NCPA - National Center for Policy Analysis

New Department of Education Rule Limits Student Choice

December 1, 2014

Because a number of students attending for-profit, vocational training programs have found themselves in debt and without a job, the Department of Education has released a new rule: schools whose students are failing to find jobs will become ineligible for federal aid. Unfortunately, writes George Leef, director of research for the Pope Center for Higher Education Policy, the rule will do nothing to help students.

For-profit schools teach students the skills they would need in a variety of careers. But because the job market has been poor as of late, many of these students have struggled to find employment. While the Education Department is targeting their colleges as the source of these problems, Leef says the real culprit is the Obama job market.

The Department of Education's new "gainful employment" rule will compare graduates' loan payments to their earnings; if their average loan payments are more than 12 percent of their annual earnings, a school is deemed to be failing. If, after two years, the school is unable to bring its debt-earnings ratio down, the federal government will withdraw federal student aid from the program.

Leef says the rule is misguided: it merely assumes that the school must be the culprit behind students' failure to succeed in the job market. The rule will only limit students' options, says Leef. Moreover, students whose schools are closed down will merely turn to other for-profit schools for training; when those students fail to find jobs, those schools will also see their debt-earnings ratio rise. He says the real problem is not with the schools but with the labor market, which has fewer offerings for young people and jobs that are often part-time rather than full-time.

Source: George Leef, "Education Department's 'Gainful Employment' Rule: Futile Tinkering That Misses Root Problems," Forbes.com, November 21, 2014. 

 

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