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ICYMI: IFL on Gainful Employment in the Washington Times

Department of Education Proposal Unfairly Targets For-Profit Education

Published Friday, May 30, 2014

ICYMI - IFL had a new piece on the Washington Times

LANGER: ‘O’ is for Obama’s overregulation

The educationists want to bury for-profit schools under paperwork


It has always the intention of the Obama administration to remake the American economy, and, in doing so, remake American society at large. Nowhere has this been more evident than in its use of executive branch power — through regulations, executive orders and task force operations — to target industries (and the segments of society that they serve) and bring them to heel to do what the administration wants.

President Obama only has a bit more than 2 years left to accomplish his most ambitious goals and much remains to be done. Among sectors targeted as ripe for transformation is education, especially secondary and post-secondary education. Despite their antimonopolistic sloganeering, liberals hate competition, especially when it comes to the struggle between traditional, state-run or nonprofit schools, and any other model of education, be it charter, parochial or for-profit. It is hard to conclude which model offends liberals more, but when it comes to secondary education, those who try to serve educational consumer needs by using a for-profit business model draw special ire. So much so that the Department of Education has, for years now, been trying to stifle the growth of profit-making educational institutions, regardless of their effectiveness.

To liberals, the very word “profit” is taboo, and they’ve been working hard to come up with ways to punish educators who believe the for-profit model might have some real advantages. To get at these institutions, the president’s folks are currently proposing what they call “gainful-employment rules.” Under these regulations, a litmus test would be applied to allow regulators to grade schools on the basis of how much debt their students accrue compared with how much they earn for the first few years after graduation, as well as how many students repay their federal loans. Ideally, those schools that don’t meet an arbitrary debt-to-income ratio or have too many delinquent student borrowers could be shut down.

They’ve tried a version of this approach, but a federal judge literally called their first attempt to overregulate the educational institutions “arbitrary and capricious.” This is their second attempt now, and it is interesting to note that the White House and Education Secretary Arne Duncan have made it clear that traditional public and nonprofit colleges and universities won’t have to meet the new standards. They are being exempted in part because few of them would get a passing grade under these tests, which are clearly directed not at them, but at the competition.

To make matters worse, many of the president’s supporters in the Senate want to go further, much further. Ignoring the administration’s losses on this issue in court, Senate Democrats such as Tom Harkin of Iowa, Richard J. Durbin of Illinois, Christopher Murphy of Connecticut and Brian Schatz of Hawaii are pushing the Department of Education to be even more aggressive in tamping down on for-profit colleges.

Their motives are clearly ideological and based on a hostility to the very concept of for-profit education, but these efforts have potentially serious consequences that should concern us all. The idea that it is possible to judge educational value with such arbitrary tests is problematic at best. Harvard President Drew Faust, no friend of for-profit institutions, maintains that a college graduate’s earnings in a first job are a “poor proxy” for measuring an educational institution’s value, a sentiment echoed by the chancellor of the University of California at Berkeley, Nicholas Dirks.

Moreover, the regulatory-impact analyses done by the Department of Education in this proposal are woefully inadequate. Though understating the cost of regulation is standard operating procedure for regulatory agencies, in this case the cost estimates are almost laughable. Education estimated, for instance, that annual regulatory costs would be $236 million, with a paperwork burden of nearly 7 million hours.

Nearly a decade ago, the National Federation of Independent Business did a seminal study on the cost of federal paperwork, concluding then that federal paperwork costs on average $50 per hour to work through and fill out. Now, even if one assumes that these costs haven’t risen over the years since the study was completed, paperwork costs alone would run $350 million, far above the $236 million that the Department of Education estimates. Putting the paperwork in an hourly context, 7 million hours is the equivalent of 3,500 man years. One man, working 2,000 hours a year for 3,500 years, or 3,500 people working for a solid year, just on Department of Education paperwork.

The inability of many schools to comply with these new regulations will drive many out of business. This may make liberals happy, but it will narrow rather than widen the educational options available to tomorrow’s students. This means that it will cost jobs — both careers for students and jobs for those within these institutions.

The gainful-employment rule is a bad idea. At least it’s bad for those who will lose an educational option and for teachers who might provide them the education they seek. It may be good, however, for public and nonprofit institutions loath to compete with educational innovators as they continue to raise tuition to students while pursuing educational politically correct agendas that too often have little to do with training or educating students for the real world after graduation.

Andrew Langer is president of the Institute for Liberty.

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