How Federal Red Tape Is Driving Up College Costs
Government involvement in American higher education has been an abject and costly failure. Out-of-control taxpayer-funded subsidies have resulted in higher—not lower—tuition bills for students and their families. In addition to throwing money at the problem, bureaucrats are foolishly trying to regulate their way to a more effective and efficient higher education system. The federal government is once again trying to pick winners and losers among education programs it deems worthy, even though Congress has already come up with a more even-handed approach to measure college performance. The Trump administration should flunk unnecessary rules and grade all college programs using the same metrics.
Former President Biden ignored the interests of taxpayers while shoveling out “free” money as fast as he could. That cavalier extravagance has come to a screeching halt under the leadership of Department of Education (DoE) Secretary Linda McMahon. As she told the House Education Committee this summer, “[I]f the degrees that these students get, or if they drop out of school, or if performance isn’t as expected, and these loans remain unpaid, they become the burden of all taxpayers. It's not that loans are forgiven or they go away; they're just shouldered by others.” Of course, the “others” that Secretary McMahon refers to are the American taxpayers.
Unfortunately, problems still linger from the Biden era. Former President Biden’s 2023 “Financial Value Transparency and Gainful Employment” rule (which is still on the books) applies stringent restrictions to “nearly all educational programs at for-profit institutions of higher education, as well as non-degree programs at public and private nonprofit institutions such as community colleges.” To participate in the federal loan process, covered programs need to prove that graduates increase their earnings (compared to high school graduates) and aren’t straddled with high debt as a percentage of their income. Bizarrely, the Biden administration chose not to apply the same accountability metrics to non-profit institutions offering four-year programs, even though these programs are at the root of higher education’s many problems.
According to a 2024 analysis by The Burning Glass Institute, 52% of graduates with only a bachelor’s degree end up underemployed a year following their graduation, employed in jobs they are overqualified for. Suzanne Kahn, vice president of the think tank at the Roosevelt Institute, notes, “Since 2023, [about] 85% of the rise of the unemployment rate is concentrated in new market entrants. And the rise in unemployment for college graduates has been [about] triple that of everybody else, which is just, I think, sort of unprecedented.” Despite these broader problems impacting all programs, including traditional bachelor’s degrees, President Biden’s DoE refused to say why it wasn’t applying its rule to the entire higher education sector. The final rule noted that “commenters argued that 4-year degree programs (administered at private nonprofit and public institutions) saddle students with more debt than shorter programs,” and unreassuringly responded that “the rule includes transparency provisions for non-GE programs, including 4-year degree programs.” Requiring “transparency” is simply not the same as subjecting college programs to stringent pass-fail metrics.
Fortunately, the One Big Beautiful Bill (OBBB) seemingly leveled this uneven playing field. As American Enterprise Institute senior fellow Preston Cooper explains, “OBBB institutes a ‘do no harm’ test for higher education. The law revokes a degree program’s eligibility for federal student loans if the earnings of its graduates are too low.” The government determines the median annual earnings of graduates four years following program completion and compares these earnings to a program-chosen benchmark corresponding to what students would have earned in the absence of a degree. While there are some exceptions to the OBBB’s “do no harm” standard, the rules are far more broad-based than the Biden regulations and apply to non-profit four-year degree programs.
With this standard put into place by Congress, one might think that the DoE rule is now obsolete and should be gone by now. Unfortunately, it has overstayed its welcome and creates a duplicative and deeply unfair double-enforcement regime. That’s a significant problem for taxpayers and students.
The Trump-McMahon DoE can correct course with the impending launch of the AHEAD negotiated rulemaking committee, which finally has a chance to wrestle power from the vestiges of former President Biden’s unaccountable DoE. That includes finally ending the obsolete “Gainful Employment” rule. There’s simply no reason why the federal government should favor some college programs over others and straddle the sector in high duplicative costs that are passed along to students. It’s time for a new approach to higher education that kicks needless spending and rules off campus.
