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Rick Hess Straight Up

Education policy maven Rick Hess of the American Enterprise Institute think tank offers straight talk on matters of policy, politics, research, and reform.

Money & Finance Opinion

ED’s “Gainful Employment” Scheme Takes a Hit

By Rick Hess — February 22, 2011 3 min read

Aww, gee. The Obama administration’s effort to back the Harkin-GAO witch hunt of for-profit colleges seems to have hit a wall. On Friday, the U.S. House voted 289-136 to block the Department of Education’s plan to impose “gainful employment” regulations on trade schools and for-profit colleges. In addition to the support of all but four Republicans, the proposal also drew the backing of 58 House Democrats--including Minority Leader Nancy Pelosi. The proposal drew the ire of the Congressional Black Caucus, which voiced concerns that it would stifle opportunities for nontraditional students. (Correction: the passage should have read, “The proposal drew the ire of some members of the Congressional Black Caucus, who voiced their concerns that it would stifle opportunities for nontraditional students.” Sorry for any confusion.)

The administration has insisted that its ham-handed attempt to selectively regulate the eligibility of students at for-profit colleges for federal aid based on the earnings of students was needed to protect students from sleazy operators. And, to be fair, there are certainly more than a few proprietary colleges that fit the bill. But there are two huge problems in the administration’s game plan.

First are the staggering technical challenges of determining what the “right” earnings ratio ought to be, and the insanely complex and problematic assumptions needed to distinguish bad actors from good. You’d think a President who has noted the crude and problematic labeling imposed by NCLB in K-12 would have urged his Ed Department to tread cautiously here. Democratic Rep. Edolphus Towns nailed it, saying, “If this rule is implemented, it will apply an unnecessary broad-brush approach to a complicated will effectively close high-quality programs while leaving programs of questionable value open.”

Second, let’s remember that for-profits, honorable and sleazy alike, are largely doing what the feds have encouraged them to do for the past few decades. We wanted to expand post-secondary education and give nontraditional students more opportunities to acquire credentials and skills. The feds have been making loans and grants available pretty indiscriminately, so that students can attend for-profits and non-profits alike. However, publics and non-profits, due to inertia, political constraints, comfortable routines, and the reliance on large state subsidies, have done a poor job of expanding their capacity or making their programs more accommodating to the logistical and scheduling needs of nontraditional students. For-profits have responded, fueled by a self-interested desire to grow market share and profitability. As a result, they have filled that gap, growing like wildfire while modifying calendars, placing campuses in convenient locales, and making extensive use of online tools.

Are there problems with some of this? Of course. After all, for-profits seeking market share and profits also have incentives to cut corners and accept as many students as they can. But that’s what the feds have asked them to do.

Federal policy has been to encourage post-secondary enrollment; not to encourage access institutions to decide whether or not applicants will benefit from enrolling or are likely to complete their degree. If that’s the new standard--if the Obama administration wants access institutions and trade schools to turn away some aspiring students, who will be attending with the assistance of federal grants or loans, because they don’t think they’ll complete or that they’re unlikely to benefit from the degree--then we should weigh and debate that course of action.

The answer is not to lash out at for-profits that have been responding to federal incentives and operating in accord with federal rules. It’s not to change the rules for some institutions while giving others a free pass. It’s not to covertly encourage institutions to turn away aspiring students even as the President insists that every American ought to attend some college. It is to rethink the incentives and rules, for public and private institutions alike, so that we’re encouraging good actors and addressing the bad ones--whatever their tax status.

It’s not clear what the House vote will ultimately mean, but here’s hoping that the Department of Education, which has not been notable for its humility when it comes to higher education, will seize this opportunity to take a deep breath, take a few steps back, and start down a more constructive path.

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