The U.S. Department of Education is pressing forward with new regulations aimed at curtailing the growth of private, for-profit institutions of higher learning.
The most controversial of these regulations include new rules for how colleges and universities are accredited, a more rigid definition of a “credit hour,” and “gainful employment” measures to force colleges to account for job placements of their graduates.
The Obama administration began the push for the new rules last year, citing a Government Accountability Office report that concluded, “occupation-specific training programs that lacked a general education component made graduates of for-profit institutions less versatile and limited their opportunities for employment outside their field.”
Administration officials used the GAO study as the rationale for the “gainful employment” rules, which would establish whether for-profit institutions are eligible for federal Title IV financial aid funding based on graduates’ ability to repay student loans. The new rules have won support from Sen. Tom Harkin (D-IA), chairman of the Senate Health, Education, Labor, and Pensions Committee.
Matt Denhart, administrative director and research associate at the Center for College Affordability and Productivity, notes the proposed regulations would disproportionately affect the for-profit sector.
“The gainful employment rules would dictate that in order for a for-profit or vocational program to remain fully eligible for Title IV Federal Financial Aid participation—nearly essential for any institution—the program must maintain a 45 percent student repayment rate on federal loans and have students achieve a median loan-to-earnings ratio under 20 percent of discretionary income or less than 8 percent of total income,” Denhart explained.
Trouble is, Denhart says, traditional nonprofit institutions would be exempt from the rules, “despite the fact that an extraordinarily large number of them fail to graduate students at all, and certainly do not graduate them in a manner fit to find ‘gainful employment’.”
Denhart notes the Education Department rules would require all institutions of higher learning to receive state authorization. Worse, he says, the rules could cripple distance-learning programs.
“The administration plans to standardize the definition of a credit hour based on an archaic seat-time methodology that is not suitable to a higher education industry that increasingly does not even use traditional classrooms,” he said. “In the end, it’s the students who lose.”
GAO Report Scrutinized
As Education Department and members of Congress have debated the proposed regulations, the GAO has come under scrutiny for allegedly misleading Congress.
The GAO announced in November its August 2010 report detailing findings from an undercover investigation of for-profit colleges. Sixteen of the report’s 28 findings would have to be revised, the agency said, because of inaccuracies or misleading statements.
The government watchdog’s admission prompted six lawmakers—Rep. Darrell Issa (R-CA), Rep. John Kline (R-MN), Rep. Alcee Hastings (D-FL), Rep. Carolyn McCarthy (D-NY), Rep. Brett Guthrie (R-KY) and Rep. Glenn Thompson (R-PA)—to send a letter to U.S. Comptroller General Gene Dodaro on December 22, 2010 asking for a formal clarification to the report.
Frederick Hess, resident scholar and director of education policy studies at the American Enterprise Institute, notes all 16 of the errors “run in the same direction”—against for-profit institutions. Hess said the odds of that happening by chance were one in 65,536.
“Given the concerns that have surfaced, observers ought to treat the findings with appropriate skepticism. Given how politicized the issue has become, and how hard Sen. Harkin and the administration have been pushing, I have to wonder about the number, severity, and consistent direction of the errors,” Hess noted.
For-Profits in ‘False Light’
Harkin cited the report as recently as Dec. 14—more than a month after the GAO admitted the findings were in error.
“It is very concerning that the GAO would issue testimony and a report full of misleading information that was all, apparently, intended to cast for-profit institutions in the least flattering light,” said Neal McCluskey, associate director of the Center for Educational Freedom at the Cato Institute.
“Indeed, this is even more alarming than the overheated, unbalanced attack on for-profit schools by people like Harkin,” McCluskey added. “The GAO is supposed to be an honest broker. If it turns out that the GAO is as politically twisted as the revisions in its report suggest, then Washington will have almost no credibility left.”
‘Administrative Bloat’ Cited
And while the GAO report has raised questions about the intent of the for-profit examination, two prominent analysts note the traditional higher education sector suffers from many of the same problems and deserves equal scrutiny. As the Obama administration works to rein in costs at for-profit universities, problems such as “administrative bloat” plague both sectors.
A 2010 report by Jay P. Greene at the University of Arkansas noted that over the past 14 years, administrative positions at top U.S. universities grew 39 percent, while teaching and research positions grew just 18 percent. Moreover, Greene notes administrative spending per student has increased 61 percent over that period, compared to a 39 percent spending increase on instruction.
Similarly, Ohio University economist and Heartland Institute policy advisor Richard Vedder reports most students graduating from traditional higher education institutions would not be considered “gainfully employed” by the Department of Education’s own definition.
Vedder found 60 percent of 20 million college graduates between 1992 and 2008 are in jobs that do not require any college education.
Lindsey M. Burke ([email protected]) is an education policy analyst at the Heritage Foundation.