Enzi blasts 'gainful employment' proposal on for-profit schools

Sen. Mike Enzi (Wyo.), senior Republican on the Senate education committee, is slamming a White House proposal designed to prevent students at for-profit career colleges from defaulting on their loans.

The proposal, Enzi said in comments submitted this month to the Department of Education (DOE), would not only disadvantage for-profit schools relative to their nonprofit competitors, but also limit access for many low-income and minority students, who tend to enroll in for-profits disproportionately.

"Admissions at for-profit institutions may become more selective, and otherwise academically qualified students may be denied admittance," Enzi wrote. "This outcome is contrary to nearly 50 years of Congressional efforts to make postsecondary education accessible to all Americans." 

The comments echo those of scores of other lawmakers — many of them Democrats — who are pushing the administration to delay the rule until the issue can be studied further. 

The issue is of great importance for the health sector because an enormous number of the nation's health professionals — from nurses to medical technicians — get their training at for-profits.

Under the proposed rule, for-profit programs would have to demonstrate that annual loan payments among recent graduates are less than 8 percent of their starting salaries. The idea is to ensure that graduates will be earning enough to pay off their debts after graduation.

The penalty for non-compliance is steep: Programs that fail to meet the standards could lose access to federal financial aid — of which 23 percent ($24 billion) went to for-profit schools last year.

Enzi said applying the new standards only to for-profit schools "will be sending the message that the Federal government is not concerned with the outcomes for over 75 percent of the Federal investment in student financial assistance."

Moreover, Enzi argued, it's not the government's role to ensure that students' educational choices "pay off." 

"Federal student financial assistance has historically been provided to increase access and help make postsecondary education more affordable," Enzi wrote. "It does not remove the responsibility of students and their families to make informed choices and to understand the financial consequences of those decisions." 

The comments put Enzi at sharp odds with Sen. Tom Harkin (D-Iowa), the chairman of the Senate education committee who's urging the White House to adopt the so-called "gainful employment" rule as quickly as possible.

“High student loan debt coupled with low repayment rates signal a questionable investment for students and taxpayers,” Harkin wrote to the DOE on Sept. 9. “[W]e encourage swift implementation of the gainful employment regulation and would be concerned with any efforts to weaken the proposal.”

Bolstering Harkin's argument, the Education Department this month issued new figures showing that the student-loan default rate at for-profits rose from 11 percent in 2007 to 11.6 percent in 2008 — much higher than default rates at nonprofit schools. 

"While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not," DOE Secretary Arne Duncan said in a statement announcing the figures.

Still, not all liberals are supporting the rule. Jesse Jackson, head of the Rainbow PUSH Coalition, is on Enzi's side, arguing that the change, while well intended, would hurt minority students.

"The amount of debt a student incurs and the student’s ability to repay that debt are not reflections of the quality of an institution," Jackson wrote in his own comments submitted to DOE. "To apply a standard that looks at debt and repayment as a measure of quality misses a greater opportunity to hold all institutions to a higher standard of student outcomes, namely, graduation rates and successful post-graduation careers."

The DOE is hoping to finalize its rule by Nov. 1.