Chalk up another victory for the lobbyists who protect profits over people. Students, scammed by for-profit schools promising good-paying jobs in everything from medical billing to web design, were no match for the well-connected lobbyists representing the $30 billion industry.
Arne Duncan, President Obama's education secretary, had the right idea, at first. Only one in 10 students attends a private, for-profit school, but they account for nearly half of all student loan defaults. So, hold schools accountable by measuring gainful employment through a student's debt burden and how quickly a loan is paid off. Withhold access to federal loans and grants — the bulk of student financing — if they fail to meet those standards.
But the Association of Private Sector Colleges and Universities, which donates generously to everyone from Sen. Rand Paul (R-Ky.) to Rep. Donald Payne (D-N.J.), unleashed its arm-twisters. And Duncan caved. Now, schools that fail to meet standards can hobble along a few extra years before the federal spigot is turned off. Students deserve better.
Payne and others say the schools serve low-income students, and harsher regs would have shut down the good and the bad, reducing these students already meager education options. For-profit schools charge more, they say, but who else would serve this population?
It’s an argument with eerie echoes of subprime lending. And we know how that turned out. Students can’t discharge a private student loan in a bankruptcy. Schools can write off the bad loans and move on. Taxpayers are left with the bill.
Payne said he’s confident the industry will become more “self-regulating.” That’s wishful thinking. The Consumer Financial Protection Board was supposed to ride herd on private student loan abuses, but as long as Republicans block the appointment of a director, that watchdog is toothless. The message to hapless students — from both political parties — is clear: You're on your own.