Some interesting developments related to the Administration's gainful employment proposal.
There's a good discussion over at the National Journal's Education Expert's blog about the issue. My response ishere (also below).
I've been struck by the 80,000 comments this proposal generated. It is the most comments generated for any Department of Education regulation. And it is exceedingly high when compared to other agencies too. For example, DOL's proposed FMLA changes generated 20,000 comments back in 2008 and the Federal Reserve's 2008 proposed credit card reforms generated 56,000 comments. More recently the Administration's proposed Meaningful Use standards for electronic medical records generated only 2,500 comments. So the volume by itself is significant.
And the concerns are coming from an odd, bipartisan mix: Democrats form the Congressional Black Caucus,Republicans, the U.S. Chamber of Commerce, a former Brigadier General, just to name a few. Lanny Davis, a former Special Counsel to President Bill Clinton, raised questions about the proposal over at the Huffington Post:
Suppose that a conservative Republican Administration, in the middle of high unemployment and an economic slowdown, proposed new regulations that would most hurt lower income people and minority groups and the for-profit colleges and universities that serve them? Can you imagine the cries of outrage from liberal critics, condemning "hard-hearted" Republicans targeting the most vulnerable young people in our society? ...
If any regulation is necessary, then Mr. Duncan owes it to the most vulnerable students who will be disproportionately hurt by the current version to use a scalpel, not a hatchet, and to address the issue of excessive student debt at all higher education institutions - not just at for-profits, but at non-profits and public universities as well.
All of the concerns raised by these comments and individuals might explain why the Administration is considering a delay of the regulation. Secretary Duncan hinted at this yesterday but we've heard from some Congressional contacts that a delay could be announced as early as this evening.
Regulation Should Be Delayed
At a time when the Obama Administration is searching for additional stimulus ideas in response to a struggling economic recovery, it is ironic that the Administration would consider advancing a proposal that will only contribute more economic uncertainty and limit important job training efforts moving forward.
Career colleges play an important role in our diverse system of higher education. They offer flexible course schedules and use online technologies to meet the unique needs of working adults, single parents, and other non-traditional students many of whom have been hit the hardest by the recession.
The proposed gainful employment regulation risks disrupting career opportunities for millions of these Americans, many of whom are minorities. It also undercuts the President’s goal of leading the world in college graduates by 2020. Here are a few of the flaws with this proposal:
-
Only Targets One Segment of the Higher Education System. Protecting students and taxpayers from low-quality programs and unwieldy debt burdens should be a priority, but these are issues we face across the whole system of higher education. Yet, the Administration has decided to only target the career colleges sector with a series of tests that many public institutions could not meet. For example, Harvard’s Medical School would fail to meet the loan repayment standard given their current repayment rate is 24%. And it is not just career college students who may struggle with their loans. At CNBC’s Town Hall meeting with the President held earlier this week, a law school student expressed his frustrations with managing his student loan debt, mortgages, and having a family.
-
Penalizes Schools for Broader Economic Trends: Michael Mandel pointed out that college debt has become more burdensome for students because of flattening wages. While college costs have risen faster than the rate of inflation, the real earnings of college graduates – regardless of the institution they attended - have gone down since 2000, particularly during the recession. The proposed gainful employment equation doesn’t reflect this and instead penalizes institutions for economic trends outside their control.
-
May Decrease Low-income and Minority Student Access:Instead of increasing low-income and minority student access to higher education, the proposed rules will limit capacity and opportunity. The new rules could also create the perverse incentive for institutions to discriminate against lower income students or anyone who might be a credit risk. This would be a bitter pill to swallow since many of these same individuals probably have the most to gain.
-
Insufficient Analysis: The proposed regulation would introduce far-reaching changes with repercussions for both students and employers but the Department lacks sufficient data to assess the full impact of this complicated and confusing regulation on the economy, students, and the broader system of higher education. There also remain unanswered questions about how public institutions could absorb so many displaced students at a time of declining public funding.
-
Targeting the Wrong Problem at the Wrong Time. The Administration’s concern for unwieldy debt is also laudable, but the focus of such effort should be on housing. As the Federal Reserve Bank of New York's report on household debt and credit shows, the major debt challenges are not student loans, but rather mortgages which account for 74% of all household debt. More than 24% of all residential mortgages are in negative equity – meaning they owe more than their house is worth – and more than eight million home loans are in delinquency, default or foreclosure. This is not only slowing the broader economic recovery but it also contributes to lower repayment rates on other forms of debt, such as student loans, especially as individuals shift more of their income to mortgage payments to prevent foreclosure. If helping individuals manage unwieldy debt is a concern, the Administration should focus their efforts here, especially after so many have acknowledged that the HAMP program has failed to provide any meaningful assistance.
For all these reasons, it is not surprising that the proposal has attracted broad, bipartisan opposition ranging from students, to brigadier generals, to the Rev. Jesse Jackson. More than 80 members of Congress, including members of the Congressional Black and Hispanic Caucuses, have expressed concerns. The U.S. Chamber of Commerce argued that the “Administration is attempting to regulate America into an economic recovery and causing tremendous uncertainty in yet another sector of the economy.” Local chambers in innovation centers such as Silicon Valley and Redmond, Washington have expressed concerns that the regulation could hurt our nation’s global competitiveness. And more than 80,000 individual comments were filed, the most in the Department of Education’s history.
The Administration should delay enacting this regulation. At minimum, more time should be given until there is better data upon which to craft a proposal and assess its full effects, especially because of the number of aspiring students and job seekers that would be impacted during very challenging economic times. The Administration should also look for ways to encourage more private sector investment in our education system, not less, particularly in developing the job training programs needed to keep our nation’s innovation edge. And any discussion of quality must include all segments of the system, not just the career colleges.
(Full disclosure, we work with a number of groups involved in both for-profit higher education as well as community colleges and public institutions of higher education. We also work with investors who have been tracking higher education regulations).
