The Gainful Employment Rule — New Developments and Implications

A couple of recent announcements about the world of for-profit higher education strike me as having implications worth exploring. The first is that the "gainful employment rule," crafted by the Department of Education, has been changed in a way that appears to benefit for-profit universities. Kelly Field covered the changes in an article for The Chronicle that appeared on June 2. Her summary:

For-profit colleges, which have spent millions fighting the Education Department’s proposed "gainful employment" regulations, have won some major concessions in the final rule, due out today.

Under the rule, vocational programs whose students have the highest debt burdens and lowest loan-repayment rates will become ineligible to receive federal student aid. The changes, which give colleges more time and ways to meet the rule’s benchmarks, are expected to significantly reduce the number of programs that would be penalized by the department.

Secretary of Education Arne Duncan said the extension was designed to give programs “every opportunity to reform themselves.”

Field elaborates:

“In theory, the rule is intended to protect students and taxpayers from programs that overpromise and underdeliver, leaving students saddled with debt and no job to show for it. Though for-profits educate only 12 percent of students, they receive roughly a quarter of all student aid and account for nearly half of the student loan dollars in default.”

The final version of the rule culminates a long pitched battle, which for-universities appear to have won, largely through intensive lobbying efforts. And it’s true that the description of the gainful-employment rule, as published in the Federal Register, singles out for-profit universities as the institutions most likely to benefit by stretching the meaning of “gainful employment.” To me, the most interesting thing about the rule, in whatever form it might ultimately take, is that it could have sweeping implications for the entire postsecondary education system. And I think those implications have largely been lost because of the intense focus on for-profits, which spend huge amounts of money on advertising, have been exposed for misleading recruiting practices, and are easiest to identify as “overpromising and underdelivering.”

The Chronicle’s Jeffrey Selingo wonders, though, what would happen if the gainful employment rule were applied to all colleges and universities, not just for-profits. In an editorial that also published on June 2, Selingo reminds us that the earning power of college graduates varies enormously depending on the subjects in which those graduates major. For example, the average annual income of someone with a bachelor’s degree in counseling-pyschology is $29,000, while the average income of students majoring in petroleum-engineering is $120,000.

Yet colleges across the country charge uniform tuitions and simply do not take into account the earning power of the varied kinds of graduates they produce. Thus, in the current climate, in which most students borrow extensively in order to attend college, an art-history major and an accounting major might graduate with equal amounts of student-loan debt, but vastly different earning capacities.

The gainful-employment rule, then, represents the federal government’s first attempt to assess the value of various kinds of postsecondary educations. It’s primitive, to be sure, in that it only considers the relationship between two factors: student debt and graduating students’ earning power. It doesn’t consider a host of other variables: How well prepared is the student when he or she enters college? How serious a student is the student about getting a quality education?

Does the student have to work to pay for college (80% do, and they work an average of 30 hours a week), and does that negatively impact his or her performance? What happens if the student changes majors? Not do the authors of the rule look beyond the bachelor’s degree: What if the art history major goes to law school and becomes a successful corporate attorney? What if the accountant’s job is outsourced to India?

The gainful-employment rule doesn’t ask these questions because its authors see it primarily as a consumer-protection measure. Graduates who aren’t gainfully employed are far more likely to default on their student loans, shifting the responsibility for paying them to taxpayers. But the rule is also an assessment tool, and that could fundamentally change the country’s conception of higher education.

Next: a news release from the Institute for Higher Education Policy about the preponderance of low-income students attending for-profit colleges.

THE CHRONICLE OF HIGHER EDUCATION

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