Republicans' Election Victory Is Good News For For-Profit Colleges

Analysts say loss of control of the senate could spell trouble for Obama's efforts to regulate the industry.

The Republicans' sweeping election victory last night is a good sign for for-profit colleges and their investors, according to industry analysts, who said that Republican control of the Senate will likely throw a wrench into the Obama administration's efforts to regulate the industry.

That would most likely come in the form of the reauthorization of the Higher Education Act, which expired in 2013. The Democratic Senate, under Health, Education, Labor and Pensions Committee Chair Tom Harkin, has been pushing a higher education bill that is tough on for-profit colleges, proposing stricter oversight and lowering the share of federal aid money that can make up the revenues of for-profit colleges to 85% from 90%.

A fully Republican Legislature would be more likely to reauthorize a Higher Education Act that is friendly to the for-profit college industry, wrote Jeffrey Silber, of BMO Capital Markets, in a note this morning.

Just last month, the administration released a final version of a series of "gainful employment" regulations that cut off the federal loan money of for-profit college programs where graduates have high levels of debt and low earnings. Those regulations will face greater scrutiny in the Senate and could potentially be defunded by a Republican legislature, wrote Silber, although they would be unlikely to pass Obama's veto.

The retirement this year of Iowa Senator Tom Harkin means that the industry will no longer have to contend with its biggest foe, whose scathing 2012 report on for-profit colleges provided strong momentum for opponents.

And Representative John Kline, known as one of the industry's most vocal advocates and a major recipient of its lobbying dollars, won reelection in his Minnesota district — despite a high-profile attempt by Bill Maher to unseat him, which hinged partially on Kline's support of the industry. Kline will likely continue to chair the House education committee.

Silber noted a potential drawback for the industry could be Republicans' hesitance to increase federal aid money for college students, such as raising the amount of Pell Grants and subsidized loan limits. Federal aid money has traditionally been the lifeblood of the industry, making up the vast majority of for-profit colleges' revenues.

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