In another prime example of federal overreach, the U.S. Department of Education is set to flood the higher education sector with a new round of regulations that will likely limit access to higher education for millions of Hispanic students. The Department’s attempt to protect students from higher debt and default under the draft “gainful employment regulation” would actually result in the denial of federal aid for many students at for-profit institutions. The rule will revoke access to federal dollars for those college vocational programs that fail to meet the set minimum debt-to-earnings and loan-default rate threshold, and do little to address the increasing cost of higher education and lack of good paying jobs in the economy. This rule would apply to all for-profit college programs and career-focused programs at public and private nonprofit colleges.
Hispanic students are currently overrepresented in the for-profit higher education sector, making up respectively 15 and 25 percent of all students attending 4-year and 2-year private for-profit colleges. With such participation, the rule could potentially be a huge roadblock for millions of Hispanics seeking access to higher education. In fact, a recent analysis commissioned by the Association of Private Sector Colleges and Universities (APSCU) and conducted by Charles River Associates consulting firm (CRA) has calculated that between 21 and 39 percent of Hispanic students are currently in programs that would become impacted under the proposed rule. Additionally, 1.4 million fewer Hispanic students would attend college in the next 10 years if the rule is fully implemented.
It is undeniable that for-profit colleges have been largely successful in adapting their programs to serve lower-income nontraditional students. Hispanics students often need flexible schedules to balance work, family and school, and for-profit colleges have been particularly successful at providing this flexibility. As explained in a recent article published in The Atlantic, most traditional colleges have instead always been designed around the needs of full time upper-middle class students who have limited responsibilities.
While the regulation aims to protect students from high levels of debt, low-paying jobs, and loans default, a noble and certainly desirable outcome, its main flaw lies in the fact that it fails to address the root of any of these issues. The government simply does not have the capacity to adequately define these matters for all of us. What is a gainful employment? What is the threshold for too much student loan debt? What are the “federal aid-worthy” college vocational programs that can best prepare students for high-paying jobs? These are questions better left to each individual to decide. If the government knew how to make smart academic and financial decisions for us, it would not be running a $17.5 trillion national debt.
The government should make sure that taxpayers money is used wisely and generate the best return on investment, which in this case means making sure students use federal aid to graduate from good college programs with a reasonable level of debt and have the skills to find jobs. However, this rule allows the federal government to choose winners and losers over the free market, which will disproportionally impact certain schools offering particular career-focused programs which serve a large share of low-income minority students. Taking this into consideration, how is precluding access to higher education to the neediest students financially responsible? Especially since we know from the latest data that the greatest driving force in income inequality is precisely access to higher education. Also, if the proposed rule truly defended taxpayers from pouring federal money into underperforming college programs, why not expand it to all college programs at all higher education institutions? Why are non-career focused programs at 4-years higher education institutions not regulated under the same rule? Is defaulting on an Ivy League’s college student loan less costly than defaulting on a vocational program student loan?
While it is true that student default loan rates are higher at for-profit colleges, especially among minority students, it is also true that these schools face greater odds in educating this particular student population because it usually lags behind in education attainment. As highlighted in a 2010 article published by the Chronicles of Higher Education, “for-profits exist in large part to fix educational market failures left by traditional institutions, and they profit by serving students that public and private nonprofit institutions too often ignore”. In the light of this reality, the proposed gainful employment just creates more incentives for the traditional higher education sector to keep ignoring the neediest students and instead focus on the financially better-off who are more likely to succeed after graduation. Instead of regulating which college programs get to receive federal aid on the back of minority students, the Department should ask public and private non-profit institutions to step up to the challenge and fid innovate ways to accommodate this demographic. Or better yet, focus on regulating underperforming primary and secondary public schools who each year fail to equip millions of Hispanic students with the skills necessary to enroll in a public 4-years college institutions. Burdening higher education with more rules in order to fix those problems that the public education system has been unable to solve seems like to easy way out.
High levels of student loan debt and loan default rates are a real problem. As a society, we should make sure that students have access to the best information available in order to make responsible financial decisions when choosing to further their education. This information should certainly include what are the prospects of landing a good job after graduating from any college vocational program. But allowing the government dictate rules on what to study, where, and how much our salary should be in proportion to our debt is not a solution. Higher Education is probably the best shot to a financially secure and prosperous existence, however, it is not a guarantee that it will immediately yield a good paying job after graduation. Establishing bureaucratic rules that micromanage the higher education sector and results in government selected winners and losers cannot be the answer to help students create a better future for themselves.