MODANY: Ungainful regulations

OPINION:

Earlier this summer, the Department of Education proposed regulations that raise serious issues for all of higher education. At stake is the ability of students to choose the schools they want to attend, the role the federal government should have in those choices and how the federal government should measure the quality of postsecondary education programs.

The proposed regulations address programs that prepare students for “gainful employment” and would restrict student access to federal student aid based on debt-to-income ratios and a loan-repayment rate of students who participate in those programs. The calculation of the ratios and rate are complex. For example, the loan-repayment rate excludes students who are repaying loans under an agreed-upon repayment plan.

The department’s proposed regulations would effectively deny access to higher education to many people underserved by “traditional” schools, particularly low-income, minority and female students and those who rely on the hands-on and flexible approaches of private-sector institutions. It is well-documented that these “nontraditional” students are, because of their economic circumstances, less likely to repay their loans and more likely to have high debt-to-income ratios, thereby placing at significant risk any institution that decides to enroll them.

This regulatory approach runs counter to the need-blind system of higher education in the private sector that works to ensure that even students who presently lack financial means are not denied the opportunity for a postsecondary education. It is also inconsistent with President Obama’s initiative for the United States to once again have the highest percentage of college graduates in the world by 2020, which will be impossible to fulfill without a healthy and productive higher education for-profit sector.

The formulas the department has proposed to assess schools’ compliance with the “gainful employment” requirement are not supported by any reasoned foundation. The loan-repayment test selects arbitrary percentages, is based on nonrepresentative data and appears to suffer from calculation errors. The debt-to-income ratios also select arbitrary percentages, rely on incomplete income data and fail to consider long-term educational benefits. Neither measure adequately accounts for the effects on the metrics of factors beyond schools’ control, such as the impact of macroeconomic conditions and student life choices.

Additionally, the department’s proposed regulations are very clearly the result of a rushed process, as they are grounded in incomplete and likely irrelevant data.

Although the department has stated that it is aware of these problems, it inexplicably has decided to move forward instead of waiting for more complete data to become available. These gaps in information and data leave institutions guessing about the answers to fundamental questions regarding the proposal’s methodology and its ultimate impact on institutions and students. Indeed, even at this late date, as schools expend resources commenting on the proposal and attempting to alter operational systems to come into compliance with the proposal, it still is not clear that the department will be able to compile and process accurately, or even access, all of the new data that implementation of the proposed rule will require. There simply is no rational basis for the department to adopt a regulatory scheme with these numerous deficiencies.

Private-sector institutions should not have to deny access to students who desire to attend their programs simply because those students need to use federal student aid to finance their education. The essence of the federal student aid programs is student empowerment - providing students with the resources needed to pay for the education they believe will yield the best return on their investment of time, effort and money. Indeed, one of the fundamental premises of the federal student aid programs is that nontraditional students, such as single parents and working adults, merit an equal opportunity at an education notwithstanding their financial circumstances. This notion of individual choice and autonomy over one’s career is at the core of our nation’s system of higher education.

Accordingly, we urge the department to gather more complete and accurate information, engage in further dialogue with interested stakeholders and then consider anew what regulatory modifications may be necessary to build upon the virtues of private-sector education and the students it serves.

But the administration should withdraw the current punitive and “ungainful” proposed regulations and start over with the goal of promoting student choice, leaving institutional governance to schools and private-sector accrediting commissions and avoiding the unintended consequence of encouraging institutions to abandon minority and financially needy students.

Kevin Modany is chairman of ITT Educational Services Inc.