NCPA - National Center for Policy Analysis

Education Department's "Gainful Employment" Proposed Regulations Gone Awry

October 6, 2010

The Department of Education's proposed "gainful employment" regulations aimed almost exclusively at for-profit private colleges would most hurt lower income people and minority groups, says Lanny J. Davis, former Special Counsel to President Bill Clinton.

So how to explain the paradox that these proposed regulations are being proposed by a progressive Democratic administration and its strongest proponents are liberal members of Congress?

The first explanation is a simple misunderstanding of the facts.

  • For example, liberals supporting these proposed regulations rightly complain about marketing and other abuses.
  • But the fact is, such abuses occur at nonprofits and public institutions as well as at for-profits and, in any event, the gainful employment regulation doesn't even address the issue of these abuses.

Moreover, those who cite the excess "cost" of student loan defaults among the lower income and minority students ignore two inconvenient, indisputable facts, says Davis.

  • Billions of dollars of taxpayer subsidies that go to nonprofits and public colleges are not available to for-profits.
  • And for-profits cost taxpayers substantially less per-student each year than nonprofits and public colleges.

The second explanation is that this is a classic example of overly broad regulations confirming the law of unintended consequences.   How broad?  According to the Department of Education's own data released last month, its proposed "gainful employment" regulations are so poorly crafted that if applied to nonprofits too (which they currently are not), Harvard Medical School and 93 of 100 Historic Black Colleges in the United States would all fail the so-called loan repayment test.

The third explanation appears a classic example of ideology trumping facts: the instinctive negative reaction of many liberals to the word "profit" when associated with providing education.  The fact is, it is precisely the profit motive that causes for-profits to offer more flexible, consumer-responsive schedules and courses, such as night classes, online courses and new curricula that are directly responsive to recent changes in the job market.

Source: Lanny J. Davis, "Education Department's 'Gainful Employment' Proposed Regulations Gone Awry," Huffington Post, September 23, 2010.

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