NATIONAL VIEW: Sayonara, for-profit colleges

THE POINT: Biden resumes Obama’s assault, which will hurt low-income students.

We laughed out loud when The New York Times quoted professor Kate Shaw asking if the Supreme Court will “continue to incapacitate” the administrative state. She was apparently serious. Do Biden regulators look incapacitated to you?

The Education Department recently finalized a 775-page rule that restricts federal financial aid to proprietary colleges that purportedly fail to prepare students for “gainful employment.” The Obama administration’s first such rule was blocked in federal court, and Trump Education Secretary Betsy DeVos rolled back its redo.

For-profit college enrollment dropped to 777,400 students in 2021 from 1.7 million in 2010 amid an assault by Obama regulators and Democratic state Attorneys General. The Biden rule could shut down most of the survivors for failing arbitrary metrics that many nonprofit and public colleges couldn’t meet.

The rule’s first prong requires graduates’ debt to be equal or less than 20% of their discretionary income, or 8% of total income. The Education Department bases this threshold on a 2006 paper about student debt and mortgage-underwriting standards, which generally limit a household’s total debt payments to 43% of income.

This measure makes no sense since the Obama-era repayment plans capped borrower payments at 10% of discretionary income. Recent Biden revisions will reduce payments to 5%. Underwriting standards by the Federal Housing Administration and government-sponsored enterprises Fannie Mae and Freddie Mac also consider how much students actually pay under these repayment plans—not how much borrowers would owe under a standard 10-year repayment plan.

The metric would punish schools for enrolling low-income students who typically take out more debt because their parents aren’t helping. There might be an argument for protecting taxpayers by limiting federal aid to schools that saddle students with debt they can’t repay. But it would only be fair to apply the rule across all colleges.

If the Biden debt-to-earnings metric were applied equitably — to borrow the left’s buzzword — public and not-for-profit colleges would account for nearly 80% of failing undergraduate degree programs. Many historically black institutions would be forced to shut down.

The rule’s second prong requires that at least half of a for-profit college’s graduates earn more than a typical high school grad. This makes sense to some extent. Yet the Education Department uses as its benchmark graduate earnings in 2021 when many states were still partly locked down, and many workers could make more unemployed.

The department also excludes earnings of graduates who go onto earn higher degrees. If this metric were applied across all colleges, public and not-for-profits would account for 90% of programs that would fail. Examples include Rutgers (cellular biology), Emory University (neurobiology) and University of Michigan (philosophy). Fine and studio arts programs at the University of Kansas, Florida International University, University of Florida, Stony Brook University, and George Washington University, among others, would fail. Certain fields result in relatively low earnings no matter what type of institution grants the degree.

These facts don’t matter to the administration. Its single-minded goal is to eliminate for-profit colleges and drive their students into nonprofit and public colleges that are often no better on gainful employment.

The Wall Street Journal