What is the Real Value of a College Education?
The U.S. Department of Education (DOE) has issued its finalized “gainful employment” regulations, which will try to give the government and taxpayers some sense of the sector’s efficiency and value of its product. While many advocates for the regulations have criticized the DOE for “caving” to industry pressure, the regulations are a game changer nonetheless: An unprecedented federal effort to gauge the value of educations from our for-profit schools on their graduates, and to punish those failing to make the grade.
I agree with arguments for greater oversight in this area, and am skeptical of the pro-business arguments supporting continued expansion. (Note that this merely represents my thoughts on this issue and not those of my employer, which has no position on the matter.)
Specifically, according to the DOE’s new regulations, for-profit colleges must demonstrate that over a third of their students are paying back their loans, and that their average loan payments do not total more than 30% of discretionary income or 12% of gross income. Colleges that fail to meet this mark three out of four years will lose eligibility for federal funding. The regulations also require for-profit institutions to report debt and repayment data to prospective students and — in the cases of schools that have fallen below their repayment threshold — what they are doing to turn things around.
I am a bit wary of the federal government implying it has better ideas about how to allocate our post-graduate income than we do, but this does not sound so bad when one considers how the for-profit college sector has mushroomed with the increased ease of access to federal aid money. Around 15% of students in for-profits default in their first two years of loan repayment. Overall, this small segment of higher education — despite only making up an eighth of enrollments — is responsible for nearly half of student loan defaults. This sounds like what my economics professors explained to me as “market failure.”
My cautious support of these oversight efforts, however, is not without a few concerns. First, as I have written before, several of the problems we are trying to address exist in the lower reaches of non-profit institutions, which have students of similar demographics (poorer, with many first-generation college students), who also graduate with higher debt burdens. These disadvantaged students are more likely to enter college without a real sense of its long-term costs; they are also far less likely to leave school with a degree. This is part of a much broader national conversation we need to have, and we should think about what the results would look like if we applied the DOE’s metrics across all of higher education. Just ask the increasingly disgruntled graduates of our law schools, where graduates of the lowest quality programs still leave $175,000 in debt.
Second is the fact that public colleges are facing incredible strains, simultaneously forced to deal with ballooning demand and rapidly shrinking funding. This has forced many to significantly increase tuition, reserve more spots for higher-paying out-of-state students, or decrease enrollments and close programs. A strong for-profit sector could fill the gaps this leaves.
These and other concerns aside, I think the regulations have the chance to be a positive step forward in ensuring a modicum of accountability from schools with a history of saddling students with unsustainable debts for credentials that may not be in their best interests.
Now, I want to hear from PolicyMic readers: What do you think of the new regulations? Are they too strong? Not strong enough? How can they be made better? Or should they be tossed?
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