Kay Steiger

How For-Profit Colleges Fared Under New Regulations: An FAQ on Gainful Employment

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Today various education outlets are reporting on the results of a year under the much watered down “gainful employment” rule put into place last year by the Department of Education, which aimed to (eventually) cut off funding from programs that didn’t allow students to be, uh, gainfully employed in the field in which they were trained. But because this is a super niche issue that not everyone pays that much attention to, I’ve written about this in an FAQ format. Enjoy.

Uh, what exactly is “gainful employment”?

This is generally the shorthand for one rule in a series of regulations designed to curb abuses in the for-profit college industry. According to data released last September, for-profit students account for nearly half of all student loan defaults, yet make up less than 28 percent of the student loan population. So, the Education Department decided to implement a rule to define “gainful employment,” language that was originally undefined under the Higher Education Act.

So what does that actually mean?

The original rule was stronger, but basically that means that at least 35 percent of students need to be repaying their loans, students who are repaying their loans have a debt load that is no more than 12 percent of the income of a typical graduate, or that students are paying no more than 30 percent of their discretionary incomes to pay back student loans.

To clarify, this isn’t targeting colleges generally but specific programs and this rule applies only to career schools—schools that promise to provide training as a medical technician or a graphic designer, for instance—and doesn’t apply to a liberal arts schools. That means that it’s running these numbers on, say, the cosmetology program at the University of Whatever, but not on the general student population at the University of Whatever.

If that program fails this test for three out of four years, ED cuts the program from access to student aid. That means the student will have to find a program someplace else that has a better track record of helping its students to be “gainfully employed.”

You said the original rule was stronger. What did you mean by that?

Originally, the rule said that the program needed 45 percent of students to be repaying loans, students should have debtload equal to 8 percent of expected earnings for that field, or that students are paying no more than 20 percent of their discretionary income to student loans. In the original rule, failing to meet all three requirements made the program instantly ineligible for student loans; failing two meant it had “restricted” access to federal loans.

But even that higher standard wasn’t enough for a lot of progressive groups. A letter sent to ED in 2010 by The Institute for College Access and Success (TICAS), the United States Student Association (USSA), U.S. Public Interest Research Group (PIRG), and my former employer, Campus Progress, said the originally proposed rule “does not go far enough and requires further clarification in some areas.” These groups did ultimately support the originally proposed rule.

So what happened?

Basically for-profit lobbying groups spent more than $16 million on lobbying to water down the rule. They engaged in a range of tactics, from flying students in from all over the country to enlisting the help of Top Chef star Tiffany Derry. First ED delayed implementing the rule, then they issued it as a significantly weakened one.

For-profit groups still sued the Department of Education over the rule, even in it’s weaker iteration.

OK, so we’re stuck with this rule for now. How did for-profit colleges do?

It looks like 193 programs at 93 institutions, totaling 5 percent of all for-profit college programs, still failed to meet all three requirements. The Department of Education hasn’t yet posted a full list, but I’ll update the post when it does.

What kinds of programs were the most problematic?

According to Inside Higher Ed, “More than half of all programs in criminal justice, as well as those that prepare secretaries, medical assistants, and pharmacy and medical records technicians, failed to meet any of the department’s standards. Other programs — including photography, interior design and certificate programs for licensed professional nurses — fared relatively better, with more than 70 percent meeting at least minimum standards.” You can see a graph of the programs here.

Which schools had these programs? 

Again, according to IHE, it looks like “one program at the University of Phoenix, one program at the Kaplan Career Institute and two at Kaplan College, represent some of the largest publicly traded for-profit colleges,” plus “about one in 10 programs at the for-profit Art Institutes.” Those were the big names. Lots of others on the list were tiny schools you’ve probably never heard of.

But even these numbers include a small percentage of schools that should be counted. As Amy Laitinen writes at Higher Ed Watch, “Only a small percentage of programs were included in the GE calculations. From approximately 28,000 programs, just 3,695 were captured in the data. This small universe is due in part to a lack of timely reporting by schools, and because many of the programs were deemed “too small’ to be counted.”

So what happens to them?

They have to fail all three standards for three more years over the next four before anything will happen. This means the earliest any of these programs will be in trouble is 2015.

That’s it, then?

Pretty much. There are plenty of folks who aren’t happy about this. Andrew Leonard at Salon writes, “The White House identified a real problem — for-profit schools scamming taxpayer money to provide poor educations — and attempted to address it forthrightly. But after dogged resistance and intense lobbying, abetted by an opposition party that, in this particular area, has flagrantly abandoned its get-government-out-of-the-private-sector ideology, the administration’s efforts to fix the broken system have become so watered down that one can rightly wonder if there will be any meaningful longterm effect at all.”

Written by kaysteiger

June 26, 2012 at 5:30 PM

Posted in higher education

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