Rep. Kline blocks limits on for-profit colleges

This just in from John Lauerman at Bloomberg:

Feb. 18 (Bloomberg) -- The U.S. House of Representatives voted today to block an Education Department proposal that would limit government funds to for-profit colleges.

Lawmakers approved by a 289-136 vote an amendment sponsored by Representative John Kline, a Minnesota Republican and House education committee chairman, blocking the Education Department’s “gainful employment” proposal. For-profit colleges have lobbied against the rule that would tie their eligibility for federal government student aid to students’ incomes and loan repayment rates.

For-profit colleges “provide students with skills that can be applied immediately to specific jobs in the workforce,” Kline said in a statement. “With more than 6 million workers unemployed for more than 26 weeks, proprietary schools address a critical need in today’s economy.”

For-profit colleges get as much as 90 percent of their revenue from U.S. student grants and loans. The Education Department began drafting the gainful employment rule last year as data showed that for-profit college students were about twice as likely to default on student loans as the national average.

‘Financial Exploitation’

“I’m disappointed the Congress shut down work on protecting students from financial exploitation today,” said Representative George Miller, a California Democrat and a member of the House education committee who opposed the bill, in an e- mailed statement. “Americans turn to career colleges for more training and an educational environment that leaves them better prepared for a career. Unfortunately, some career college programs are only leaving their students with a mountain of debt.”

Democratic Representatives Alcee Hastings of Florida, Edolphus Towns of New York and Rob Andrews of New Jersey, and Republican Representatives Judy Biggert of Illinois, Virginia Foxx of North Carolina, and Glenn Thompson of Pennsylvania are among the co-sponsors of the bill.

“Let’s keep the door to opportunity open to the millions of non-traditional students who want options in higher education,” Harris Miller, president of the Washington-based Association of Private Sector Colleges and Universities trade group, said in a statement. “Any changes of this significance should come out of the legislative process, should cover all colleges and universities, should be focused on real outcomes, such as completion rates, and be subject to vigorous debate and public scrutiny.”

Shares Gain

The Bloomberg U.S. For-Profit Education Index of 13 companies rose 3.3 percent at 4 p.m. New York time. American Public Education Inc., which yesterday reported fourth-quarter profit of 52 cents a share to beat analysts’ estimates, increased $8.40, or 24 percent, to $43.49 in Nasdaq Stock Market composite trading for its biggest single-day jump since November 2007. Apollo Group Inc., the biggest U.S. for-profit college and operator of the University of Phoenix, rose $2.18, or 5 percent, to $45.82.

The amendment to a spending bill would block the rule through the end of the government fiscal year on Sept. 30, and must be approved by the Senate to take effect.

“It is unlikely that a similar amendment, if included in the Senate version, would pass there, given the strong support for the proposed Gainful Employment regulation shown by Senator

(Tom) Harkin,” Jeff Silber, an analyst with BMO Capital Markets in New York, wrote today in a note to clients. “Even if it did, President Obama could veto it. We believe the industry will still make an effort in the Senate.”

Party Vote

Republicans, the majority party in the House, voted 231 to 4 in a favor of today’s amendment while 58 Democrats backed the measure and 132 opposed it, according to Kline’s office.

Kline got $56,500 from educators and their families’ last year, his fourth-biggest source of campaign contributions during his re-election campaign, according to the Center for Responsive Politics, a Washington-based research group. For-profit colleges hired at least six former members of Congress, including Richard Gephardt, a Missouri Democrat and the former House majority leader, to lobby for them last year.

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