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May 12, 2014

‘Gainful Employment’ Rule Stifles Opportunity


President and CEO, U.S. Chamber of Commerce

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Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce
Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce
Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce

Understanding that education and training can be a big competitive advantage in a tough job market, many laid-off workers and young adults have taken steps to skill up. Widely accessible institutions that equip students with a specific skill or trade--such as online universities, community colleges, and vocational schools--have played an increasingly important role in providing the stepping-stones to do so.  

Despite the opportunities that these schools are putting within reach of aspiring individuals, the administration is considering a misguided federal rule that singles out for-profit institutions and could threaten students' access to education. The so-called gainful employment rule--almost exclusively targeting for-profit institutions--would rate them based on debt-to-income ratios and loan repayment rates for former students. Under the proposal, if the schools don't meet a federally imposed standard (which many nonprofit colleges could not meet if the rule applied to them), they would see their federal student aid slashed.

Students would be hurt the most. Enrollment numbers in private sector educational institutions reflect a growing demand from students who come from low-income backgrounds and underserved communities. By throwing down additional financial obstacles, the federal government could prevent them from pursuing a life-changing opportunity.

The Department of Education admits that without the aid tens of thousands of students could be forced out of programs without immediately enrolling somewhere else. Independent studies project that one in five schools wouldn't meet the standard, and that as many as a third of all students at for-profit institutions would be displaced.

What happens to their job prospects and earning potential then? And where will employers find workers for jobs requiring specific skills? For a nation facing the twin challenges of a skills gap and an income gap, the rule is a pretty dumb idea!

What makes the proposal even more foolish is that it won't actually accomplish what it sets out to do. Proponents of the rule argue that it would help rein in education costs. They may be right on the goal, but they're wrong on the approach. If regulators truly believed that the gainful employment rule would make postsecondary education more affordable, they'd apply it to all institutions.

Rather than an arbitrary rule applied only to private sector colleges that would deny federal aid to lower income students, a better approach would be to encourage greater transparency across the system. That would naturally drive institutions to offer a better value--and it would equip consumers with the necessary facts to make an informed decision based on what they need, not on what the government says they should have.  

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About the Author

Thomas J. Donahue
President and CEO, U.S. Chamber of Commerce

Thomas J. Donohue is president and CEO of the U.S. Chamber of Commerce.

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