The Obama administration is facing a torrent of criticism over its new “gainful employment” rule, a sweeping regulation designed to crack down on for-profit colleges, while protecting taxpayer money from being wasted.
The for-profit sector, along with Republicans and some Democrats on Capitol Hill, have slammed the new proposal, arguing it will eliminate higher-education opportunities for many Americans at a time when well-trained workers are needed more than ever.
The Education Department unveiled the new rule Friday. It addresses the most common criticism of for-profit schools — that they run lackluster programs and leave students with worthless degrees while profiting off of taxpayer dollars.
Supporters vehemently dispute that characterization and say the sector is an increasingly vital part of today’s higher education landscape.
“I am deeply disappointed by the department’s suggested approach, which will disproportionately harm nontraditional and lower-income students who have no choice but to rely on student loans in order to pursue a postsecondary education, and need the flexibility career colleges provide,” said Rep. Alcee Hastings, a Florida Democrat.
This is the White House’s second shot at the gainful employment regulation. A version of the proposal released in 2012 largely was struck down by a federal judge and the administration was forced to start from scratch.
The battle between the administration — along with powerful Democrats on Capitol Hill — and for-profit colleges has been playing out for years, but Friday’s rule represents perhaps the most tangible action the White House can take.
The regulations apply to about 8,000 specific schools or programs in institutions across the country.
They require that average graduates from a given program — such as nursing or business — not pay more than 20 percent of their discretionary income toward students loans, or 8 percent of their total annual earnings.
The rules also say that a program’s default rate, or percentage of former students who stop repaying their debts, must not exceed 30 percent.
Right now, about 25 percent of the 8,000 programs covered by the regulations risk falling short of the thresholds and, as a result, being cut off from federal money.
“We want to expand opportunity, but it’s got to be high-quality opportunity,” Education Secretary Arne Duncan told reporters last week. “When that opportunity is leading to massive debt, when that opportunity is leading to massive default rates, that’s not opportunity any of us can be proud of, that’s not fair to people trying to climb the economic ladder. It’s not fair to taxpayers and, frankly, it’s abusive.”
In justifying the rule, the Education Department pointed to the fact that for-profit colleges represent about 13 percent of the total higher education population, but 31 percent of all student loans.
They account for nearly half of all student loan defaults, Mr. Duncan said.
Many for-profit institutions get the vast majority of their tuition dollars from taxpayer-funded loans or grants. Losing access to that money likely would put many for-profits out of business.
But the for-profit sector and its supporters say the reason they rely so heavily on federal aid is because they cater to low-income students. The sector also is a favorite of military veterans, single parents, older Americans and others who fall into the “nontraditional student” category.
For-profit schools offer flexible class schedules and often allow students to take courses online, making them appealing to those with children, full-time jobs or other commitments outside the classroom.
For those students, access to a college education is threatened by the administration’s approach, said Steve Gunderson, a former Republican congressman who now serves as president and CEO of the Association of Private Sector Colleges and Universities.
“The U.S. Department of Education’s actions confirm that they are engaged in a sham … with the sole goal of reaching a predetermined conclusion that will result in eliminating higher education access and opportunity for millions of students based on the type of institution they attend,” Mr. Gunderson said. “The department has never been interested in constructive input or ensuring that student access is protected.”
The regulation is now in a 60-day public comment period, after which it will be finalized.