Department of Education’s ‘Gainful Employment’ Rule: An Excessive And Ideologically-Driven Regulation

by Lanny J. Davis – January 9, 2015

Suppose a Republican administration’s Department of Education enforced a regulation that cut off federal student loans only for those students who attend colleges that predominantly serve lower income, minority and working class families. Can you imagine the cries of outrage that would be heard from liberal members of the Congress? Class discrimination? Hard-hearted conservatives targeting the most vulnerable students in our society?

So, how and why did this happen in a progressive Democratic administration—one whose policies I have supported over the last six years? To put it another way, is there a better example of excessive and ideologically-driven regulation by liberal government, fact-free and producing the opposite consequences of what is usually the goal of liberalism: protecting the underserved and providing them greater economic and educational opportunities?

Some factual background

For the last four years, the Administration has targeted students who attend for-profit “career” colleges to be subject to the “gainful employment” regulation. This regulation sets limits on debt-to-income ratios almost entirely for those students who are enrolled in for-profit career college programs. The first version of this regulation, issued about three years ago by the Department of Education, was declared illegal by a federal court. The latest version was published in October of 2014, and has already been challenged in federal and state court for being arbitrary and capricious.

For-profit career college students are primarily from lower-income, minority or working middle-class families and are often the first in their families to pursue higher education. The Department of Education estimates that about 1,400 programs serving 840,000 students—of whom 99 percent attend for profit institutions—would not pass the gainful employment regulation.

How does a purportedly progressive Democratic Department of Education justify this discriminatory treatment of the most vulnerable students in our society? The answer is: By relying on false and misleading data to support the inflammatory headline in its press release describing the gainful employment regulation as necessary to “protect Americans from predatory and poor-performing career colleges.”

Debunking the Education Department’s claims

Start with the false assertion contained within the press release announcing the gainful employment regulation that “72 percent [of career college programs]…produced graduates who on average earned less than high school dropouts.” Glenn Kessler, in his widely respected “Fact Checker” column in the Washington Post, gave this statement “two Pinocchio’s” for being misleading because of flawed statistical methods. Kessler reported that Department of Education officials confirmed that, using these same methods, “graduates of 57% of private institutions—a list that includes the Harvard Dental School—earn less than high school dropouts.” That admission to Kessler, which proves the absurdity of the 72 percent statistic, was not included in the Education Department’s press release.

Second, the Department of Education claims there are abuses in marketing and recruitment at for-profit schools driven by recruiters, supporting the inflammatory “predatory” word in the headlines. It should be self-evident that a minority of bad apples don’t justify targeting the entire barrel. And, there already are stringent Education Department regulations and federal and state consumer protection laws that prohibit such tactics and require transparency to all prospective students.

Third, the Education Department misleadingly asserts that for-profit students have higher tuition costs than public community colleges, which are not covered by the gainful employment regulation. But the opposite is true: When you take into account the substantial taxpayer funds from state and local governments used to reduce the cost of tuition at community colleges, tuition actually costs taxpayers $25,000 more per graduate at public community colleges than at for-profits.

Fourth, community colleges not effectively covered by the gainful employment regulation have graduation rates that are one-third that of for-profits (63 percent vs. 20 percent)—another inconvenient truth that was omitted.

Ideology is trumping the facts

Nor do Department of Education policymakers explain where these 800,000 plus career college students will go, given how over-crowded community colleges and state-subsidized public universities already are—or how taxpayers will afford subsidizing their tuition.

It is clear that behind the flawed statistics of the gainful employment regulation is ideology that views the words “for-profit” as per se evil, inevitably leading to fraud and abuse. I would urge the Education Department to hit the reset button, enforce the consumer protection regulations and laws against any school allowing fraudulent recruitment, and support measures to relieve students of crushing debt burdens instead of bailouts to banks “too big to fail.”

It is time for facts to trump ideology—not the other way around.

Lanny Davis is an attorney, an EVP of Levick Communications, and has represented the for-profit sector in past years and still does today.