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A federal judge is sending the Department of Education back to the drawing board on its effort to crack down on the scammiest, most useless for-profit college career-training programs. Under the Obama administration's gainful employment regulations, in order to maintain eligibility for federal student aid, career training programs must meet at least one of three tests: At least 35 percent of a program's former students must be repaying their loans, or else the program has to have estimated annual loan payments of no more than 30 percent of a former student's discretionary income or 12 percent of total earnings. Nearly 200 programs are currently failing to meet even one of these thresholds—but for the moment at least, they're off the hook:
But Judge Contreras ruled that the 35 percent debt-repayment standard had no basis. "No expert study or industry standard suggested that the rate selected by the department would appropriately measure whether a particular program adequately prepared its students," the opinion said. "Instead, the department simply explained that the chosen rate would identify the worst-performing quarter of programs. Why the bottom quarter? Because failing fewer programs would suggest that the test was not 'meaningful' while failing more would make for too large a 'subset of programs that could potentially lose eligibility.'"
Since it seems the concept that 35 percent of students of a career-training program should be able to pay back their loans doesn't pass legal muster, the administration will have to come up with a replacement regulation; the good news here is that that's possible since the judge only overturned a specific test rather than the entire concept of regulating the for-profit college industry in this fashion. The better news is that the for-profit college industry is a target-rich environment and the government shouldn't have much trouble coming up with a new test, backed by expert study, to rein in programs that put students deeply in debt without equipping them to get jobs that will enable them to pay off that debt.

Originally posted to Daily Kos Labor on Mon Jul 02, 2012 at 01:27 PM PDT.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, Progressive Hippie, and Daily Kos.

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Comment Preferences

  •  Here's an idea... (5+ / 0-)

    Taxpayer-funded student loans may be provided ONLY to those students who are attending a public or non-profit institutions of higher learning.

    Period

    End of Sentence

    •  Nice sentiment, but it wouldn't work. (1+ / 0-)
      Recommended by:
      ManhattanMan

      Non-profit doesn't mean not out to screw people, nor does it mean that board members aren't mobsters and loan sharks in suits.  For profits could simply re-organize into non-profits.

      Many health insurers, for example, are not for profit.  They often still do everything in their power to hose people.

      DOE is going to have to come up with rules.  And judges should stay out of it unless there is a constitutional principle at stake.

      "The attack on the truth by war begins long before war starts and continues long after a war ends." -Julian Assange

      by Pierro Sraffa on Wed Jul 04, 2012 at 07:30:50 PM PDT

      [ Parent ]

      •  There has been a huge proliferation of (1+ / 0-)
        Recommended by:
        NorthCountryNY

        for profit institutions that are out to get money from students at all costs.  While there are not-for-profit health care institutions that still screw people over that is hugely different than non-profit healthcare institutions.  These for-profit schools can't just switch to being non-profits and keep doing what they're doing.  In fact, they would have absolutely no reason to do so and if loan guarantees were restricted to non-profit institutions then most if not all of the education sharks would go out of business or be massively restructured.

        There revolution will not be televised. But it will be blogged, a lot. Probably more so than is necessary.

        by AoT on Wed Jul 04, 2012 at 09:24:50 PM PDT

        [ Parent ]

        •  You miss the point. (0+ / 0-)

          Not allowing for profits to take part would provide incentives for the same people or types of people to organize non-profits instead, either converting existing institutions or creating entirely new ones.

          I'm not saying for profit is good; in fact, I would agree with you that most are scams.  But non profit doesn't mean pure of heart either.

          BTW, some of our most prestigious not for profit universities and colleges are sharks.  They are "non profits" sitting on endowments while tuition rates are raised endlessly.

          "The attack on the truth by war begins long before war starts and continues long after a war ends." -Julian Assange

          by Pierro Sraffa on Wed Jul 04, 2012 at 09:51:16 PM PDT

          [ Parent ]

          •  It doesn't mean pure of heart but it does (0+ / 0-)

            mean that you don't have institutional investors making millions off of the government guarantees.  I'm certainly not going to argue even a little bit that non-profits can be pretty screwed up, but once you put the potential profit in there it becomes a whole new level.

            There revolution will not be televised. But it will be blogged, a lot. Probably more so than is necessary.

            by AoT on Wed Jul 04, 2012 at 10:24:01 PM PDT

            [ Parent ]

  •  The way I understand it, the judge (4+ / 0-)
    Recommended by:
    notrouble, wilderness voice, FG, erush1345

    merely requires to DoE to marshal their facts a bit more - he did not contest their authority to issue such regs.

    I tremble for my country when I reflect that God is just; that his justice cannot sleep forever. ~Thomas Jefferson

    by bobdevo on Mon Jul 02, 2012 at 01:34:28 PM PDT

  •  maybe if we call students "freeloaders"... (1+ / 0-)
    Recommended by:
    wsexson

    it'll solve the problem.

  •  All sounds a bit (1+ / 0-)
    Recommended by:
    wilderness voice

    Activist Judgy to me.
    Those seem like very reasonable tests.

  •  Maybe DoE should look at the ratio (0+ / 0-)

    of expenditures on TV advertising to amounts spent on actual classroom instruction.  Good schools don't have to advertise - students tend to seek them out.

    Private health insurance: a protection racket without the protection.

    by rustypatina on Tue Jul 03, 2012 at 03:59:15 AM PDT

  •  The best way to regulate them is (0+ / 0-)

    to make laws to expand eligibility for government-funded student loan programs, so that banks will have to compete against that (if they want to stay in the student loan business). Public competition will be the key to regulating greed-monsters like banks, private insurers etc., who have always been able to buy lawmakers, judges etc.

  •  Ho hum... another scam. (3+ / 0-)
    Recommended by:
    Jerry J, AoT, David Fetter

    Proprietary 'education' was, is, and will remain silk-suited theft.

    'Schools' are set up to lure as many unsuspecting and unprepared checkbooks as possible; financial leeches are perfectly willing to construct whatever games are necessary for the trap. They work together to build legal flypaper that starts, as always, with syrupy promises and taking up-front money. And of course there are always votes to be bought and loopholes to be inserted to grease the skids.

    Business loves the whole thing, because they want nothing to do with education themselves. Offloading training simply reduces cost. Since the scam turns out desperately unqualified product, business refuses to pay for any part of it, before or after the grifting.

    'Graduates' are mostly stuck with minimal wages to go with the useless debt. The few who might learn enough to be valid employees, or who stumble into work when a serious need momentarily reduces hiring standards, become poster children hiding the dismal overall statistics.

    And to close the loop, the unpaid debt goes nearly immediately to accounting losses, written off on tax forms (but cleverly sold to debt collectors, often multiple times, creating a whole new income stream).

    No wonder they love public funding. It simply speeds up the income flow, while guaranteeing that any question about the whole scheme can be neatly diverted away from the profiteers in a sweaty partisan scream of governmental incompetence.

    In other Kardashian news....

    The furnace of Affliction produces Refinement, in States as well as Individuals. John Adams, 1776.

    by semiAdult on Wed Jul 04, 2012 at 07:43:00 PM PDT

  •  This is an excellent ruling. (1+ / 0-)
    Recommended by:
    zackamac

    Measuring a school's quality by looking at loan repayments makes three unfounded assumptions:

    1) That the only purpose of college is to get a better job.

    2) That the financial status of graduates depends only on the college -- not on the wealth and connections of the student's family, the student's age, or the student's race/gender.

    3) That the Free Market, by awarding graduates of certain schools higher salaries, is an acceptable arbiter of an education's value.

    Now, I'll grant that #1 is pretty reasonable. And for #2 it can be argued that NYU should not be prohibited from fleecing rich kids by means of their (OMG) Creative Writing Program.

    But #3 is a snake that must be killed before it grows...

    •  The issue being that this ruling addresses (3+ / 0-)

      specifically for-profit schools.  Schools that generally "guarantee" that you'll get work when you graduate and wouldn't exist if it weren't for government subsidies.  Comparing that with public schools or even private non-profit schools is like comparing apples and oranges.

      That said, I do think this was a good ruling, specifically because the number was so arbitrary.  But the government has absolutely no responsibility to provide the educational corporations with these sorts of subsidies.  Really they should restrict student loan guarantees to non-profit institutions.

      There revolution will not be televised. But it will be blogged, a lot. Probably more so than is necessary.

      by AoT on Wed Jul 04, 2012 at 09:29:53 PM PDT

      [ Parent ]

    •  These are CAREER colleges! (0+ / 0-)

      It doesn't seem unreasonable to me that a career college should -- you know -- prepare students for a career!

      Bin Laden is dead. GM and Chrysler are alive.

      by leevank on Thu Jul 05, 2012 at 07:24:16 AM PDT

      [ Parent ]

  •  now there may be enough DoEd data to examine (0+ / 0-)

    the possibility of the Bush administration's role in facilitating these schools and their market failure but also whether in the case of Bain, perhaps there's some financial involvement

    The better news is that the for-profit college industry is a target-rich environment and the government shouldn't have much trouble coming up with a new test, backed by expert study, to rein in programs that put students deeply in debt without equipping them to get jobs that will enable them to pay off that debt.
    http://federalstudentaid.ed.gov/...

    Präsidentenelf-maßschach"Nous sommes un groupuscule" (-9.50; -7.03) "Ensanguining the skies...Falls the remorseful day".政治委员, 政委‽ Warning - some snark above ‽

    by annieli on Wed Jul 04, 2012 at 07:52:50 PM PDT

  •  Question: (0+ / 0-)

    Does the federal government guarantee these loans, or a percentage of them, when students take them out through private banks?

    "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

    by SueDe on Wed Jul 04, 2012 at 07:56:28 PM PDT

  •  When I was young and naive (1+ / 0-)
    Recommended by:
    leevank

    I lost my GI Bill to one of these for-profit colleges. I ended up with $10k of student loan debt on top of that. I'm still paying for it and never found a full-time permanent job. There were four for-profit schools in the area turning out hundreds of graduates every month, all with the same qualifications, essentially saturating the market. All I could find was temp jobs that barely paid minimum wage. I eventually had to just move on.

  •  In this economy, hard to guarantee 35% will pay (0+ / 0-)

    it pack even if most of them get jobs, because pay income be too low and other life costs too high.

    Success is not necessarily an indicator of how well te school teaches people, but may be an indicator of how well "connected" the school administration and alumni are with companies. Do we really want to make schools compete in the "good old boy" network? It's not always what you know but who you know. Unless you guys want to find another way to sort the sharks out while promoting the concept of a meritocracy.

    -We need Healthcare Reform... but i'm selfish, I Need Healthcare reform-

    by JPax on Wed Jul 04, 2012 at 10:12:50 PM PDT

  •  A different type of loan (0+ / 0-)

    I would like to propose a different type of loan.
    It would be federally financed and administered.

    The loan would be for tuition and books only.
    The loan would be granted at a zero interest rate.

    The loan would be paid back yearly over your lifetime as part of your income tax filing. The rate of repayment would be proportional to your income. Big dollar earners would be required to pay it back relatively quickly, and lesser earners would take more time. There would be no escape from repayment such as bankrupcy etc. Yearly repayment collections would be simplified since it would be part of your income tax filing.

    The loan would be a pact between the individual and society.
    Society (the government) makes the loan available, and the individual repays as they are able it over many years.

    The scandanavian countries provide student tuition and even a stipend for living expenses. They believe that it is an investment for the good of society.

    We as the wealthiest country should be able to provide a zero interest loan for education and consider it a good investment in the future.

    Right now the federal reserve is making loans at virtually zero interest rate to the big banks. We can provide the same financial help to students, stimulate the economy and recover the funds over decades.

    Educational loans should not be a profit making industry for the banks and government.

    "Humankind cannot bear very much reality." - T.S. Eliot

    by fixxit on Wed Jul 04, 2012 at 10:17:51 PM PDT

  •  Or, we could give such colleges some competition (0+ / 0-)

    My mom went to the University of California at Berkeley (even then one of the nation's top universities) in the 1950s, and she paid not a cent for her excellent education there.

    Not. One. Dime.

    How about (re)establishing free, state-funded higher education for everyone who qualifies?

    The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts. -Bertrand Russell

    by mftalbot on Thu Jul 05, 2012 at 11:27:42 AM PDT

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