The Higher Education Act of 1965 requires proprietary and vocational (read “for-profit”) colleges, other than clearly designated “liberal arts” or non-degreed vocational programs, provide “an eligible program of training to prepare students for gainful employment in a recognized occupation.” Compliance is a condition for those colleges’ students to be eligible for federal financial aid including guaranteed student loans.
Unfortunately, the Higher-Education Act did not define “gainful employment”. So, now the Education Department is poised to issue a proposed rule that does. The DOE’s most-recent draft of the “gainful employment” rule bars federal aid for programs where a majority of the graduates’ loan payments under a 10-year repayment plan exceed 8 percent of their expected earnings.
Two weeks ago at the Career College Association (CCA) convention of for-profit colleges, this proposed rule dominated discussion. Critics of for-profit colleges argue that such institutions are about to receive comeuppance for aggressive recruiting practices and high tuition rates. I’m all for managing post-graduation debt. I also favor making sure students get the education they were promised. However, this proposed gainful employment rule doesn’t accomplish either goal. In fact, it raises some troubling questions:
• Why does the rule only apply to for-profit schools? Are graduates of traditional colleges immune to the burdens of student debt?
• What roles do students themselves play in their post-graduate debt burden? Why should the decisions of students who borrow more money to extend their college career penalize students who graduate on-time? Should the financial condition of students who rely on loans affect those students who have saved?
• Shouldn’t critics examine the “total cost to degree” rather than the absolute annual tuition rate when comparing for-profit colleges to other education options?
• Do for-profit colleges provide opportunities for educational innovations that the structures of not-for-profit institutions cannot easily foster?
The CCA estimates that 18% of programs at for-profit colleges will fail the test. Even worse, 33% of students at for-profit colleges attend one of these potentially failing programs. Fortunately, last week the DOE postponed implementation of the rule to allow additional study. Hopefully, the DOE’s final rule will consider not only these issues but also the most critical question about unintended consequences. Will implementation of this rule eliminate college as an option for less affluent or nontraditional students?
