The Obama Education Profit Seekers A former official finds a way around a new rule punishing for-profits. Re: WSJ Opinion | Review & Outlook March 25, 2016 6:49 p.m. ET The Obama Education Profit Seekers - WSJ Even progressives need to make a living. And as the Obama Administration winds down, the great and good in government are looking for gainful private employment. Some of them are even smart enough to do it by exploiting the regulations they pushed while in government. Take Jim Shelton, the deputy secretary of education in 2013 and 2014. Last summer he became “chief impact officer” at 2U, a publicly traded company that caters to public and nonprofit colleges and universities. The company provides software and services that allow schools to offer degree programs over the Internet, and its customers include the likes of Northwestern and Syracuse. Higher education needs innovation and competition, and for all we know 2U’s courses are splendid. But it’s especially notable that Mr. Shelton has joined 2U because its for-profit online business model allows it to circumvent the onerous regulation that the Department of Education promoted to punish for-profit schools during Mr. Shelton’s tenure. That’s the so-called gainful-employment rule that requires for-profit colleges to demonstrate a certain level of post-graduation student success to be eligible for student loans. This rule, which the Obama Administration pursued relentlessly despite legal setbacks, has forced even the best for-profit schools to shrink enrollments. Students who have suffered the most tend to be low-income and minorities who can’t afford to spend four years in college but can balance work and school at the likes of the University of Phoenix or DeVry University. The rule has one giant loophole. It doesn’t apply to nonprofit or public universities, and it also largely exempts community colleges. Many of these have graduation rates or loan default rates that are as bad or worse than for-profits, but Mr. Obama’s regulators have a special animus toward for-profits. Which works out beautifully now for Mr. Shelton and 2U, which can work around the gainful-employment rule and still make a buck. 2U’s customers don’t have to meet the rule, so 2U doesn’t have to worry about it either. Never mind that 2U’s online services compete in many respects with those offered by for-profit schools that don’t have a nonprofit middle man. Mr. Shelton tells us that in government he was focused on eliminating bad behavior, not punishing a whole industry. He also assures us that 2U is focused on high-quality outcomes for students, and this is “totally consistent” with his approach when he was in government. Mr. Shelton adds that the “policy and regulatory framework was not there” to aggressively regulate the nonprofits. That will be small consolation to his for-profit competition. Mr. Shelton is the second former deputy education secretary who has been able to make good by exploiting government regulation of for-profit education. Recently we told you about Tony Miller, who is among those buying the parent company of the University of Phoenix after the Obama Administration took roughly 90% off its market capitalization. The bargain price should provide plenty of upside potential, especially if the next Administration doesn’t hate for-profit education as much as this one. We’ll be watching Messrs. Shelton and Miller with great interest as they pursue their new careers as born-again capitalists.
I believe that "gainful employment" regulations should apply either to all schools or none, but this characterization of for-profit schools as the only ones accommodating such students is about ten years out of date.
You’re correct Steve. My general take on the article was that it targets the Washington revolving door syndrome and its possible pitfalls…
I feel like a broken record. People willfully filter out the information that doesn't further their agenda. The gainful employment rule applies to for-profits and non-profits that offer non-degree programs. I don't know why people on this forum keep perpetuating this lie that the gainful employment rule only applies to for-profits. The schools teaching the bulk of non-degree programs are community colleges. Schools like University of Phoenix and Devry don't even depend on non-degree programs.
update https://www.nytimes.com/2017/06/14/business/student-loans-for-profit-schools-colleges.html?_r=0
