The New Rules Don’t Go Far Enough

Osamudia R. James

Osamudia R. James is an associate professor of law at the University of Miami, where she teaches and writes about education law.

Updated April 10, 2012, 11:03 AM

The gainful employment rules are focused on repayment rates and post-graduation income relative to student debt burden. But this singular focus on individual finances is misguided.

For-profit colleges betray the student and the public, which is all the more troubling because these institutions depend on public money.

Higher education bestows benefits on the individual and the public. For the individual, education often precedes meaningful democratic involvement, personal fulfillment and income and career advancement. The societal benefits of a better-educated population include higher tax revenue, reduced spending on social support and an enduring democracy. Regulation of the for-profit higher education sector should contemplate all of these factors.

By civic and economic measures, for-profit higher education outcomes are disappointing. Compared with students of similar socioeconomic and academic profiles at nonprofit institutions, students at for-profit institutions have higher debt burdens, are less likely to graduate, account for disproportionately high numbers of student loan defaults (for which taxpayers are on the hook), reap weaker monetary returns on their education and are less likely to vote or participate in political activities.

These outcomes are most severe among marginalized groups, like veterans, the working poor and minorities, who enroll in for-profit programs in disproportionate numbers, sometimes persuaded to matriculate by recruiters who shame, coerce and lie in an effort to meet enrollment targets. These students, often the products of inadequate secondary educations, consider for-profit institutions because they are unprepared for, and feel out of place at, nonprofit institutions.

How ironic then that for-profit colleges further marginalize these students by encouraging them to borrow more than what is necessary, training them for job markets that will not absorb them after graduation, and failing to prepare them for civic engagement and social prosperity. This betrayal of the student and the public is all the more troubling given the dependence of for-profit institutions on public money: for-profits derive 75 percent of their revenue from public funds, and use 25 percent of all federal student loan dollars to educate only 7 percent of the nation’s post-secondary students.

The real question is not whether for-profit graduates make too little money relative to their debt levels, but whether the profit-maximizing motive encourages institutions of higher education to provide a sub-par education, preying on both students and the public in pursuit of shareholder benefit.

Against this query, the gainful employment rules don’t go far enough. Maybe it's time to stop using public dollars to prop up the for-profit education sector. Public money currently allocated to these institutions would be better spent improving American public education and expanding access to nonprofit post-secondary institutions instead.

Topics: Education, colleges, student loans, students

How to Regulate For-Profit Colleges
