Showing posts with label gainful employment rule. Show all posts
Showing posts with label gainful employment rule. Show all posts

Tuesday, November 25, 2014

When It Comes to Student-Loan Crisis, The Department of Education Is a Wizard of Oz Outfit: No Brains, No Courage, and No Heart

As the The Chronicle of Higher Education reported recently, the U.S. Department of Education has relaxed it standards for regulating student loans in ways that benefit certain segments of the higher education industry at the expense of students.

Specifically, DOE spared two or three dozen colleges from the consequences of having high student-loan default rates, it loosened standards for awarding Parent Plus Loans, and it dropped the "cohort-default-rate metric" from DOE's new "gainful employment" rule--a rule that is intended to rein in for-profit colleges that are not producing good student outcomes.

Relaxing standards for PLUS Loans

First, DOE relaxed standards for receiving Parent PLUS loans, loans parents take out to pay for their children's college educations. This may be good for historically black colleges and universities (HBCUs), which  have lobbied DOE to undo changes in DOE eligibility rules for Parent Plus loans because the stricter eligibility rules had hurt enrollment rates at some HBCUs.

But by relaxing its eligibility standards for PLUS loans, DOE may have hurt parents who are struggling to put their children through college. PLUS loans are a dangerous way to finance a college education because parents who sign them are personally liable along with their children for paying back those loans. And parents who take out PLUS loans will find it almost impossible to discharge those loans in bankruptcy even if health problems or a job loss makes it difficult to pay those loans back.

Dropping the "cohort-default rate" 

Likewise, dropping the "cohort-default rate" metric from DOE's new gainful employment rule will be good for HBCUs and the for-profits, both of which tend to have relatively high student-loan default rates. This change will make it easier for them to continue being elibible for participation in the federal student loan program--their life's blood.

Nevertheless, as critics noted, "the revised rule, which only looks at graduates' debt-to-income ratios, will allow 'dropout factories,' to pass simply by limiting the debt of the few students who finish" (Field, 2014). Allowing dropout factories to continue participating in the student loan program cannot be good for the students who are lured into attending them.

Sparing colleges from consequences of high student-loan default rates

Finally, sparing some colleges from the consequences of their high default rates, as DOE did last fall, is good news for the institutions that were spared (somewhere between 20 and 30).  But to allow a handful of high-default-rate colleges to continue receiving federal student-aid money may not be good news for the students who will continue borrowing money to enroll in colleges where a high percentage of students are unable to pay back their student loans.

DOE's approach to student loan crisis: No brains, no courage and no heart

The US. Department of Education: No brains, no courage, and no heart

The Chronicle quoted Maxwell John Love, president of the United States Student Association, as saying that DOE's actions "reinforces concerns the system is rigged in favor of the industry and special interests" (Field, 2014). And of course Love is right.

President Obama, Secretary of Education Arne Duncan, and the Department of Education's senior officials know that the student loan program is out of control.  Their feeble attempts to rein in the for-profits are evidence of that.

But the for-profits will never be brought under control.  They have consistently fought DOE's efforts to regulate them either by lobbying or through litigation. In fact, the Association of Private Sector Colleges and Universities sued DOE again this month, trying to block DOE's latest reiteration of its gainful employment rule (Field, 2014). This is the industry's third lawsuit against DOE that I know about.

In short, the Obama administration is a Wizard of Oz operation when it comes to confronting the student-loan crisis.  Its approach to fixing this massive problem lacks political courage; its regulatory efforts are cumbersome and unimaginative; and--at bottom--Obama and his minions are without genuine sympathy for the millions of people who have been hurt by the federal student loan program, by the for-profit colleges, and by the banking industry that has made millions in profits by offering private student loans

No brains, no courage, and no heart: this is the epitaph of the Obama administration's pathetic efforts to address the student loan catastrophe.

References

Kelly Field. ON College Accountability, Will Education Dept. Blink Again? The Chronicle of Higher Education, November 20, 2014. Accessible at:


Sunday, March 23, 2014

Tardy praise for the Obama Administration's regulations to cut down on abuse in the for-profit college industry

Arne Duncan
I have criticized President Obama and Secretary of Education Arne Duncan for not doing enough to stop the abuse in the for-profit college industry and for failing to pass measures to ease the suffering of millions of stressed-out student-loan debtors.  I have argued for bankruptcy reform so that insolvent student-loan borrowers can discharge their student loans, and I favor a law that would prohibit the federal government from garnishing the Social Security checks of elderly student-loan defaulters. I also favor a crackdown on Dickensian loan-collection practices against student-loan defaulters.

I still favor those things, and I still think the Obama administration has not done enough to help people who have been injured by their participation in the federal student loan program.  But President Obama and Secretary of Education Duncan have tried to rein in the abuses in the for-profit college industry, and they deserve praise for their efforts.

In October 2010, the Obama administration released new regulations--called the program integrity rules--in an effort to stop fraud, misrepresentations, and high-pressure recruiting by for-profit colleges.  The rules prohibited for-profit colleges from paying bonuses to employees based on the number of students they recruited, a practice that encouraged recruiters to sign up students who were unqualified for the programs they borrowed money to enter.  The rules also contained sanctions against institutions that misrepresented their programs or their programs' costs.

In 2011, the Department of Education issued its gainful employment rules--rules designed to close down colleges that did not produce significant numbers of graduates who made enough money to pay off their student loans.

The for-profit industry sued to invalidate these regulations, and they enjoyed quite a bit of success.  A federal court struck down important sections of the program integrity rules, and another federal court essentially gutted the Department of Education's gainful employment rules.

But a few days ago, the Department of Education released new regulations to rein in abuse among the for-profit colleges. These new regulations wee drafted to avoid the legal pitfalls that led the original regulations to be struck down by the courts.

Of course, the for-profits may sue to strike down these new regulations, and they will certainly turn their lobbyist loose to keep the government from effectively stopping abuses in an industry that is ripe with abuse.

But at least President Obama and Secretary of Education are still trying to clean up the for-profit college industry. They face long odds, but they deserve credit for their perseverance.

References

Association of Private Sector Colleges and Universities v. Duncan, 681 F.3d 427 (D.C. Cir. 2012).

Association of Private Sector Colleges and Universities v.Duncan, 870 F. Supp. 2d 133 (D.D.C. 2012).

Chris Kirkham. For-Profit Colleges That Bury Students in Debt Face Second Obama Crackdown. Huffington Post, March 13,  2014. Available at: http://www.huffingtonpost.com/2014/03/13/for-profit-colleges-obama_n_4961163.html