Friday before Election Day, the Obama Administration via the Department of Education released a “gainful employment” rule applicable to higher education, which singles out a particular type of learning institution: the for-profit school. The new regulation will prohibit students from being able to receive federal student aid “unless the program can show that their graduates’ annual loan payments do not exceed 20% of discretionary income, or 8% of total earnings.” The Department of Education essentially surmises that for-profit schools do not produce quality programs.
Basically this new rule will throw many for-profit colleges out of business. It’s not the first time a regulation of this kind has been issued, either. A federal court struck down the first attempt put forth by the Administration back in 2012. And yet, this newer version is more stringent — with 7 times as many programs likely to not pass standards/criteria for “gainful employment” now. The estimate is that around 1,400 programs educating 840,000 persons will fail the new magical threshold.
The Administration has stated that the goal of the new rule is to “protect students”, and that the rule is necessary “to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes.” However, the rule is not applicable to public and nonprofit institutions. When pressed for the double standard during a congressional hearing on the topic last spring, Education Secretary Arne Dune said that “development of the college rating systems would address the rest of higher education”. That is a cop-out.
So here we have an Administration interfering with the ability of adults to pursue the educational path that best fits their needs by limiting their choices through the deliberate withholding of financial aid assistance from certain schools or programs that the government deems unfit. The government has chosen to redefine the term “gainful employment” in such a way that many career pathways will now be closed at a myriad of institutions that have previously educated many — especially a large number of poor and/or minority persons. These students quite often lack parental financial assistance anyway, and now removing the option for financial aid adds another barrier to upward mobility.
This ridiculous regulation was opposed in a signed letter by 18 members each of both the Republican and Democrat parties last spring, many of whom are minorities, citing their concerns for its adverse affect on low income students and those from non traditional backgrounds. However, their non-partisan approach fell on deaf ears.
Our country has many options for education — some students thrive a four year public institution; others, a community college or small private school and still others, a for-profit institution. Though Obama has consistently championed college education, this rules changes will make it harder, not easier, for a segment of the population to become a college graduate.
Another troubling aspect is how the rule measures debt. The WSJ points out that, “if the department were merely trying to protect students, then Mr. Obama’s “Pay As You Earn” plan that caps loan payments at 10% of discretionary income would make the rule moot. This is why the rule doesn’t measure graduates’ actual loan payments, but rather the median amount of debt they incur amortized over 15 years for bachelor’s degrees. Many students take up to 25 years to repay their loans.”
And more: “This economic reality is why the Administration is steering students toward loan forgiveness plans like Pay As You Earn. Grads who find non-gainful employment in government or at a nonprofit can get their loans forgiven after 10 years of modest payments. So the White House is encouraging graduates to pursue low-paying jobs in “public service” even as it punishes for-profit colleges whose graduates do precisely that.”
The Administration is once again picking winners and losers, this time in the realm of education. The new rule essentially encourages students to pursue their education — but only at places whose programs and operations are subsidized by taxpayer dollars.