In a report published this month, the Capital Research Center (CRC), a nonprofit group that monitors the activities of politically active nonprofits, reported that the Open Society Institute, the grant-making arm of left-wing billionaire George Soros’s empire, supported groups advocating tighter regulation of for-profit higher education institutions.
The CRC report by RiShawn Biddle also reports that Steve Eisman, a money manager with Morgan Stanley who made a large sum of money short-selling subprime mortgages, has bet that for-profit colleges will lose federal subsidies. According to Biddle, Eisman has both met with Department of Education rulemakers and testified before Congress against the subsidies.
“On March 17, 2011 the government transparency group Citizens for Responsibility and Ethics in Washington (CREW) filed a Freedom of Information Act request to learn more about how the Education Department had formulated the Gainful Employment rule,” Biddle writes in the June 2011 CRC report. “CREW uncovered emails detailing the all-too-cozy dealings between supporters of the crackdown like Eisman and the Soros-backed think-tanks and the Obama education department.”
The Department of Education recently adopted what it calls the “Gainful Employment” rule, which will cut the amount of federal tuition subsidies (such as Pell grants) available to for-profit colleges if students graduate with high debt-to-income ratios. The rule does not apply to public and not-for-profit private colleges.
The rule was justified in part by a report from the Government Accountability Office that Biddle characterized as “error-riddled.” “The for-profit higher education sector is also taking hits from the Government Accountability Office (GAO), the watchdog arm of Congress,” Biddle noted. “After investigating 15 for-profit colleges, the GAO reported in
August 2010 that all ‘made deceptive or otherwise questionable statements’ and four ‘encouraged fraudulent practices’ such as falsifying data on federal student aid applications,” Biddle noted.
“Three months later, the GAO admitted some errors but still stands by its report.” Biddle, editor of the education reform website dropoutnation.com., notes at least one instance in which GAO investigators did not live up to the agency’s otherwise impeccable research standards.
“For example, GAO inaccurately reported that a Pennsylvania-based forprofit college told an undercover agent not to report a $250,000 inheritance on his fi nancial aid forms,” Biddle pointed out. “It later was revealed that excluding the inheritance was the undercover investigator’s idea.”
“A red-faced GAO was forced to reissue a revised version of its report, but by then the damage was done.” For-profit stocks had taken a hit.
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