How the Feds Plan to Violate Student Privacy

Though civil liberties groups have been slow to react, there’s a disturbing aspect to the Education Department’s new “gainful employment” rules pertaining to for-profit colleges: Starting in 2015, the Social Security Administration (SSA) will start turning over its data on the earnings of individual students at career colleges to the Education Department. This is so it can assess whether the students’ ratio of federal student loan debt to income complies with other gainful employment regulations issued by the department. Under the new rules, one of the metrics for deciding whether students can use federal aid (grants and loans) to attend a post-secondary vocational program is whether the average debt-to-income ratio of the school’s graduates is no higher than 12 percent (or 30 percent of the graduate’s “discretionary income” as defined by federal rules).
 
The idea behind the debt-to-income rule is to assess whether the graduates of vocational programs–including programs offered by community colleges and other nonprofit institutions as well as career colleges–are actually getting the jobs for which their training at tax-subsidized expense is supposed to be preparing them. But the SSA-Education Department arrangement–the result of an unprecedented agreement between the two federal agencies–raises serious problems related to both the privacy of the students involved and the transparency of the process of determining whether a school has failed to meet the debt-to-income threshold.
 
Most troubling is the involvement of the Social Security Administration–and also, indirectly, the Internal Revenue Service, which supplies earnings information to the SSA based on tax returns. After all, the SSA is supposed to be in the business of calculating Social Security benefits, not monitoring compliance with laws that have nothing to do with Social Security. The IRS, in turn, is supposed to be in the business of collecting taxes, including Social Security taxes, not helping the Education Department decide whether the University of Phoenix is in compliance with new gainful employment rules. Both agencies, the IRS in particular, are bound by strict laws forbidding the sharing of data except as explicitly permitted by federal statute, such as the one that allows the SSA to use IRS-supplied tax-return information along with filings by employers to determine benefits. Taxpayers have historically relied on the nearly complete confidentiality of their tax-return information as an incentive to honesty in reporting. Controversial provisions in the 2010 “Obamacare” health law that turn the IRS into an enforcement agency for compliance with the law’s individual insurance mandate have raised serious and justifiable objections. Now, thanks to an SSA-Education Department partnership that has no clear statutory authorization, both the SSA and the IRS will be complicit in an arrangement that has nothing to do with either agency’s statutory mandate.

In a May 26 essay in Inside Higher Education, Daniel J. Solove, a law professor at George Washington University, pointed out that neither the SSA nor the Education Department has spelled out exactly how the Education Department will "receive student income data and how this data will be treated." The plan right now—set to go into effect in four years–is for the SSA to take the actual incomes of students who have completed vocational programs at a particular school, and aggregate those incomes into an average number that the Education Department would use to calculated gainful employment. Presumably no students' names would be attached to any of the numbers, providing a measure of privacy protection. In response to an inquiry by GOP Sen. Orrin Hatch of Utah Social Security Commissioner Michael Astrue said that the data his agency will supply to the Education Department will be "strictly statitstical." Yet, as Solove observes, "there are no details as to exactly what additional data SSA will be collecting about students and what technical and administrative safeguards the agency will have in place to protect the increased data collection."

This, of course, raises the other issue implicit in the Education Department's data-collection partnership with the SSA: transparency. As Solove wrote, "Without understanding what data went into the Education Department's calculation, institutions and students will simply be informed of ED's conclusion that they failed to meet a certain threshold and that they will no longer be eligible for federal financial aid." Calling the Education Department's calculation a "black box" to which neither students nor educational institutions would have access, Solove pointed out that career colleges and other operators of vocational programs will have no way to contest adverse Education Department decisions. Furthermore, data-sharing among multiple federal agencies means an increased likelihood of leaks and other security breaches.
 
Many seem not to mind the rules' implicit threat to the privacy of wage-earners and taxpayers. The gainful employment rules, while on their face applying to nonprofit as well as profit-oriented vocational programs, specifically target the latter category for all practical purposes. (Community colleges typically charge rock-bottom tuition because of their large taxpayer subsidies, and their students usually incur little federal debt.) Much of the impetus for strict gainful employment standards comes from a Democratic presidential administration that is ideologically hostile to the idea of a private market for higher education. This is the same administration that, working with a Democratic Congress, killed off the student-loan industry in the private sector.
 
But some market-oriented conservatives, taking a sauce-for-the-gander stance, have suggested that the IRS start releasing earnings data on the graduates of all institutions of higher learning, including non-profit liberal arts colleges, lackluster state universities, and elite public and private research behemoths. In a May 8 essay for the Chronicle of Higher Education, Richard Vedder, director of the Canter for College Affordability and Productivity, detailed what he argued would be the benefits of having the IRS calculate the mean and median earnings by college of its graduates and then release the data (the information would come from lists of students' Social Security numbers supplied by the colleges so that the students themselves would remain anonymous). Vedder wrote: "Students could readily compare colleges not only in terms of costs (based on tuition charges less expected financial assistance), but also potential future revenues. Companies, including those that rank colleges, could calculate estimated average rates of return on families' investment in colleges." Vedder suggested that the IRS further break down its findings by academic unit of the colleges in question: the business school, the college of engineering, and so forth.
 
Of course everyone already knows that graduates of Harvard earn more on average than graduates of Podunk State, and that a B.A. in art history qualifies its holders for…a receptionist's job at an art gallery, maybe. A recent study by Georgetown University of the median earnings by major of college graduates was like "duh": Engineers at the top of the salary heap, holders of bachelor's degrees in the humanities, the arts, education, and social work competing for "trickle-down table scraps," as an article in Fast Company put it the report. The website Payscale.com (relied on by the Center for College Affordability and Productivity in its college rankings for Forbes magazine) offers fairly accurate gauges of starting salaries for many occupations, although its data are self-reported. Still, Matthew Denhart, administrative director of the Center for College Affordability and Productivity pointed out, "The findings [that the IRS might come up with under Vedder's proposal] might be really interesting. We might be surprised, for example, that graduates of UCLA might make more money than graduates of UC-Berkeley [the most prestigious campus of the University of California system]."
 
Vedder's proposal is a hypothetical, and even Denhart concedes that it is "a little troubling. It would give the government a lot more power." The problem is that under the Education Department's new gainful employment rules, the government already has abrogated to itself that power, over one segment, the vocational segment, of higher education. It's not hypothetical. By enabling the IRS and the Social Security Administration to collect and use data for purposes never envisioned when those agencies were created, the department's new rules are grave threats to students' privacy and to principles of transparency that ought to be central to democratic governments.

Charlotte Allen

Charlotte Allen blogs for the Los Angeles Times and writes frequently about cultural trends for the Weekly Standard.

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