Obama’s ‘gainful employment’ regulations make college less attainable for low-income students

Stephen DeMaura President, Americans for Job Security
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President Obama has been quick throughout his five years as president to routinely talk about how students today are graduating with higher debt. In fact, the president himself just paid off all of his student loans in the early 2000s.

That’s why it wasn’t a surprise to hear the president mention student loans in last week’s State of the Union. The president noted:

“We’re shaking up our system of higher education to give parents more information, and colleges more incentives to offer better value, so that no middle-class kid is priced out of a college education. We’re offering millions the opportunity to cap their monthly student loan payments to ten percent of their income, and I want to work with Congress to see how we can help even more Americans who feel trapped by student loan debt.”

First things first, the president’s proposal does not “shake up” higher education. Instead, it does little to address the overall problem plaguing our higher education system: high costs. And those high costs reverberate throughout the economy. The Federal Reserve Bank of New York found that 25-year-olds are less likely to have a car loan if they have student loans, while 30-year-olds with student loans are also less likely to have a home mortgage. In short, student debt is distorting economic decision making, encouraging graduates to be more cautious about their careers and finances.

But despite this growing body of evidence, the president is doing little to change the system of postsecondary education – nothing to modernize the system of accreditation, nothing to enhance the efficiency of higher education delivery, and nothing to make college more affordable.

Instead, President Obama’s Department of Education is proposing regulations that will limit the amount of competition within higher education, which – as any economics student would tell you – will lead to higher, not lower, prices. The “gainful employment” regulations, as they are termed, will limit federal funding if students’ debt-to-income ratio following graduation is above an arbitrary threshold.

The gainful employment regulations are another example of the administration’s government-knows-best philosophy. President Obama’s Department of Education is saying that it should have a say in who goes to school and where they go. And the administration has a clear preference for four-year liberal arts colleges – as the gainful employment regulations only apply to vocational programs.

If these regulations are so impactful, the Department of Education should apply them to all colleges and universities, including four-year liberal arts colleges. Instead, the regulations disproportionately impact “new traditional students,” which encompass students that may not go straight from high school into post-secondary education. These students are adults, perhaps individuals who have been laid off, and tend to be low-income and minority students.

For them, a four-year liberal arts college is often not a viable solution. They are given the chance to thrive in these private or alternative programs. And they will have fewer options for which programs and institutions to attend.

Those factors even have a broad coalition of lawmakers and parties concerned, including some of the most liberal congressmen concerned. Congressman Alcee Hastings (D-FL) and 29 congressmen have criticized the President’s plan, noting that gainful employment regulations would “negatively impact millions of students nationwide.” They are spot on.

Yet other members of the President’s Party are predictably falling into line; liberal California Congressman Mark Takano is hosting a briefing on Capitol Hill Tuesday in support of the regulations. Unsurprisingly, only representatives of liberal special interests are on the speaker list.

Containing college costs is indeed a problem worthy of inclusion in the State of the Union, and providing low-income and minority students with affordable access to education is imperative to improving all Americans’ access to opportunity. Unfortunately, the president’s plan will do neither.