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“Gainful Employment” Regulations Will Hurt Private Colleges

Ever since John Kenneth Galbraith published The Affluent Society in 1958, American liberals have been striving to build a full-fledged European welfare state in America. President Lyndon Johnson’s Great Society program was inspired by the same ambitions to socially and economically engineer the United States. Inspired in good part by the vision of an ideologically remade America, governments have expanded enormously over the half century that has passed since then. From the federal level all the way down to school boards and town councils, governments have gained new taxation, spending, and regulatory powers in almost every conceivable direction.

Despite this massive growth, there are still areas where government in America has not yet reached European size. One of them has to do with general income security. We should be thankful for that, for reasons I explain in my book Remaking America: Welcome to the Dark Side of the Welfare State. However, liberals keep pushing the ideological idea that every man and woman in America has some kind of inherent right to a certain income. Inspired by such concoctions as government being some kind of employer of last resort, and the basic income guarantee idea, liberals have made significant political and legislative gains in establishing the notion that people have the right to a certain income regardless of their own choices and efforts.

This move away from personal responsibility has accelerated under the Obama Administration. A good example is the regulatory conglomerate known as “Gainful Employment.” In a nutshell, this is an effort by the federal government to dictate to the private sector how much a person “should” make at certain points in his or her career. The implication―obviously not spelled out in the regulations―is that if a person does not make as much as the federal government thinks he or she should make, then some private entity somewhere, other than the person in question, bears responsibility for the insufficient earnings.

On March 14, 2014, the U.S. Department of Education explained how these regulations can be applied:

“The Obama Administration announced today new steps to address growing concerns about burdensome student loan debt by requiring career colleges to do a better job of preparing students for gainful employment—or risk losing access to taxpayer-funded federal student aid. The proposed regulations released by the U.S. Department of Education will help to strengthen students’ options for higher education by giving all career training programs an opportunity to improve, while stopping the flow of federal funding to the lowest-performing ones that fail to do so.”

In order to determine how much a student “should” make after having attended a so-called career college, in 2012 the federal government produced an Excel spreadsheet with more than 7,900 rows of earnings guidelines. The guidelines specify the maximum share of a person’s income that should go to paying back student loans. While this sounds like a misguided but ultimately inconsequential bureaucratic product, in reality it becomes an instrument for dictating the income trajectory for college graduates.

The loans used in the regulations are federal; and since the federal government controls the rates, repayment requirements, and all other financial aspects of the loan, it is easy to use the “Gainful Employment” regulations to establish minimum salaries for people who owe the government on such loans. All the government has to do is, again, to determine the maximum share of a person’s income that can go to paying back loans. If a person pays a larger share, then according to the regulations, she is not making enough money.

But what can the federal government really do if someone does not make what she “should” make? Well, as the quote above indicates, these regulations can be used to go after the educational institutions that a person graduated from. Andrew Quinlan, president of the Center for Freedom and Prosperity, elaborates:

“The Obama administration has consistently sought to eliminate education choices and reduce opportunities, particularly for the poor. The president has repeatedly tried to eliminate funding for the D.C. Opportunity Scholarship Program, despite the fact that the limited school-choice program costs less per pupil than public schools and has seen positive results for poor students. His Justice Department has even misused and misapplied old or irrelevant laws to assault local school-choice programs. Now, the Department of Education is targeting private-sector colleges through so-called ‘Gainful Employment’ regulations. The rules not only punish an entire business model…but by closing one of the best avenues for working class adults to improve their education and increase employability, they also threaten jobs and the economy. The proposed rules would cut off federal loan and financial-aid eligibility for programs that fail to meet certain federal standards, such as graduates with high student-loan debt relative to their earnings in the first few years after graduation. This is a deeply flawed approach for reasons both practical and philosophical.”

Career colleges help millions of Americans advance or reinvent their careers. They are a private-sector invention, responding to a need by others in the private sector, and they operate entirely at the mercy of the free market. If a school provides inadequate education, its graduates make less money than graduates from other schools. Prospective students quickly pick up on such differences and make a free-market, independent choice to avoid low-performing schools.

It seems, however, that this application of the “Gainful Employment” regulations has created a perfect storm of statist intentions: The desire to regulate people’s incomes has merged with a deeply held negativism toward private education.

America has a proud, centuries-old private education tradition. We also have a centuries-old, well-working free-market economy where people can both fail and succeed. The very pursuit of happiness, prosperity and a satisfying career is often as rewarding as reaching the goal. The “Gainful Employment” regulations, and all other regulations aimed at socially and economically engineering our society, rob people of that very reward. Fewer people become productive, independent citizens and more people become dependent on government for their progress through life. The welfare state wins.

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