The Economic Standard: Proprietary Colleges Crackdowns Will Harm Students

Over the past ten years, proprietary colleges have become the boogeyman of the modern American education system. Critics routinely contend that these institutions “frequently charge their students too much in tuition while delivering too little in education and opportunities.” As a result federal regulators have proposed several regulations that would discriminate against proprietary schools, harm traditionally underserved students, and deny them an opportunity to receive further education. 

In the Fall of 2020, the National Student Clearinghouse Research Center estimated that nearly 800,000 students were enrolled at proprietary colleges, accounting for about 5% of total students in the United States. Yet, despite the sizable number of students enrolled at proprietary schools, they face an increasingly hostile and asymmetric regulatory environment.

The most immediate concern is that the Department of Education (DoE) intends to revise the 90/10 rule that dictates proprietary schools, but not private or public nonprofit institutions, “collect at least 10 percent of its revenue from nonfederal sources for two consecutive years.” Failure to do so will see these institutions lose their “eligibility to participate in Title IV programs” and receive federal student aid. Currently, funds received under GI benefits are classified as nonfederal sources. The DoE, however, proposes to reclassify these funds as federal funding.

Unfortunately, the proposed regulatory reforms ignore the reality that further discriminatory regulation would only harm the students lawmakers and regulators want to protect. Research consistently shows that those who attend proprietary institutions are often older, predominantly female, and more likely to come from a minority background than their counterparts at public and private institutions. Additionally, proprietary schools often allow those with fewer educational qualifications the opportunity to obtain an education beyond high school. 

They also ignore the outcomes of those who attend. For example, Northwestern University scholar Dr. Jonathan Guryan has extensively discussed the financial benefits proprietary institutions provide their students post-graduation. In his research, Dr. Guryan emphasizes that the earnings gains for graduates of The Center for Excellence in Higher Education ranged from 19-43% for those who earned an associate’s degree and between 27 and 48% for those who earned a bachelor’s degree. Excluding costs, these statistics pointed to additional income between $11,900 and $125,000 for associate degree graduates and between $40,000 and $153,000 for bachelor’s graduates. 

Onerous regulations on proprietary schools would ultimately see students lose the ability to experience these financial gains

Critics of proprietary schools also ignore the fact that they provide students with choices. While public and private nonprofit schools focus on traditional liberal arts education or STEM courses, for-profit schools focus on vocational courses. As education policy expert Diane Auer Jones notes, over the past twenty years, community colleges “have focused on providing lower-cost general education courses in order for some to transfer to four-year colleges” and have “reduced the number and size of vocational programs. This shift has left for-profit schools as the only provider of vocational courses for those who do not want a liberal arts education.” 

Imposing burdensome regulations on proprietary schools will only force students into a liberal arts education, despite demanding vocational courses. As Senator Mike Enzi (R-WY) stated in 2011, for-profit schools “provide important training for those who choose to become mechanics, plumbers and electricians” instead of pursuing traditional academic training.

While pressure to impose more stringent requirements on proprietary institutions is ratcheting up, lawmakers and federal regulators should first consider who will be most harmed. In the case of proprietary schools, it seems abundantly clear that those most at risk from further regulation are minority students and those who seek a vocational education. 

If lawmakers do want to ensure students receive a good education, they should perhaps consider applying regulations evenly, rather than targeting specific institutions. 

This article was published in The Economic Standard.

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