This post is a response to CNBC’s John Carney
ATR opposes all federal education loans. If we had it our way these programs wouldn’t exist at all. ATR has and will continue to advocate for a reduction and elimination of federal education loans. The Department of Education estimates that in 2011 they will authorize direct loans totaling $116 billion. If that wasn’t bad enough, the government, via the Federal Family Education Loan program, backs loans issued with private capital. According to the Congressional Review Service, there are approximately $450 billion in FFEL loans outstanding and due to be repaid in the coming years. These programs, undeniably, need to be scaled back and eventually eliminated.
However, these programs do exist. The gainful employment rule that ATR opposes does nothing to reduce the amount of money the government spends on education or education loans. The misconception that once students will no longer be able to receive federal loans to attend certain for-profit institutions, the government will use the money to pay down the debt or give Americans a tax cut is wishful thinking.
When has a federal agency not spent money appropriators already allocated to it?
What the gainful employment rule does is further skew an already skewed market, America’s higher education sector. ATR believes that every college—private, public, or for-profit—should be able to compete for students that receive federal loans. The gainful employment rule creates obstacles for certain colleges to jump over but not others—this is what ATR finds problematic.
ATR’s requested Securities and Exchange Commission (SEC) investigation about the gainful employment rulemaking process is an entirely different issue. Thanks to diligent investigative work from the Citizens for Responsibility and Ethics in Washington (CREW), there are warranted concerns that hedge fund managers’ manipulated for-profit schools’ stocks in order to short sell them. In addition to CREW, Senators Enzi (R-Wyo), Burr (R-N.C.) and Coburn (R-Okla.) have also called for SEC investigations.
It is unfortunate that these federal spending programs exist. ATR also bemoans the existence of public schools, teachers unions, and Obamacare—but that doesn’t mean we won’t work to mitigate the negative effects of these bad policies or institutions.