The federal government is abusing its power to target private education providers

The Wall Street Journal's editorial board recently tallied the federal agencies that are harassing Elon Musk and his companies for one reason or another. Those efforts, backed by Mr. Musk's opponents in Congress and elsewhere, have already blocked progress on SpaceX's Starship, which could take humans back to the moon and eventually Mars.

The Biden administration is using similar strategies to stifle innovation and progress in higher education. As my colleague Beth Akers recently pointed out, student loan servicer MOHELA was tangentially involved in the lawsuit that blocked President Biden's first illegal effort to forgive hundreds of billions of dollars in student loans. Was. Soon after, servicers found themselves the target of Congressional hearings, punitive actions by the Department of Education (DOE), and other efforts to undermine servicers.

Meanwhile, the DOE has taken over administration of some loan programs from servicers, including MOHELA, which could provide an excuse to forgive even more loans. This is despite the fact that the Ministry is grossly mismanaging its current responsibilities and that some schools with insufficient enrollment may be closed. States like California have seen financial aid applications drop by nearly 50 percent.

Dating back to the Obama administration, similar efforts by the federal government to target private sector dissidents appeared to follow a clear pattern.

1. The federal government identifies private sector targets.
2. Government officials and activists express “concerns” about the goal. To test these views, key questions are asked of the Government Accountability Office (GAO) or other perceived “neutral observers.”
3. The target suffers from greater regulatory scrutiny, or simply the anticipation of such scrutiny (in the form of reduced investment, loss of partnerships, or bad publicity).
4. Governments may take regulatory action to make it difficult for Target (and its allies) to operate.
5. Regardless of the details, the result is often a self-fulfilling prophecy that stifles innovation, harms students, eliminates jobs, and wastes taxpayer resources.

The Obama administration used these tactics to block many for-profit colleges. In 2016, the DOE (which at the time had an active “For-profit Task Force”) first took action against ITT Technical Institute. This was quickly followed by action by activists, state attorneys general, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and college accreditors, ultimately leading to the school's closure.

A similar pattern can be seen within the online program management (OPM) space during the current administration. In 2022, Congressional Democrats asked GAO to study the growth of the university and its university affiliates. GAO rightly concluded that the Department of Education “needs to strengthen its approach to monitoring universities' arrangements with online program managers.” This led the department to propose highly punitive regulations, which also received pushback from DOE's traditional higher education allies.

Those proposals have been stalled for months now, but even the threat of regulation (along with a return to in-person learning post-COVID-19) is causing OPM stock to plummet. This in turn led to further letters to activists demanding further government action to protect students from the economic fallout. One OPM company ultimately pushed back, calling these actions “baseless attacks by special interests seeking to harm our business and scare our partners and students.” Perhaps this is the beginning of a long-overdue pushback from companies that are exposed to the efforts of regulatory activists, who seek legal legitimacy only after deciding against whom to exercise regulatory power. .

Some for-profit companies simply abandon the pursuit of profit in order to deal less with regulators and spend more time on their core functions. However, this comes with many challenges. Grand Canyon University transitioned to nonprofit status in 2018, but despite receiving IRS approval, the DOE has not yet accepted this designation. The school believes the department, the Federal Trade Commission, and the Department of Veterans Affairs are “coordinating efforts to unfairly target GCU.”

The University of Phoenix is ​​similarly seeking to reduce its for-profit status through acquisition by the state of Idaho, a common-sense approach that would give the state significant new campus capabilities. But the deal is already under intense scrutiny from the usual suspects on Capitol Hill and in Idaho, with concerns that federal regulators will still come after the deal.

All of these examples, of course there are others, represent overreach by regulators more interested in eliminating their targets than protecting students or fairly applying the law. In the end, it will be students who end up taking fewer, more expensive programs that are ill-equipped to meet their needs and prepare them for the workforce. Private companies targeted by regulation would be wise to fight back or otherwise make themselves harder targets to pin down. Complacency, hope for compromise, and appeals to reason and law are clearly futile strategies.

Michael Brickman is an adjunct fellow at the American Enterprise Institute, where he focuses on higher education and educational reform. Previously, he served as Senior Advisor to the U.S. Under Secretary of Education and Director of National Policy at the Thomas B. Fordham Institute.