Regulating For-Profit Higher Education
C/o PBS
In recent decades, a growing number of students have enrolled in for-profit colleges. In the last ten years, enrollment at for-profit colleges in New York City has increased by two hundred percent. Overwhelming evidence shows that many of these for-profit institutions are little more than unscrupulous debt factories. The federal government and various states have attempted to address the issue in different ways. The Department of Education is currently conducting a negotiated rulemaking that offers some hope.
For-profit schools charge much higher tuition than comparable programs at community colleges, and have a much higher percentage of students who end up defaulting on student loans. The U.S. Senate Committee on Health, Education, Labor, and Pensions issued a report in 2012 that brought the problem into focus. The thorough report found that for-profit colleges charge exorbitant tuition, rely heavily on federal student loans, engage in deceptive marketing practices, and spend less than twenty percent of their revenue on instruction. According to the New York Legal Assistance Group, students at for-profit colleges are more likely to be “foreign-born, of color, and supporting dependents than a student at a non-profit or public school.”
The National Conference of State Legislatures summarized the recent efforts of some state governments to more effectively regulate these institutions. Two of the more promising laws emerged from Maryland and California. Maryland has prohibited the payment of incentives and commissions to recruiters, and has begun to phase out the use of state student aid at for-profit colleges. California has tied state funding to graduation and student loan default rates. Nearly eighty percent of for-profit colleges in California do not meet the modest graduation and default rate standards that the state has recently adopted.
The Obama Administration has sought to regulate for-profit schools through the Department of Education. The Higher Education Act makes reference to “gainful employment.” The Department of Education, through the rule making process, attempted to define “gainful employment” in a way that would tie federal funds for certain vocational programs to things like loan repayment rates. Judge Contreras of the U.S. District Court for the District of Columbia effectively struck down the “gainful employment” regulations in 2012, holding that a proposed loan repayment threshold was arbitrary.
The Administration hasn’t given up. The Department of Education is currently in the process of a negotiated rulemaking on the gainful employment issue. The negotiated rulemaking committee includes individuals who have been highly critical of for-profit colleges, including Margaret Reiter, formerly of the Consumer Law Section of California State Attorney General’s Office, and Eileen Connor of the New York Legal Assistance Group. The committee also includes industry representatives, which may mean that a consensus is unlikely. According to Ben Miller of the New America Foundation, the draft of the new rule is, in some ways, even “tougher” than the one that was struck down by the D.C. Circuit Court. The new standards would be based on two debt-to-earnings ratios. The standards articulated in the draft of the new rule no longer include a debt repayment benchmark, which had been the main reason the previous rule did not survive judicial review.
Hopefully the Department of Education will promulgate regulations that provide meaningful relief to students who would otherwise be ripped off by for-profit colleges. The for-profit schools are the poster-child for a much broader problem. The cost of higher education has skyrocketed, student loan debt has risen considerably, and technology is beginning to make the economy so “efficient” that human beings are becoming obsolete. President Obama has proposed a college rating system that would measure affordability and promote accountability. This is a good idea.
Imagine, for the sake of argument, a hypothetical, ostensibly not-for-profit law school. Imagine that this school charges nearly $60,000 dollars a year for the same education that cost less than $25,000 a year in 1999, when the job market was significantly more robust. Would this really be any less reprehensible than a for-profit college? It wasn’t enough for the baby boomers to declare that greed is good, embrace neoliberalism, destroy the social safety net, create new technology that displaces what was left of the middle class, and essentially turn the greatest country in the world into a vast multilevel marketing scam. They also had to find new and exciting ways to profit off of the misery that they have wrought. They had to build private prisons. And they had to drive up the cost of higher education. After all, what is a lifetime of heavy student loan debt when the only viable alternatives are low wage jobs with no benefits and little opportunity for advancement? What is the price of false hope in a post-industrial wasteland?
Young people are being robbed by the higher education industry. Some of the most vulnerable members of Generation Y are being robbed by particularly obnoxious for-profit institutions. President Obama, Senator Harkin, and the Department of Education all deserve credit where credit is due. But more needs to be done. If it were up to me, accreditation would be brought under the auspices of the Department of Education, and it would be contingent on job placement and affordability.