Opinion: New ‘gainful employment’ regulation is weak medicine for a strong ailment

Bottom line?

If students are failed by for-profits, they face life-long, crippling debt.

But if for-profits fail their students, they face the inconvenience of disclosing the truth about their programs, the burden of filing paperwork to voluntarily discontinue them, and the creative angst of rebranding their programs to reset the regulatory clock and maintain the federal subsidies that enrich their investors.

And because 81 percent of for-profit colleges are two-year or less than two-year institutions, the vast majority of their students will already be out of school and into the job market before any sanctions can be levied against the programs that shortchanged their dreams and made off with their cash.

Meanwhile, many of these former students will be shouldering huge debt and holding certificates or diplomas that may or may not lead to gainful employment.

In case you haven’t already noticed who is being protected and who’s getting thrown under the bus, the new regulation also offers for-profit colleges all sorts of lifelines and loopholes for “special” scenarios, both in terms of their annual failure patterns and in the way the standards are tested. Consider the following:

  • Debt: Schools can opt to calculate their students’ debt-to-income ratios using only the cost of a program’s tuition and fees. By not including the costs associated with textbooks, room and board, etc., programs can make it appear as if students have less debt than they actually do.
  • Income: The final regulation determines a program’s debt-to-income ratio on the basis of whichever is higher: the students’ median or mean income. By providing schools with a choice between two sets of data, it is easier for programs to maintain eligibility for federal funding.
  • Surveys and state data: If the Social Security Administration is unable to provide income data for, let’s say, three students in its calculation of a program’s debt-to-income ratio, those specific students won’t be removed from the calculation. Instead, the data for the program’s three students with the highest loan debt will be removed in their place.

Painfully weak, indeed.

In announcing the regulations, U.S. Education Secretary Arne Duncan told The New York Times that “as a country, we need this sector to succeed.”

But shouldn’t the sector be expected to reciprocate by contributing to the country’s success? Or have 20 years of lax regulation and unfettered access to ever-increasing amounts of federal subsidies rendered the for-profit college sector too big to fail? Too powerful to be reined in?  Immune from accountability?