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Lanny Davis

Lanny Davis

Posted: September 23, 2010 03:45 PM

The Liberal Paradox

Suppose that a conservative Republican Administration, in the middle of high unemployment and an economic slowdown, proposed new regulations that would most hurt lower income people and minority groups and the for-profit colleges and universities that serve them? Can you imagine the cries of outrage from liberal critics, condemning "hard-hearted" Republicans targeting the most vulnerable young people in our society?

Yet that is exactly what the Department of Education's proposed "gainful employment" regulations would likely do. They are almost exclusively aimed at "for profit" private colleges, which are predominantly comprised of lower income and minority students. Let's be careful about characterizing, as some liberals have done, those schools catering to such vulnerable at-risk students with "open admission" policies as "bad actors" whereas the more selective elitist Harvards and Stanfords with less student loan defaults are deemed "good actors."

This has the uncomfortable look and feel of disparate class and racial treatment - which should make liberals very uncomfortable.

So how to explain the paradox that, in fact, these proposed regulations are being proposed by a progressive Democratic Administration and its strongest proponents are liberal members of congress?

There appear to be three explanations - each one less meritorious than the other.

The first is a simple misunderstanding of the facts. For example, liberals supporting these proposed regulations rightly complain about marketing and other abuses. But the fact is, such abuses occur at non-profits and public institutions as well as at for-profits and, in any event, the gainful employment regulation doesn't even address the issue of these abuses (although liberal commentators and editorial writers continue to conflate the two issues).

Moreover, those liberals who cite the excess "cost" of student loan defaults among the lower income and minority students ignore two inconvenient, indisputable facts: first, billions of dollars of taxpayer subsidies that go to non-profits and public colleges are not available to for-profits; and for-profits cost taxpayers substantially less per-student each year than non-profits and public colleges, when the approximately $1 billion of taxes/year paid by for-profits are taken into account.

Second, this is a classic example of overly broad regulations confirming the law of unintended consequences.

How overly broad? According to the Department of Education's own data released last month, its proposed "gainful employment" regulations are so poorly crafted that if applied to non-profits too (which they currently are not), Harvard Medical School, D.C.'s famous minority school, Howard University, and 93 of 100 Historic Black Colleges in the U.S. would all fail the so called loan repayment test. But, supporters of the regulation say, failing just one-of-two tests won't result in loss of student federal loan eligibility. However, just recently, Iowa Democratic Senator Tom Harkin, one of the strongest proponents of this proposed regulation, suggested that failure of the loan repayment test alone should be enough to bar student loans to those who need them the most.

This is why numerous members of the Congressional Black Caucus have strongly weighed in against these proposed regulations and more and more representatives from minority and blue collar communities are waking up and opposing the proposed regulation.

The third explanation appears a classic example of ideology trumping facts: the instinctive negative reaction of many liberals to the word "profit" when associated with providing education. This seems uncomfortably similar to opposition by most liberals to private "charter" schools within urban public school districts, opposition that seemed increasingly paradoxical as more and more inner city parents supported having the choice of charter schools for their children.

The fact is, it is precisely the profit motive that causes for-profits to offer more flexible, consumer-responsive schedules and courses, such as night classes, online courses, and new curricula that are directly responsive to recent changes in the job market.

Clearly Secretary Duncan needs to put an amber light on the "Gainful Employment Regulation" as it is presently written. As Harry C. Alford, President and CEO of the National Black Chamber of Commerce wrote recently, "student debt is a national problem, one that must be addressed, but imposing regulations on schools that are effectively educating students is unnecessary."

If any regulation is necessary, then Mr. Duncan owes it to the most vulnerable students who will be disproportionately hurt by the current version to use a scalpel, not a hatchet, and to address the issue of excessive student debt at all higher education institutions - not just at for-profits, but at non-profits and public universities as well.

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Lanny J. Davis, a Washington D.C. attorney and former Special Counsel to President Bill Clinton in 1996-98, serves as a paid "Special Advisor" to the Coalition for Educational Success, a group composed of several companies that own and operate for-profit higher educational colleges in the U.S.