-profit colleges are winning their battle to dismantle Obama-era restrictions as Education Secretary Betsy DeVos rolls back regulations, grants reprieves to schools at risk of losing their federal funding and stocks her agency with industry insiders.” That’s despite the industry’s history of exploiting low-income students and veterans, leaving graduates saddled with debt, and failing to make good on promises of job prospects. But while DeVos’s actions may be trademark Trumpism, they are also continuous with a long history of fleecing that has been going on since World War II.

No one was more dismayed this week than the Obama veterans who worked to crack down on for-profits, who described the rollbacks as one step forward, two steps back. Clare McCann, who spent two years at the Education Department and is now the deputy director for federal higher education policy at New America, didn’t mince words. “It sucks,” she told me. “It’s hard to watch a lot of this stuff thrown out in a really reflexive way, and it’s hard to think about all the promises we made to students about how we were going to improve their lives.”

It’s especially galling given how obviously damaging the for-profit sector has been to American education. Research shows that for-profit colleges leave students with more debt and a decline in their earnings. And when it comes to scammers in the industry, it’s hardly just a few bad apples. When you look at the history of for-profit colleges, it has been one set of abuses after another,” McCann said. Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, put it even more succinctly: “The for-profit college industry has adopted consumer fraud as its business model.”

Despite all that, the Obama administration’s effort to regulate for-profits was itself no perfect example of permanent reform. Some critics like Nassirian say they should have done more, and much sooner, before the collapse of Corinthian Colleges, a poster child for bad actors in the for-profit sector, left thousands of students stranded in 2014. “He meant well, but his administration was very late to the game in recognizing the problem—and frankly this was not some kind of under the surface issue at the time,” Nassirian said.

As the Trump administration’s actions draw challenges from enterprising state attorneys general, advocates of quality education must grapple with why Obama’s reforms were such an uphill battle—and with America’s longer history of acquiescing to for-profits.

“Every decade or two since World War II, lawmakers have loosened oversight of federal aid to career colleges run by for-profit companies only to be disappointed time and again by rampant abuses,” Century Foundation policy associate Margaret Mattes reminded us in January. In other words, this is not a new problem. If for-profit “sham schools” are now running amok, it didn’t come out of nowhere, and both parties share the blame.

If anything, as Mattes sees it, Republicans have actually been more vigilant than Democrats over the decades. Dwight Eisenhower, Richard Nixon, Gerald Ford, and George H.W. Bush all took up the issue. Even Ronald Reagan’s Secretary of Education William Bennett called on Congress to close “legislative loopholes that invite unscrupulous schools to defraud the taxpayer and take advantage of vulnerable students,” complaining that “kids are left without an education and with no job, and the taxpayer ends up holding the bag for a kid who gets cheated.” In perhaps the clearest illustration of how different the politics were, Bennett had to persuade Senator Ted Kennedy—that Democratic liberal lion—that for-profit scamming was a serious issue.

As for Obama, his reforms were significant, though most came toward the end of his tenure. The administration introduced the enforcement unit and the “borrower defense” rules that are now under attack by DeVos. Still, when it comes to protecting students, it’s not quite as simple as Democrats moving us forward and Republicans taking us back.

Perhaps the most important achievement of the Obama era—and another that DeVos is gearing up to eviscerate—was the “gainful employment” regulation, aimed at ensuring that students graduating from for-profit colleges found incomes sufficient to pay down their debt. Nassirian, who was part of negotiations on that regulation, said industry resistance was fierce. “The sector declared holy jihad against the entire government of the United States,” he told me.

But the for-profit industry wasn’t the only source of resistance. In 2011, some Democrats in the House, including members of the Congressional Black Caucus, joined a bipartisan effort aimed at blocking the gainful employment rule, arguing that cracking down on for-profits would only keep higher education in the hands of the few. A nasty fight ensued. One aide with the caucus told Talking Points Memo at the time, “It’s disgusting to see Democrats, especially members of the CBC, actively shilling for an industry that disproportionately preys on low-income and minority students.”

The infighting didn’t derail the rules, but the lessons it revealed—that the predatory practices of for-profit colleges are inextricably linked to larger issues about access to higher education in the United States—are ones we shouldn’t forget.

The reign of Betsy DeVos at Trump’s Education Department may have the for-profit industry cheering, but her appointment of Julian Schmoke this week—a move that so vividly illustrates the Trump administration’s deference to these schools—may have at least one unintended side effect. It could unite Democrats in opposition. Just as DeVos is making privatization of elementary and secondary education toxic for Democrats, forcing them to reevaluate their support for “school choice,” she may make it uncomfortable for Democrats to continue backing for-profits. The party needs to be unified on this issue for another reason as well: After decades of cyclical progress and setbacks, McCann said legislation may be needed to truly regulate this industry in a meaningful way. “It requires a much broader regime than you can accomplish through regulation,” she told me.