President Obama has put more emphasis than most American presidents on furthering higher education, not surprising given his own involvement in the academy. He has famously called for our nation to regain its position as the leading country in the world in the proportion of young persons with bachelor’s degrees, and has vigorously and largely successfully pushed for increasing Pell Grant aid for lower-income Americans.
Yet by regulatory fiat his Administration has just taken the most viciously anti-poor, anti-first-generation college student move made by this and perhaps any President. The new “gainful employment” rules announced by the Department of Education, while softened from their originally proposed form, are harmful for low-income Americans wanting a college experience.
On the face of it, the rules seem reasonable. Schools whose students have very low levels of vocational achievement risk the loss of access to student loans and grants. The federal government reasonably does not want to throw vast amounts of money at institutions with a dismal track record in terms of improving the economic status of their students.
But there are two huge flaws in the regulations. First, they apply disproportionately to for-profit schools, essentially giving state and private institutions operating on a not-for-profit basis a free pass. It is argued that student loan money goes disproportionately to students at for-profit institutions. My first response to that is: So what? More relevantly and factually, a large majority of student-loan money goes to students at traditional not-for-profit institutions, but the nature of the ownership of the institution should be of no bearing in passing regulations relating to learning or vocational outcomes. Looking at Pell Grants, for example, 75 percent of recipients attend nonprofit schools. But the administration is saying with the new regulations, “let’s look only at the 25 percent attending for-profit schools.”
More bluntly, it is crystal clear to me that this regulation reflects the Obama Administration’s hostility to business and free-market capitalism, and is a deliberate attempt to tilt the balance in American higher education away from schools operating on a commercial market-based model. It is a move governed more by ideology than common sense. At a practical level, it appears the regulation will significantly close down a number of programs and hurt many students pursuing degrees.
Actually, another motive for proceeding with the regulations in the face of bitter bipartisan opposition has been suggested by others that is even less defensible if valid. In an excellent blog on The Hill web site, Kevin P. Chavous opined that “a cloud is forming around the motives of those crafting the gainful employment rules and short sellers who stand to profit if private-sector education stocks tumble.”
And what group of students will be impacted? Wealthy students? White kids from upper-middle-class homes? To the contrary, some 41 percent of the enrollment in the four-year for-profits is made up of Hispanic or black students, compared with 28 percent for all of higher education. The for-profit schools are skewed towards serving the poor and minorities.
The Obama call for greater higher-education participation can be achieved only if groups with low participation are motivated to go to college. Yet the administration is moving to close down schools that have been on the cutting edge of increasing participation amongst these groups. Whereas many traditional schools have not wanted to dirty their hands reaching out to these down market students (just look at the low proportion of Pell recipients at the elite schools), the for-profits have done so.
The six-year graduation rate reported by the federal government is pathetically low at some traditional schools: 32% at the University of Texas at El Paso, 26% at Boise State University, 14% at Chicago State. To be sure, the data are flawed in many regards. Yet PayScale.com reports median earnings of graduates with one to four years experience to be higher at Kaplan University than at several not-for-profit schools, including the University of Maine at Augusta and Daytona State College. Possibly these schools would have trouble meeting the Department of Education regulations, particularly since the PayScale data are biased in that they report information only on graduates, ignoring the vast numbers of dropouts from many schools receiving federal monies.
A case can be made to restrict federal financial aid. I would go even farther—an excellent case can be made to eliminate such aid. An even more compelling argument can be made that we should not be trying to expand higher education enrollments. But if the U.S. government is going to try to expand higher education and distribute aid to students, it should not base restriction of that aid on the ownership structure of the institution. The overt hostility to this industry has been reflected in sharp declines in the price of for-profit company stocks. Higher education no doubt has some bad actors, and some reforms are needed. But if we are going to apply rigid accountability standards, let’s do it uniformly by leveling the playing field.
