Ungainful Regulations; Faulty Plan Will Hinder the Most Needy Borrowers

The Washington Times (Washington, DC), September 7, 2010 | Go to article overview

Ungainful Regulations; Faulty Plan Will Hinder the Most Needy Borrowers


Byline: Kevin Modany, SPECIAL TO THE WASHINGTON TIMES

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. …

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