With lobbying blitz, for-profit colleges diluted new rules

But after a ferocious response that administration officials called one of the most intense they had seen, the Education Department produced a much-weakened final plan that almost certainly will have far less impact as it goes into effect next year. The story of how the for-profit colleges survived the threat of a major federal crackdown offers a case study in Washington power brokering. Rattled by the administration’s tough talk, the colleges spent more than $16 million on an all-star list of prominent figures, particularly Democrats with close ties to the White House, to plot strategy, mend their battered image and plead their case. Anita Dunn, a close friend of President Obama and his former White House communications director, worked with Kaplan University, one of the embattled school networks. Jamie Rubin, a major fund-raising bundler for the president’s re-election campaign, met with administration officials about ATI, a college network based in Dallas, in which Mr. Rubin’s private-equity firm has a stake. A who’s who of Democratic lobbyists — including Richard A. Gephardt, the former House majority leader; John Breaux, the former Louisiana senator; and Tony Podesta, whose brother, John, ran Mr. Obama’s transition team — were hired to buttonhole officials. And politically well-connected investors, including Donald E. Graham, chief executive of the Washington Post Company, which owns Kaplan, and John Sperling, founder of the University of Phoenix and a longtime friend of the House minority leader, Nancy Pelosi, made impassioned appeals. In all, industry advocates met more than two dozen times with White House and Education Department officials, including senior officials like Education Secretary Arne Duncan, records show, even as Mr. Obama has vowed to reduce the “outsize” influence of lobbyists and special interests in Washington. The result was a plan, completed in June, that imposes new regulations on for-profit schools to ensure they adequately train their students for work, but does so on a much less ambitious scale than the administration first intended, relaxing the initial standards for determining which schools would be stripped of federal financing. “The haranguing had zero effect,” said Cass R. Sunstein, the White House official who oversees rule making. Rather, he and other administration officials said they listened to what they viewed as reasonable arguments and decided to narrow the scope of the original plan. But Robert Shireman, a former Education Department official who helped shape that original plan, said the intense politics surrounding the issue played a part in “watering down” the final result. “From early on, the industry was going to friends inside and out of the administration and saying, ‘They’re out to get us,’ and creating the impression that these regulations were unfair or irrational,” said Mr. Shireman, who left the department before the plan was finished. “They decided to raise holy hell,” he said in an interview. Many colleges saw the federal government’s attacks as “Armageddon for the industry,” said Avy Stein, a partner at a private equity fund that owns a network of schools called Education Corporation of America. The industry was on the defensive after a series of federal investigations portrayed it as rife with abuse. They found that recruiters would lure students — often members of minorities, veterans, the homeless and low-income people — with promises of quick degrees and post-graduation jobs but often leave them poorly prepared and burdened with staggering federal loans. In response to the rising concerns, 18 months ago the Obama administration proposed its tough restrictions linking tens of billions of dollars in federal student aid to formulas measuring students’ debt levels and income after graduation. Colleges whose students were not earning enough money to start paying back their loans would be in danger of losing federal aid altogether. The proposal was aimed at ensuring that the for-profit schools were providing “gainful employment” in a wide range of vocational fields they taught, like medical testing, massage therapy, business management and cosmetology. The joke in Washington, however, was that the industry effort to defeat the plan mainly ensured “gainful employment” for the capital’s Democratic lobbyists and political consultants.