New Gainful Employment Regulation To Cost States $4.3 Billion A Year

Date: November 12, 2014

San Francisco, CA - The federal government’s new regulatory restrictions on proprietary postsecondary institutions, known as the gainful employment rule, will cost states billions of dollars as students displaced by the rule seek alternative institutions. A new study by Dr. Jorge Klor de Alva and Dr. Mark Schneider of the Nexus Research and Policy Center examines this impact.

“If the nearly 620,000 degree-seeking students displaced by the new federal regulations choose to continue their studies in public institutions, it will cost states a minimum of $4.3 billion annually to meet this new demand,” said Dr. Jorge Klor de Alva, president of Nexus Research and Policy Center. “This equates to a $40-plus billion dollar unfunded mandate to states over the next decade.”

The authors also show that during a recent five-year period the proprietary sector enrolled nearly 4.7 million full-time equivalent (FTE) students across all 50 states plus D.C. representing $28 billion in savings for taxpayers around the country.

These findings should caution policy makers, college administrators, and taxpayers who support shifting the education of hundreds of thousands of students from the proprietary to the public sector—a sector that is too frequently ill equipped and undercapitalized to handle such an influx.

Klor de Alva went on to add, “This study serves as a reminder to policy makers that when comparing costs between public and proprietary institutions, it is important to consider not just the cost to students and their families represented by the tuition charged by each institution, but also the per-student public subsidy borne by taxpayers that supports the real cost of education.”

Download the full report at Nexus Research and Policy Center. 

 Thank you.

Dr. Jorge Klor de Alva
President, Nexus Research and Policy Center


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