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Commentary By Preston Cooper

Don't Single Out For-Profit Colleges for Policing

Education, Economics Higher Ed, Regulatory Policy

The Obama administration’s proposed “defense to repayment” regulations, released last month, make no secret of targeting the for-profit college sector. The collapse of Corinthian Colleges, which has cost the government $170 million and counting in loan forgiveness, has inspired the administration to identify the for-profit college sector as the root of higher education’s problems and regulate it accordingly. Yet focusing exclusively on for-profit colleges is misguided: the problems are in the whole system, not one particular sector.

“To paint a complete picture of which higher education sectors present the most problems, regulators should look at where the students actually are.”

The proposed regulation makes it easier for former students to request federal loan forgiveness when they are victims of fraud or misrepresentation by colleges. The rule also creates a number of new conditions that institutions must satisfy or risk losing access to federal financial aid. (I discussed these in more detail in two previous columns.) The ostensible purpose of these provisions is to identify bad apples before they rot, potentially reducing the number of future loan forgiveness requests and thus saving taxpayers money—not to mention protecting students from poor-quality schools.

The catch is that these conditions only apply to for-profit and private nonprofit colleges. Public institutions are exempt. If the administration truly wanted to protect students and taxpayers, it would not create different rules for different schools.

The administration justifies its uneven regulation with the claim that for-profit schools are much more likely to experience problems, such as high student loan default rates, that put taxpayer money at risk. This is true: 4.5 percent of for-profit colleges have default rates of 30 percent or higher (the regulations’ threshold for losing aid access), compared to just 2.8 percent of public colleges, according to Department of Education data.

However, the administration should keep in mind the distinction between the share of schools and the share of students attending...

Read the entire piece here on Forbes

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Preston Cooper is a policy analyst at the Manhattan Institute's Economics21. Follow him on Twitter here.

This piece originally appeared in Forbes