Washington and higher education distortion

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Washington’s aggressive maneuvers against ITT may have closed a suspect network, but it also showed the breathtaking impact of federal oversight. In August, the U.S. Department of Education declared ITT schools could not enroll students using federal financial aid based on the network’s “administrative capacity, organizational integrity, financial viability and ability to serve students.” Just days later, ITT declared bankruptcy and closed its classrooms.

The abrupt closure of a large, longstanding educational provider should make higher education entrepreneurs like Udacity and edX ask when Washington may decide their offerings are substandard and come calling. True, ITT lost its accreditation, but what about the nontraditional online programs that could help former ITT students pick up the pieces and don’t fit into the standard accreditation mold?

Another recent example of postsecondary failure is instructive here. Indiana Tech Law School’s case involves mistakes at multiple levels and demonstrates that government’s heavy-handed interventions are impossible to evenly distribute.

Indiana Tech opened its law school four years ago, but the school struggled to gain recognition from the American Bar Association (a clue for students that they should take their ambitions elsewhere). The school graduated its first class of 20 students in May, and 12 students took the bar exam in July—but only 3 passed (Indiana’s statewide passage rate was 61 percent). This fall, the university’s board cited $20 million in losses due to under-enrollment and announced plans to close the law school in 2017.

There is plenty of blame to go around: Last week, one of the school’s professors threatened to sue the university for fraud; there was a disconnect between what students needed to know and what they were prepared for; and students misjudged the school’s credentials.

Last year, a private university in Arizona called Saint Xavier that had been lured with taxpayer subsidies abruptly shut its doors. How many ITTs, Indiana Techs, and Saint Xavier’s are out there? It’s impossible to know. The U.S. Department of Education volunteered taxpayers to swoop in and cover ITT student loans, but it will be inordinately expensive for taxpayers if the federal government intervenes after every postsecondary failure.

Washington dominates student lending and is assuming oversight of all kinds of colleges and technical schools—which can only make entrepreneurs second-guess the level of risk in adding new options to America’s tertiary system.

Government action distorts what should be the natural course of events: Students carefully choose a place to learn, and employers judge the value of a student’s work. Inevitably, failure at different points will be a part of the process—making success all the more valuable.

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