For-Profit Colleges Under Pressure From Proposed ‘Gainful Employment’ Rules

A U.S. Department of Education proposal that would tie federal financial aid eligibility of for-profit colleges to the results the schools deliver drew a wide array of reactions ahead of its comments deadline this week. The association that represents the schools took advantage of the comment period to build up ammunition against the rule—including a new study.

For-profit schools promise big results for their students, and the U.S. Department of Education (DOE) wants to ensure the schools hold up their end of the bargain.

But the agency’s proposed method of doing so—a “gainful employment” rule that ties the schools’ financial aid eligibility to the success of its students—is controversial and drew an array of reactions. More details below:

The proposed rule is unlawful and will needlessly harm millions of students who attend private-sector colleges and universities.

About the plan: In March, DOE announced draft rules to regulate the for-profit education industry, which often focuses on vocational programs, teaching skills for careers in fields like nursing and law enforcement. Under the proposal, for-profit programs would need to meet thresholds for debt loads carried by their students and students’ loan-repayment rates. Programs that failed to meet the rule’s tests would lose their eligibility to participate in the federal student loan program. The new rules, which would also apply to certificate programs offered by nonprofit colleges and universities, were prompted by a 2012 court decision that largely invalidated an earlier version of  regulations.

Identifying low performers: The agency proposed the rules in part because for-profit programs represent just 13 percent of all students in higher education but 31 percent of all student debt. Students in for-profit programs are also more likely to default on their loans than students at public institutions. “Higher education should open up doors of opportunity, but students in these low-performing programs often end up worse off than before they enrolled: saddled by debt and with few—if any—options for a career,” U.S. Education Secretary Arne Duncan said in a March statement. “The proposed regulations address growing concerns about unaffordable levels of loan debt for students enrolled in these programs by targeting the lowest-performing programs, while shining a light on best practices and giving all programs an opportunity to improve.”

Gearing up for a fight: The Association of Private Sector Colleges and Universities opposes the rule, offering a lengthy response during the comment period and commissioning a study showing the effect the gainful-employment rule would have on students and for-profit institutions. “The proposed rule is unlawful and will needlessly harm millions of students who attend private-sector colleges and universities. The department has evidently prepared the rule to circumvent the district court’s decisions to strike down the prior version of these regulations; but the proposed rule contravenes the teachings of those cases,” APSCU President and CEO Steve Gunderson said in the group’s comments on the regulations [PDF]. The association asked DOE to withdraw the proposal entirely.

Other association takes: Other organizations offered different views. The American Council on Education, which represents more traditional educational institutions, generally supported the concept [PDF] of a gainful-employment rule but took issue with the specifics, arguing that the proposal would be ineffective against underperforming programs and “should be both modified and strengthened.” Meanwhile, in a joint comment [PDF], the American Association of Community Colleges and Association of Community College Trustees agreed that such a policy was necessary but noted that compliance would be difficult. “Unfortunately, the [rule’s] proposed metrics, which are primarily and appropriately focused on programs that lead to excessive debt, indiscriminately impose expensive and burdensome reporting and disclosure requirements on all institutions with [gainful employment] programs, regardless of their cost, borrowing rates, and risk to students,” the associations wrote.

Outside of the education sphere, a variety of consumer groups, associations, and labor unions, including the NAACP and the National Consumer Law Center, sent a letter supporting gainful-employment rules, according to Inside Higher Ed, but stating that “the proposed regulation is too easy to game, and its standards are too low.”


Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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