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Obama chooses wrong path to reform for-profit colleges

Corinthian Colleges, a major for-profit chain, is closing campuses that operated under the name of Everest Institute.AP/file

The US Department of Education wants to improve the chances that students at for-profit colleges come away with a reasonable likelihood of “gainful employment in a recognized occupation.” But the department’s proposed regulatory changes that would strip federal student loan aid from millions of students are more likely to invite lawsuits than to prompt serious changes in how people with limited access to mainstream colleges and universities prepare for careers.

The implosion of Corinthian Colleges, a major for-profit chain that recently announced plans to sell or shutter more than 100 schools, highlights a need for careful policing of this sector by federal education officials. But tougher regulations alone are a blunt tool for rooting out abuses in for-profit education, especially if some rules are poorly calibrated. Instead, the Education Department needs to set reasonable standards for all schools that accept federal student loan aid, while also zeroing in on the activities of unscrupulous or troubled operations — as it has with Corinthian. The chain is effectively shutting down — under an agreement with the Education Department — because the agency had watched it carefully, demanded detailed records on job placement and other measures of performance, and then suspended federal money when key information wasn't forthcoming.


That's not, however, an argument for treating the entire for-profit education industry like pariahs. For-profits account for 20 percent of the associate's degrees granted in the United States, more than double the rate of 20 years ago. The cost to attend these schools is much higher than tuition and fees at a public community colleges. But their career-specific certificate programs, convenient locations, and flexible schedules are still a big draw, especially for working parents and nontraditional students in low-income areas. If the new regulations come to pass, about one-fifth of the available programs could be shelved, and as many as 7.5 million students shut out over the next decade.

The worst of the for-profit colleges misrepresent their job placement numbers and engage in other deceptive business practices. But the Obama administration's proposed rules don't precisely target such behavior. The most ill-conceived measure would eliminate federal student loans if the estimated annual loan payment of a typical graduate exceeds 8 percent of a student's total earnings. It's an arbitrary number. And it's not just the trade association of the for-profit colleges that is crying foul. Independent economists call into question the rationality of a regulation that doesn't account for gains in earnings or changes in economic conditions in a student's life that have nothing to do with the quality of course offerings.


It's harder to argue with the Department of Education's plan to strip student aid from for-profit colleges where student loan default rates are above 30 percent. Yet plenty of public colleges wouldn't look especially impressive on a student loan default index either. And the Obama administration isn't rattling any swords at those institutions.

There should be a better way to get at the problem of for-profit colleges that burden students with brutal amounts of debt and virtually worthless degrees. Requiring for-profit colleges to spend a minimum percentage of their operating budgets on academic programs would be one. Holding them to the same accreditation standards as other institutions of higher education would be another. Meanwhile, state attorneys general can do plenty now to thwart shady for-profits at the local level. Last fall, for example, Attorney General Martha Coakley ordered a Brockton-based, for-profit school to reimburse students $425,000 and stop misrepresenting job placement numbers in its medical field training programs.

As Corinthian showed, there are plenty of problem operators among for-profit colleges. But removing them shouldn't require a clear-cutting operation by the Obama administration.