HOW CAN THE FOR-PROFIT EDUCATION INDUSTRY RESPOND TO NEW U.S. GOVERNMENT REGULATIONS?

As an estimated 25 million students pursued higher education at domestic institutions this past fall, the U.S. Department of Education formalized its most recent set of rules and regulations aimed at protecting students from what it considers to be low-performing educational programs. These rules have two major components: 1) Gainful Employment (GE) regulations that could ultimately prevent some programs from accessing federal student loans, and 2) Financial Value Transparency (FVT) reporting — and, in some cases, student acknowledgement — requirements.

The complexity of the regulations makes it difficult for many people to fully understand their scope and implications. In addition, there may be an information gap between the voluminous regulations themselves and short articles or blogs that tend to omit important specifics or raise more questions than they answer. Given that GE only regulates the for-profit portion of the overall U.S. education sector, there are inescapable ramifications that some of those organizations will need to deal with. The for-profit sector should quickly assess each institution’s bespoke level of risk, blunt the effects and steer organizations into more stable and profitable futures, but how they handle the challenges will impact investment decisions within the sector in the future.

This article will attempt to strike a balance between these two extremes by:

1. Providing a brief overview of the background and context, particularly on GE regulations;
2. Summarizing the most recent round of efforts that have led to the new rules;
3. Presenting the outcomes of data-driven assessments of:
   1. Comments on the proposed regulations that were posted publicly;
   2. The scope of coverage for the final regulations; and,
   3. At-risk programs;
4. Analyzing implications for U.S. higher education generally; and,
5. Offering guidance to for-profit educational institutions and their owners/investors.

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