When the Education Department issued its rules on “Gainful Employment”  targeting for-profit educational institutions, its proposal was thrown out by a federal district court as “arbitrary” and “capricious.”

The architect of these “gainful employment” rules, Bob Shireman, just wrote a paper essentially saying that for-profit schools deserve the treatment they get.

…As Shireman explains it, for-profit colleges are fundamentally different from nonprofit ones because their owners — be they shareholders for publicly traded companies or board members for privately held ones — reap personal financial gain if the institution grows in size or increases its profits.

While boards and leaders of nonprofit institutions may get bigger salaries if their institutions thrive, federal tax law specifically prohibits them — through a concept known as “nondistribution constraint” — from having an ownership interest or “unduly” benefiting personally from their organization’s net earnings. For-profit colleges “reject” that constraint by operating as for-profit companies, he argues.

The personal profit incentive that owners of for-profit colleges have increases the chances, Shireman argues, that the institutions “compromise student and public needs in pursuit of growth and profit.” While Shireman notes that “nonprofits have problems, too,” — questionable levels of student learning, rising tuitions and student debt, etc. — he is not shy in asserting that for-profits perform worse, citing the colleges’ higher debt burdens and default rates, among other things.

And it is for that reason, he argues, that for-profit colleges need more regulation “to better direct the profit motive toward socially optimal ends.” In addition to a gainful employment rule that could be made stronger with the addition of a student loan repayment rate, Shireman recommends that the government toughen the federal regulation (known as “90/10”) that requires for-profit colleges to derive at least 10 percent of their revenue from sources other than federal student financial assistance. …

Some for-profit school representatives were on hand to dispute Shireman’s assertions. For instance, College Insurrection has reported on numerous public institutions at which the President’s salary topped $1 Million.

The for-profit college officials who appeared alongside Shireman at Wednesday’s event challenged some of his assertions (and a few of his facts, noting that the paper misstates the degree of disclosure for-profit colleges make about the compensation of their executives and their accreditation outcomes). Wallace Boston, CEO of American Public University System, noted that its regional accreditor requires that a majority of its board members be independent of the company, for instance. And in response to a question, he said that his compensation this year was $560,000 — a lot lower than a lot of private and public university leaders.