Vicki E. Alger
Vicki E. Alger, Ph.D., is a research fellow at the Independent Institute in Oakland, California.
The Obama administration claims its latest college crusade will help students. On the contrary, its “gainful employment” regulations amount to a hostile takeover attempt by government of the fastest growing higher education sector in the country that will hurt students, taxpayers, and the economy.Education Secretary Arne Duncan acknowledges that most career colleges make a vital contribution to American global competitiveness. The few that don’t leave students with crushing debt and no degree to show for it; however, that outcome is hardly unique to the private or for-profit sector.
Rather than hold bad actors accountable, both public and for-profit alike, through existing laws, since 2010 Duncan has singled out and tried to use his department to exert more control over the for-profit career college sector, which has swelled from 200,000 students in the late 1980s to 2 million as of 2010.
Back in 2010 the U.S. Department of Education unveiled a set of proposed gainful employment rules requiring private for-profit colleges to meet mandated loan repayment rates and debt-to-earnings levels before their students could qualify for federal student aid.
The final regulations unveiled in 2011 deemed students’ employment “gainful” only if it was in an occupation recognized by the federal government. They further mandated student repayment and debt load ratios that a federal judge struck down the following year for being “arbitrary and capricious.”
Undeterred last year the Obama administration revived its crusade against what Duncan called “predatory” career colleges with proposed mandates that are no less arbitrary or capricious than their predecessors.
Under the new proposed regulations unveiled earlier this year, for students to qualify for federal aid for-profit career colleges must prove the estimated annual loan payments of graduates do not exceed 20 percent of their discretionary earnings, or 8 percent of their total earnings, and the default rate for former students does not exceed 30 percent.
Duncan justified the move insisting that 72 percent of for-profit career colleges graduated students who earned less than high school dropouts. That claim has since been roundly dismissed. And there’s ample reason to doubt other claims by his department.
Department of Education officials estimate that 90 percent of career college students losing federal financial aid because of gainful employment regulations will find suitable alternatives. Actual figures tell a very different story.
Should the Obama administration succeed and gainful employment regulations take effect next year, more than 4 out of 10 students currently enrolled at for-profit career colleges could lose access to federal financial aid, according to research by the Association of Private Sector Colleges and Universities. Over the next decade as many as 7.5 million students could lose access.
And who are these students?
Most for-profit career college students are older adults, including members of the military. They are also far more likely to be from traditionally underrepresented populations, including minorities and first-generation college-goers.
These students seek out private for-profit career schools precisely because the public and non-profit sectors aren’t the right options for them, including not offering the desired degree programs or flexible schedules that help them balance family and career responsibilities.
Forcing these students into schools and programs the Obama administration (and its union allies) prefer won’t help them or taxpayers.
The net taxpayer cost of a private for-profit college student is $183 compared to more than $13,000 per public college student. If private for-profit options aren’t available, many of these students would have to transfer to public colleges at cost taxpayers nationwide an additional $1.7 billion annually. In the long-run gainful employment regulations could cost students and taxpayers even more.
As many as 23 million skilled and educated workers are needed over the next decade, and private for-profit career colleges specialize in offering degree programs in the highest-growth occupational fields.
At a time when 90 million Americans are undereducated, 12 million are unemployed, and family incomes are down, gainful employment regulations are the last thing American students, taxpayers, or our economy needs.