[Vision2020] Closer Scrutiny of For-Profit Schools

[Art Deco]

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August 3, 2012
Closer Scrutiny of For-Profit Schools

The last several weeks have not been particularly restful for the lucrative
for-profit education industry.

A federal judge
upheld<http://www.nytimes.com/2012/07/02/education/judge-strikes-a-for-profit-college-regulation.html>the
Department of Education’s right to regulate unscrupulous for-profit
schools that leave students with big debts and valueless credentials.

A Senate committee released a blistering
report<http://www.harkin.senate.gov/help/forprofitcolleges.cfm>showing
that many of these schools pocket huge profits, even though most
students leave without degrees.

A study<http://www.insidehighered.com/news/2012/07/03/study-finds-wage-disadvantage-those-starting-profits>from
the National Bureau of Economic Research found that people who started
in programs awarding an associate degree — a big slice of the student
population — reaped significant economic rewards with degrees from public
and nonprofit institutions. Those with degrees or certificates from
for-profits did not.

This is all sobering news. The for-profit sector is growing rapidly and now
consumes about one-fourth of all federal education loans and grants. It is
essential that the federal government tighten its rules to make sure that
taxpayers — not to mention the students themselves — get their money’s
worth.

The Obama administration took a stab at this last year by issuing new rules
requiring both for-profit and nonprofit career-training programs to meet
one of three tests to remain eligible for federal student aid. The common
thread to these tests was that schools had to show, in effect, that their
graduates had not been crippled by debt. The rules stipulated that at least
35 percent of graduates must be repaying their loans, or that the typical
graduate’s estimated annual loan payments did not exceed 12 percent of
earnings, or that repayments did not exceed 30 percent of discretionary
income.

Judge Rudolph Contreras said he found no convincing rationale for the 35
percent repayment rate rule, but made clear that the department had a
statutory right to curb predatory schools that exploited students.

In our view, the federal government has more than a right to regulate these
schools: it has a clear obligation to do so. By almost any metric, the
for-profit schools are generally a bad deal for taxpayers — and for the
underprivileged students they often recruit through deceptive means. It is
imperative that Washington do its part by making its rules as strong as
possible.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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