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