NCPA - National Center for Policy Analysis

New Rule from the Department of Education Threatens Educational Options

November 10, 2014

The Department of Education has issued new rules that penalize colleges whose students are not finding employment. The Wall Street Journal reports that career-training programs along with 3,400 for-profit colleges are subject to the agency's new "gainful employment" rule, which pulls access to student loans if too many students earn low salaries or find themselves awash in debt.

Why is the Education Department targeting for-profit schools? The agency says that while 11 percent of all students in higher education programs are enrolled in for-profit institutions, students who graduate from for-profit schools are responsible for 44 percent of federal loan defaults. Education Secretary Arne Duncan contends the schools are leaving students with debt, not necessary job training.

Detractors argue the rule is full of unintended consequences and that it will limit the poor's ability to access educational programs. As Vicki Alger, research fellow at the Independent Institute, explained, the students who enroll at these schools tend to be adults -- often military members -- and are more likely to be minorities and the first people in their families to attend college. They choose career schools over traditional colleges for a number of reasons, including that they tend to offer flexible scheduling and degree programs that allow them to continue their careers and take care of their families while completing their educations. According to Alger, for-profit schools and career programs also offer nontraditional students the chance to earn degrees in today's fastest-growing fields, enabling them to gain the skills needed to find a job in the workforce.

The rule also has implications for taxpayers. According to Alger, taxpayers pay about $183 per student in a for-profit college but more than $13,000 per student attending a public college. If for-profit options become unavailable, students will seek out higher-cost public education options.

Source: Josh Mitchell, "For-Profit College Rules Not as Tough as Proposed," Wall Street Journal, October 31, 2014; Vicki E. Alger, "Obama Is Deploying 'Gainful Employment' Regulations To Threaten For-Profit Colleges,", October 6, 2014. 


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