Obama Shouldn’t Limit Higher Education Choices

The Obama administration has consistently sought to eliminate education choices and reduce opportunities, particular for the poor. The president has repeatedly tried to eliminate funding for the D.C. Opportunity Scholarship Program, despite the fact that the limited school-choice program costs less per pupil than public schools and has seen positive results for poor students. His Justice Department has even misused and misapplied old or irrelevant laws to assault local school-choice programs. Now, the Department of Education is targeting private-sector colleges through so-called “Gainful Employment” regulations. The rules not only punish an entire business model for the wrongdoings of a small few schools, but by closing one of the best avenues for working class adults to improve their education and increase employability, they also threaten jobs and the economy.

The proposed rules would cut off federal loan and financial-aid eligibility for programs that fail to meet certain federal standards, such as graduates with high student-loan debt relative to their earnings in the first few years after graduation. This is a deeply flawed approach for reasons both practical and philosophical.

While there is a strong case to be made for ending or severely reducing government financial support for higher education, allowing government to distort the market by picking winners and losers would be even worse than the current system of heavy subsidies. The “Gainful Employment” regulations amount to a thumb on the scale, which unsurprisingly would benefit government-run institutions at the expense of the private sector.

As a practical matter, the proposed rules are an overreaction to a few bad apples and would undermine other important policy goals. Rather than encouraging the provision of education to under-served markets, the rules do precisely the opposite. They penalize institutions that attract students who start from poor financial positions. In a lengthy comment to Education Secretary Arne Duncan, Donald Graham, chairman of Graham Holdings Company, which owns education provider Kaplan Inc., explains why this misguided approach would reduce the options available to those most in need of opportunities for advancement:

The Department proposes to regulate our sector by three metrics: the debt students incur, their income and the number of student borrowers who default on their loans.

What do those metrics all have in common? They all get better as a college educates FEWER low-income students. The lowest-income students incur the most debt; therefore they will represent the greatest risk to colleges under this regulation. The best way a college can hold down on student debt is: do not admit very low-income students.

As an industry practitioner, Mr. Graham understands the power of incentives. If you reward colleges for attracting fewer low-income students – or punish them for taking on more – then the result will be fewer opportunities for working class Americans to upgrade their educations. Surely that’s not what the Obama administration wants. But it does appear that they find it an acceptable price to destroy private-sector higher education. If that seems hard to believe, consider the words of the regulator who began this crusade.

Former deputy undersecretary of education Robert Shireman, who initiated the Gainful Employment regulations, is currently under investigation for ethics violations and conflicts of interest relating to these effort. He has made clear through public comments that he sees eradicating private-sector colleges as his ultimate goal. In a recent speech delivered at the Center for American Progress, he said he does not believe that a business should own a college. As Mr. Graham notes, this is a troubling attitude for a regulator:

The judgment on whether businesses were fit to own colleges was made by the Congress of the United States in 1965. Mr. Shireman and now his successor regulators seek to substitute his judgment for that of Congress… As neutral an analyst as Mark Kantrowitz says the current regulation might well put the entire sector out of business. Based on his CAP speech, Mr. Shireman would cheer. Our students would not. They think they know where they want to go to college even better than Mr. Shireman and his heirs do.

Despite the ongoing investigation into Mr. Shireman, his successors have continued the assault on for-profit colleges. Nor were they dissuaded when a federal judge struck down previous incarnations of the rule for being “arbitrary.” Certainly, if you believe the goal is to protect students, it is arbitrary to target a narrow subset of institutions that serve only about 20% of all higher education students.

The rule is better understood, however, as an effort to punish an industry by those ideologically opposed to its existence. This makes for-profit colleges just the latest private sector industry besieged by unelected bureaucrats in the Obama administration. Whether it be the war on coal, the stonewalling of the Keystone pipeline, or this new crusade against private sector education, it’s time for ideologues in the Obama administration to stop obstructing progress and innovation simply because it originates in the private sector.

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