March 22, 2014

Shame: Wall St Journal Compares Rule for Predatory Colleges to Obamacare


I thought it was a matter of time before defenders of America’s predatory for-profit colleges tried to equate President Obama’s effort to regulate those schools with Obamacare. In seeking to block Obama’s “gainful employment” rule, which would penalize career colleges that consistently leave their students worse off than they started, the industry’s arguments have been as misleading as their tactics have been unscrupulous. And now, it’s happened.

This morning, the Wall Street Journal has an editorial entitled “Education’s ObamaCare.” It calls the gainful employment rule “a regulatory assault on some of America’s most innovative and affordable schools,” when in fact the rule, whose latest draft was released for public comment last week, would penalize only  those schools whose combination of low quality and exorbitant prices consistently buried former students in overwhelming debt.

It’s not surprising that advocates for such poorly-performing colleges now want to paint gainful employment with an Obamacare brush, given the appeal to Tea Party voters and others of describing the health reform effort as big government overreach. But whether or not one supports Obamacare, it ought to be clear that there is a fundamental difference. Much of what Obamacare regulates is actual free market activity — private insurance companies, hospitals, doctors, who earn much of their revenue from employers and patients. By contrast, big for-profit colleges obtain around 86 percent of their revenue from federal student grants and loans — from our tax dollars.

The for-profit college sector is not a free market effort; it’s largely a government program. And the question facing the Obama Administration is: Should this government program have rules that permit rampant waste, fraud, and abuse with taxpayer dollars, or should it have rules that motivate recipients of government aid to compete by truly helping students train for careers?

While some for-profit colleges do a good job preparing students at affordable prices, there is overwhelming evidence that many of these schools consistently wreck the financial futures of veterans, single mothers, and others struggling for a better future. These predatory schools use deceptive advertising and recruiting that misleads enrollees about program costs and job placement rates. More than half of the students who sign up, aiming for jobs like medical technician, auto mechanic, or software coder, drop out within about four months. The real cost of tuition and fees can be nearly double that of Harvard. But even the students who graduate often struggle to find jobs beyond the Office Depot shifts they previously held. Last week, the Department of Education reported that 72 percent of the for-profit college programs it analyzed produced graduates who on average earned less than high school dropouts.  Not surprisingly, then, for-profit colleges, with 13 percent of U.S. college students, account for nearly half of all student loan defaults. 

That is exactly why the Obama Administration is taking action.

The Journal, seeking to validate its specious argument that for-profit colleges help low-income students and students of color, cites Rep. Alcee Hastings (D-FL) as a supporter of the industry.  It doesn’t mention that Hastings and the other Democrat who strongly opposes rules for the industry, Rob Andrews (D-NJ), have gotten piles of campaign cash from the industry, Hastings at least $54,500 and Andrews at least $78,547 between 2009 and 2013.  Hastings took donations from, delivered the commencement address at, and allowed a scholarship to be named after him at, Florida’s FastTrain College, raided by the FBI in 2012 and shut down for systematic fraud. Hastings, before serving in Congress, was impeached and removed from a federal judgeship by Congress in 1989 after being acquitted in court of bribery charges; Andrews is retiring as he faces an ethics investigation regarding personal use of campaign funds.

In addition to Andrews and Hastings, the top recipients of for-profit college campaign money include House Speaker John Boehner (R-OH), House education committee chairs John Kline (R-MN) and Virginia Foxx R-NC), and Rep. Vern Buchanan (R-FL), himself the subject of ethics reviews.

The real reason that this predatory industry has so many friends in Washington is that it uses a big chunk of the $30-plus billion it has been raking in annually in taxpayer dollars to buy lobbyists, spinmeisters, and campaign contributions in Washington.  It’s corruption, plain and simple.  There’s no other good explanation for why so many free market, small-government Republicans oppose efforts to hold these companies accountable. Or why a small group of House Democrats oppose protecting hard-working low-income and middle-class Americans from frauds committed by predatory corporations.

Contrary to the Journal‘s suggestion, the gainful employment rule applies to all types of career training programs, whether at public, non-profit, or for-profit colleges.  It’s just that the for-profit colleges are the ones who risk flunking the rule, because they so often put their students at risk. Their argument is like bank robbers complaining that the bank robbery laws only apply to them.

Industry lobbyists are out in full force. At least one market analysis, from the firm William Blair, is predicting that the new gainful employment rule will be “softened or blocked through a combination of lobbying, legal, and legislative challenges.” The Journal itself already ran an op-ed attacking gainful employment authored by former Senator Bob Kerrey (D-NE) and private equity man Jeffrey Leeds, without disclosing that both have financial ties to the industry. The head of powerful U.S. Chamber of Commerce has pledged that his group will “do everything we can” to block the rule.

The latest version of the gainful employment rule is in fact a modest effort to address a shameful abuse of students and taxpayers alike.  Given the scope of the problem, the Administration should make the rule stronger and not, as the Journal urges, throw it away.

UPDATE 3/22/14 11:40 pm: OK, I forgot that the Bob Kerrey-Jeffrey Leeds Wall Street Journal op-ed described above, published last December, already made a false comparison between gainful employment and Obamacare. So hats off to Kerrey and Leeds for pioneering this misleading rhetoric, and thanks to the brilliant advocate who reminded me who came first.

This article also appears on Huffington Post.