The Wall Street Journal’s editorial board recently tallied the federal agencies harassing Elon Musk and his companies for one reason or another. These efforts, which are boosted by Musk’s opponents in Congress and elsewhere, have already held back the progress of SpaceX’s Starship, which could take humanity back to the moon and eventually to Mars.
The Biden administration is using a similar playbook to hamper innovation and progress in higher education. As my colleague Beth Akers recently noted, student loan servicer MOHELA was tangentially involved in the lawsuit that blocked President Biden’s initial unlawful effort to forgive hundreds of billions of dollars in student loans. Soon after, the servicer found itself the target of congressional hearings, punitive measures by the Department of Education (DOE) and other efforts to undermine it.
Meanwhile, DOE is taking over the management of some loan programs from servicers, including MOHELA, which may serve as a pretext to forgive even more loans. This is despite the facts that the department has so epically mismanaged its current responsibilities that some enrollment-strapped schools may close; 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 opponents have seemed to follow a clear pattern:
1. The federal government identifies a target in the private sector.
2. Government officials or activists raise “concerns” about that target. Leading questions are asked of the Government Accountability Office (GAO) or other perceived “neutral observers” to validate these views.
3. The target suffers from greater regulatory scrutiny, or merely the anticipation of such scrutiny (in the form of reduced investment, lost partnerships, or bad press).
4. The government may take regulatory action to make it harder for the target (and its peers) to operate.
5. Regardless of the particulars, the result is often a self-fulfilling prophecy that hampers innovation, harms students, kills jobs and wastes taxpayers’ resources.
The Obama administration used these tactics to inhibit many for-profit colleges. In 2016, DOE (which at the time had an active “for-profit task force”) was among the first to take action against ITT Technical Institute. This was quickly followed with actions by activists, state attorneys general, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and college accreditors, culminating in the school’s eventual closure.
A similar pattern can be identified within the online program management (OPM) space during the current administration. In 2022, congressional Democrats requested that GAO study the growth of college and university partners. GAO unsurprisingly concluded that the Department of Education “needs to strengthen its approach to monitoring colleges’ arrangements with online program managers.” This led the department to propose extremely punitive regulations that received pushback from even DOE’s traditional higher education allies.
Those proposals are currently in a months-long limbo, but even the threat of regulation (along with a return to in-person learning after COVID) has caused OPM stocks to plummet. This, in turn, has led to yet another round of activist letters demanding even more government action to protect students from the financial fallout. One OPM company has finally resisted, calling these actions “unfounded attacks from special interest groups seeking to harm our business and scare our partners and students.” Perhaps this is the start of long-overdue pushback from companies being subjected to regulator-activist efforts that search for legal justification only after deciding who to use regulatory power against.
Some for-profit enterprises are simply giving up profit-seeking in an effort to spend more time on core functions and less dealing with regulators. This, however, has come with its own host of challenges. Grand Canyon University converted to nonprofit status in 2018, but despite gaining IRS recognition, DOE has yet to accept this designation. The school believes that the department, the Federal Trade Commission and the Department of Veterans Affairs are “coordinating efforts to unjustly target GCU.”
The University of Phoenix is similarly looking to drop its for-profit status through an acquisition by the state of Idaho, a commonsense approach that would give the state significant new in-house capabilities. However, it is already facing scrutiny from the usual suspects on Capitol Hill as well as within Idaho, due in part to fears that federal regulators could come calling even after the deal goes through.
Each of these examples — and there are certainly more — represents an overreach by regulators more interested in taking out targets than protecting students or fairly applying the law. Ultimately, it will be students who’ll find themselves stuck with fewer and more expensive programs that are poorly equipped to meet their needs and prepare them for the workforce. Private-sector players finding themselves in the regulatory crosshairs would be wise to fight back and otherwise make themselves difficult targets to pin down. Complacency, a hope for compromise, or appeals to reason or the law are evidently futile strategies.
Michael Brickman is an adjunct fellow at the American Enterprise Institute, focusing on higher education and education reform. Previously, he served as a senior adviser to the U.S. undersecretary of Education and as national policy director of the Thomas B. Fordham Institute.