There’s a fight brewing in the world of higher-education over little-known regulations that let the federal government decide where you can go to college. Eighteen states have sued the Department of Education after Secretary Betsy DeVos announced they would be delaying implementation of some parts of the Gainful Employment rule.
Under Gainful Employment regulations, schools can be barred from federal loan programs if their graduates’ student debt-to-income ratio is too high. The idea sounds good in theory. But in practice, these regulations allow the government to pick winners and losers in education.
The Department of Education has been favoring nonprofit and public schools, applying the Gainful Employment rule almost exclusively to for-profit institutions. Ninety-eight percent of the programs the Department of Education said failed to meet the threshold last year were for-profit institutions.
While there are certainly some bad apples, for-profit colleges can be a good option for people trying to jumpstart their career or get a degree. For-profit schools are more likely to offer night and weekend classes or flexible online options that fit with a full-time worker’s schedule.
By targeting for-profit schools and shutting off their access to federal student loans, gainful employment rules shut the door of opportunity for the many people who don’t fit into the traditional four-year college mold.
Occupational licenses add an additional wrinkle to the gainful employment standard. Cosmetology school graduates are much more likely to have bad debt-to-earnings ratios. Most states require aspiring hairdressers, barbers and manicurists to complete months of training at expensive cosmetology schools before they can get government permission to work.
Instead of a binary system that restricts entire student bodies from getting loans, the Department of Education should give schools skin in the game by using a risk-sharing model. Putting schools on the hook for a percentage of students’ loan debts if they default already shows promising signs of success.
American students need an education system that adapts and innovates to meet their needs. Higher education badly needs reform, but the Gainful Employment rule is not the right approach.
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