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Court Throws Huge Wrench in Higher Education Transparency Efforts

Published:  March 20, 2013

A federal district court judge dealt a huge blow yesterday to the U.S. Department of Education’s efforts to regulate the for-profit college sector. More broadly, the court’s decision in the case, which deals with the Department’s Gainful Employment regulations, could make it much more difficult to bring greater transparency and accountability to higher education as a whole.

The roots of this case go back to June when the federal district court vacated some of the Department of Education’s Gainful Employment (GE) regulations. While the judge affirmed the department’s authority to regulate on GE and held up requirements that GE programs disclose information like median debt to students, he found that one of the three measures used to determine whether a program prepared students for gainful employment -- the student loan repayment rate -- “lacked a reasoned basis.” And since the judge concluded that all the metrics were intertwined, he threw them all out. With no metrics to report, the disclosure requirements included in the regulations were also effectively eliminated.

The Department went back to the court and asked the judge to reinstate the reporting requirements so that it could implement the disclosure provisions of GE (without program-level information, disclosure would be impossible to achieve). In yesterday’s decision, the judge denied this request on the grounds that the reporting requirements would violate one of the worst laws in the history of higher education: the federal ban on a student unit record system.

The ban came about as a result of the Bush administration’s efforts to address the dearth of information on higher education outcomes. Secretary Spellings Commission on the Future of Higher Education recommended that

The Department of Education should collect data and provide information in a common format so that interested parties can create a searchable, consumer-friendly database that provides access to institutional performance and aggregate student outcomes in a secure and flexible format.

Higher education institutions, wary of transparency and accountability, revolted--but under the guise of wanting to protect student privacy. Congress responded to this uproar in 2008 by making it illegal for the Department to collect student-level records, except for those necessary to run the federal financial aid programs. And this is where it gets tricky.

Since 1986, the Department has been authorized to maintain the National Student Loan Data System (NSLDS), which includes, among other things, names and social security numbers of students in the federal financial aid programs. Under the Gainful Employment regulations, information is required for all students in GE programs, regardless of whether they receive federal aid. In order to enforce the regulations, the Department expanded NSLDS to include students who had not applied for or received financial aid. According the yesterday’s court decision, adding students who do not receive aid to NSLDS is a violation of the student unit record ban. This means that current disclosure requirements are now also out the window.

This court’s decision underscores just how damaging the unit record ban is. GE programs that are engaging in educational malpractice will not have to share this information with prospective students. This is terrible news for students in those programs. At least there was a brief moment in which it looked like at least some students would get critical information so they could make informed decisions about where to go to school. But now even that little bit of transparency and accountability is gone.

Given the strong and growing support on both sides of the aisle for greater transparency in all of higher education (whether for-profit, nonprofit, or public), the court’s decision should be an immediate wake-up call to Congress to repeal the ban.

A week before President Obama unveiled the College Scorecard in his State of the Union (a scorecard with a conspicuous blank space under “employment” outcomes), House Majority Leader Eric Cantor, in outlining his “Making Life Work” agenda, said

Suppose colleges provided prospective students with reliable information on the unemployment rate and potential earnings by major….Armed with this knowledge, families and students could make better decisions about where to go to school, and how to budget their tuition dollars. Students would actually have a better chance of graduating within four years and getting a job.

But this bipartisan calls for greater transparency (not to mention calls for greater accountability for hundreds of billions of taxpayer dollars) will largely go nowhere with this student unit record ban in the way. Hopefully Congress is paying attention.

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