Gainful Employment Rules Shortsighted

In a study released by the Competitive Enterprise Institute (CEI), author Kara Cheseby challenges the Department of Education’s (DOE) proposed "Gainful Employment" regulations.

Cheseby makes the case that the new rules would cripple the career college sector, which has provided vital opportunities for post-secondary education and upward mobility for underserved student populations.

  • Currently, the Higher Education Act requires that a career college must prepare students for gainful employment in order for these institutions to enroll students who are eligible for federal financial aid.
  • The DOE’s new rules would create new narrow metrics to define "gainful employment" based on student debt-to-income levels and loan repayment rates.

The DOE claims that the new rules are necessary because graduates of career colleges currently account for a disproportionate number of federal loan defaults. But as Cheseby notes, the DOE neglected to take students’ socioeconomic status into account in its evaluation of federal loan defaults and loan repayment rates.

  • The DOE claims that evaluating a newly employed graduate’s debt-to-income level is a fair assessment of whether he or she is gainfully employed.
  • However, students often attend career colleges in order to obtain entry-level positions in their chosen profession.

Career colleges have a far better record of graduating low-income and minority populations than public institutions and private, not-for-profit schools, at a substantially lower total government and taxpayer cost. Rewriting federal student aid rules to discriminate against career college students will unfairly disadvantage these communities without providing taxpayers any significant savings.

Source: Nicole Ciandella, "New CEI Study Challenges Department of Education’s ‘Gainful Employment’ Rule," March 24, 2011

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