Education Industry Reporter

On the State of the Union and the President’s Speech at the University of Michigan

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

Last week saw an interesting development in higher education — on top of the now-official (meaning marked with a good-bye party) retirements of a number of higher ed folks from the U.S. Department of Education, including Dan Madzelan and Fred Sellers (Congratulations and best of luck to all!).  In the President’s State of the Union address on Tuesday, he outlined a number of broad proposals designed to, among other goals, reduce the cost of higher education.  As Insider Higher Ed reported the next day, given the lack of specifics, while some were immediately critical, many in the the higher ed community took a “wait and see approach.”

Although still in development, last Friday the President discussed the plan in more specific terms in a speech at the University of Michigan.  Mark Katrowitz provides an excellent summary of the budget proposals.

In short, it looks to impose a “gainful employment”-like rule on all of higher education.  Recall that the gainful employment rule requires that proprietary schools (and some programs and non-profit schools)  offer programs that exhibit a sufficient return on investment – or, are a “good value” — lest those programs not be eligible for Title IV funds.  The new proposal seeks to condition receipt of Supplemental Educational Opportunity Grants (SEOG), Perkins Loans, and Work Study funds based on meeting the Administration’s goals of:

1) Setting responsible tuition policy, offering relatively lower net tuition prices and/or restraining tuition growth.
2) Providing good value to students and families, offering quality education and training that prepares graduates to obtain employment and repay their loans.
3) Serving low-income students, enrolling and graduating relatively higher numbers of Pell-eligible students.

It will be interesting to see what happens with this idea.  Certainly, most observers would suggest that the Secretary does not have the authority to enact such a rule absent legislation.  Of course, many observers thought/still think the Secretary needed legislation to enact the “gainful employment” rule that was published in June 2011.   I would also be surprised if there wasn’t a significant amount of criticism of this proposal.  As Inside Higher Ed reported, a similar proposal was scuttled the first time it was offered up, back in 2003:

Rep. Howard (Buck) McKeon, a California Republican who was then chairman of the Committee on Education and the Workforce’s 21st-Century Competitiveness Subcommittee, proposed penalizing colleges that increased their cost of attendance by more than twice the rate of inflation for two consecutive years, including cutting off federal aid. Colleges attacked the idea as calling for “price controls,” and McKeon’s bill never made it out of committee.

Thus, what began with the gainful employment debates and proprietary schools is merely being extended to others institutions of higher education.   This seems even more likely considering that the President is also proposing to collect earnings and employment data from colleges to help create a proposed “College Scorecard”.  I’m sure that more details will come in the future and, most importantly, we will see if the administration believes it can enact these changes absent new legislation.