Our Editorial: End attack on for-profit schools
Under President Obama, the for-profit higher education sector was a primary target for federal regulation and oversight, which ultimately pushed several schools out of business. It was too deep for the government to go in determining what’s best for college students.
The execution of the Obama-era “gainful employment” rule and other regulations was heavy-handed, and biased against private and for-profit schools, and now Secretary of Education Betsy DeVos has decided to freeze them. It’s the right decision, and one the Education Department calculates could save taxpayers $14.9 billion over the next decade.
Eighteen states and the District of Columbia have fired back with a lawsuit against DeVos and the department, arguing the action will harm students. The attorneys general are specifically upset about pulling back on the “borrower defense” rule, which was set to take effect July 1 and would have given students who felt they were defrauded by their school greater ability to seek loan forgiveness.
Since the feds are so heavily entrenched in the student loan business, that leaves taxpayers on the hook when students seek to set aside their debt.
DeVos’ position is that at a time when the U.S. needs more education options rather than less, these standards target the very programs preparing students outside normal college demographics for the workforce.
“The two-word term ‘gainful employment’ in the Higher Education Act turned into hundreds of pages of regulation under the Obama administration,” said Elizabeth Hill, press secretary for DeVos, in a statement. “Once fully implemented, the current rules would unfairly and arbitrarily limit students’ ability to pursue certain types of higher education and career training programs.”
That’s been the reality of these regulations. For example, last fall, ITT Technical Institute had to close suddenly — a decision that left Michigan students at five campuses stranded, along with thousands of others across the country.
The government cut off financial aid to the schools, alleging but not proving that ITT misled students on their prospects after graduating and defrauded investors.
The Obama administration defended its rules, claiming the government shouldn’t support schools that marginally improve employment and saddle students with crushing debt taxpayers end up paying. And it’s true that nearly half of all loan defaults come from students attending for-profit schools, while only accounting for about 13 percent of the higher ed population.
“The important thing that researchers have found is that overall access isn’t compromised when for-profit institutions are shut down,” says former Department of Education consultant Jordan Matsudaira. “The students almost completely end up at a nearby community college, with a higher quality education.”
That approach may have some merit, but it went overboard, holding schools accountable for a trend affecting for-profit and nonprofit colleges alike: inflating education costs and stagnating wage growth.
College education costs have risen 63 percent in the last 10 years, says Miranda Marquit with Student Loan Hero, a company helping graduates manage loans and repayment plans. “It’s not surprising people can’t make their payments.”
DeVos promises to review the frozen rules, and possibly replace them with revised versions. A more rational approach is welcome.