The last several weeks have not been particularly restful for the lucrative for-profit education industry.
A federal judge upheld the Department of Education’s right to regulate unscrupulous for-profit schools that leave students with big debts and valueless credentials.
A Senate committee released a blistering report showing that many of these schools pocket huge profits, even though most students leave without degrees.
A study from the National Bureau of Economic Research found that people who started in programs awarding an associate degree — a big slice of the student population — reaped significant economic rewards with degrees from public and nonprofit institutions. Those with degrees or certificates from for-profits did not.
This is all sobering news. The for-profit sector is growing rapidly and now consumes about one-fourth of all federal education loans and grants. It is essential that the federal government tighten its rules to make sure that taxpayers — not to mention the students themselves — get their money’s worth.
The Obama administration took a stab at this last year by issuing new rules requiring both for-profit and nonprofit career-training programs to meet one of three tests to remain eligible for federal student aid. The common thread to these tests was that schools had to show, in effect, that their graduates had not been crippled by debt. The rules stipulated that at least 35 percent of graduates must be repaying their loans, or that the typical graduate’s estimated annual loan payments did not exceed 12 percent of earnings, or that repayments did not exceed 30 percent of discretionary income.
Judge Rudolph Contreras said he found no convincing rationale for the 35 percent repayment rate rule, but made clear that the department had a statutory right to curb predatory schools that exploited students.
In our view, the federal government has more than a right to regulate these schools: it has a clear obligation to do so. By almost any metric, the for-profit schools are generally a bad deal for taxpayers — and for the underprivileged students they often recruit through deceptive means. It is imperative that Washington do its part by making its rules as strong as possible.
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