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Thursday, June 02, 2011

Education Finalizes Controversial Rule: America’s Small Businesses and Its Workforce will be Harmed

After much secrecy and backroom shenanigans, public protest and bipartisan opposition from Congress, the Department of Education (DoE) released its draconian “Gainful Employment” rule today, June 2. The regulation appears aimed at killing career colleges. For many in the business community, the rule is anti-competitive and anti-entrepreneurial. It must be overturned or stopped, and SBE Council hopes the Congress will do just that.

Under the rule issued today, career schools will be heavily penalized if graduates fail to meet arbitrary debt-to-income ratios. Some students will no longer be able to secure federal student aid to attend a program that would give them the skills and credentials to advance their marketability in the workplace.

For-profit colleges have grown exponentially over the last decade because they are filling a significant market demand for training America’s workforce. The for-profits have moved into this niche, developed online courses that 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."

Keep in mind that nearly half of all students at for-profit colleges and universities are African American and Latinos. Thanks to this misguided “Gainful Employment” regulation, many minority students will be put at risk for losing access to institutions that help to enhance their skills in the labor market. “Solving” the student debt crisis by targeting students who face the highest unemployment levels and restricting their access to post-secondary education -- especially during a challenging and competitive economic period -- is irresponsible and shortsighted.

Biased government regulation is never fair or wise. In this instance, it may also be illegal. Certainly a rule that targets a single business sector to the exclusion of the competition is almost certainly suspect. Over the last year, government watchdog groups such as CREW have pointed to the Department’s lack of transparency and its obfuscation. CREW repeatedly called for a Security and Exchange Commission (SEC) investigation into an array of improprieties during the rulemaking process, among them a discredited Government Accountability Office (GAO) report and suspicious collaboration between Wall Street short-sellers and policymakers. Others have raised deep concerns about the DoE’s legal authority to regulate in such a sweeping manner. Indeed, the DoE has broken new ground and set new precedent by regulating career colleges to the extent outlined in “Gainful Employment.”

Congress needs to move immediately to block the rule. The process and circumstances by which the DoE advanced the rule just plain smells, and the burden this intrusive regulation imposes on career colleges, students and our economy is just too great.

Karen Kerrigan, President & CEO

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