On Tuesday, Senator Mike Enzi (R–WY) took a stand against the Department of Education’s (DOE) assault on the for-profit college sector, walking out of a hearing on the DOE’s new regulations limiting access to higher education.
The new “gainful employment” rule issued by the DOE on June 2 restricts access to student loans for students attending for-profit universities. Enzi noted in a statement released after the hearing:
Many of these affected schools provide important training for those who choose to become mechanics, plumbers and electricians. This rule uses a heavy hand against these schools and makes it more difficult for Americans to access educational opportunities.
Senator Tom Harkin (D–IA), a supporter of the new regulations, wants to see the DOE pursue even more aggressive restrictions on the for-profit sector. Harkin has been orchestrating the fight against for-profit colleges, holding a series of hearings last fall. One hearing last August was based in large part on a rushed GAO report that contained numerous errors, an extremely rare occurrence with the agency.
The new rules prohibit students from receiving federal loans or grants to attend a for-profit college if the college’s average debt-to-earnings ratio exceeds 12 percent of a graduate’s income or 30 percent of discretionary income. Harris Miller, president of the Association of Private Sector Colleges and Universities, said the new regulations are “basically a back-door way of price fixing.”
Even though the final 436-page rule issued by the DOE provided some concessions to the for-profit sector, the new debt-to-earnings restriction means that an estimated 18 percent of for-profit programs will fail to meet the new regulations, and 5 percent could lose eligibility entirely, reports the Chronicle of Higher Education.
And an even more concerning problem has arisen. In order to track the debt-to-earnings ratio of for-profit college graduates, the Social Security Administration will be providing its income data on individual students to the U.S. Department of Education. According to the Manhattan Institute’s Minding the Campus blog:
Most troubling is the involvement of the Social Security Administration [SSA]—and also, indirectly, the Internal Revenue Service, which supplies earnings information to the SSA based on tax returns. After all, the SSA is supposed to be in the business of calculating Social Security benefits, not monitoring compliance with laws that have nothing to do with Social Security. The IRS, in turn, is supposed to be in the business of collecting taxes, including Social Security taxes, not helping the Education Department decide whether the University of Phoenix is in compliance with new gainful employment rules. Both agencies, the IRS in particular, are bound by strict laws forbidding the sharing of data except as explicitly permitted by federal statute, such as the one that allows the SSA to use IRS-supplied tax-return information along with filings by employers to determine benefits. Taxpayers have historically relied on the nearly complete confidentiality of their tax-return information as an incentive to honesty in reporting.
Those who favor the new regulations on the for-profit sector note that the sector can claim just 12 percent of students in higher education overall, yet it accounts for nearly 25 percent of student aid. Half of all loan defaults are from students at for-profit universities. However, these statistics don’t provide an “apples-to-apples” comparison with similar students at traditional universities. Daniel Bennett writes in The New York Times:
While data suggest that default rates are higher among for-profit schools than other sectors, defaults at public community colleges are comparable even though they charge much lower tuition (taxpayer subsidies cover the remaining costs). Both of these sectors serve a challenging student population (low-income and minority), and yet proprietary schools are singled out by the “gainful employment” regulations.
Default rates have risen for all of postsecondary education, as the national cohort default rate increased to 7 percent in 2008 from 4.5 percent in 2003.
For-profits are finding success because they are helping a segment of students that are historically underserved by traditional universities. In order to ensure that students continue to have access to for-profit institutions, Senator Jim DeMint (R–SC) has offered an amendment that would nullify the gainful employment rule by preventing the new regulation from having any force of law.
President Obama says he wants the United States to have the highest percentage of college graduates by the year 2020. The merits of the goal aside, if the President is serious, his Administration should stop the witch hunt against for-profit colleges.
