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Friday, May 06, 2011

Students, Employers, Career Colleges Getting Shafted by Controversial DOE Regulation

On May 4, after a year of obfuscation, the Department of Education (DoE) released its highly controversial “Gainful Employment” rule to the Office of Management and Budget (OMB) for final review. For many in the business community, the rule is considered both anti-competitive and anti-entrepreneurial to its core. It is a misguided rule that unfairly singles out for-profit colleges.

These career schools stand to be sharply penalized if graduates fail to meet arbitrary debt-to-income ratios. For-profit colleges have grown exponentially over the last decade because they are filling a huge market demand for training our workforce -- teaching specific skills required by the marketplace, meaning employers. The for-profits have moved into this market niche, developed online courses that far outstrip the capacity of their not-for-profit competitors, and are now being made to pay for their success because they have out-performed the "competition."

Along its circuitous route, the "Gainful Employment" rule has drawn fire from many across the political spectrum, but especially from leaders in minority communities. Nearly 40% of students at for-profit colleges and universities are African American and Latinos, and these students will be most at risk for losing their access to federal financial aid under the new rule.

The House, in an uncharacteristic display of bi-partisan unity, voted overwhelming to defund the rule, anticipating its dire consequences for workers and the economy. Why then is DoE rushing to release a rule that will result in a loss of jobs in a successful business sector while potentially killing college AND job options for hundreds of thousands of (especially, minority) students?

Further, why is DoE ramming through a rule that has been riddled with procedural problems? And why have questions about the rule-making process been stonewalled? Good government groups such as CREW have repeatedly called for an SEC investigation into an array of improprieties, among them a discredited Government Accountability Office (GAO) report and highly suspicious collaboration between a group of Wall Street short-sellers and proponents of "Gainful Employment" at the DoE. Senators Burr and Coburn called for an IG investigation into the DoE, which was initiated last week.

Plagued by charges of cover-up and lack of transparency, the DoE has now released the rule to the OMB without making the language public, although there are concerns that key financial analysts have been made privy. Is this any way to run a U.S. regulatory agency?

To be sure, there are many questions that need answers before the rule is finalized. At a minimum, the rule needs to be publicly posted so that affected stakeholders can develop their responses. Secretary Duncan and his agency continue to defy the call for full transparency. This closed-door process must be challenged. It’s no way to do business.

Karen Kerrigan, President & CEO

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