Gainful Employment: An Unfair Rule With Bad Consequences

Recently, the U.S. Department of Education unveiled its controversial College Scorecard website and accompanying data. This was the first time that student salary and debt information was made available on one page for the public to see and scrutinize. As expected, outcomes at some institutions were excellent while others were very poor.

The Scorecard is intended to prod institutions to take action to improve results for students. Imagine the outcry if, based on this first round of data, the Department penalized (or closed down) institutions whose outcomes were weak, without giving them a chance to make changes.

But that is what may happen in the upcoming year with the Department of Education’s Gainful Employment (GE) regulation. It judges degree programs on the debt and earnings of their graduates within just one area of higher education—the for-profit sector.

While the GE Rule may result in the closure of many poor-performing programs, this complex regulation will also harm many reputable ones by penalizing those that actually produce excellent outcomes for their students and imposing sanctions for poor performance without offering an opportunity to improve. 

Let’s look at specific examples. The School of Visual Arts is a well-respected, highly competitive fine arts and design college in New York that happens to be for-profit. It has a high graduation rate (66 percent), a low student loan default rate (7 percent), and a low number of defaulters (59). These are exemplary outcomes, but because its graduates pursue creative and fine art careers that do not pay very much the first few years after graduation, many of its programs won’t pass the regulation. 

In fact, Mark Schneider of College Measures, an expert in outcomes in higher education, analyzed debt and earnings information from the College Scorecard and concluded that virtually all programs at fine arts colleges in the country would fail the Rule. However, only for-profit programs like those at the School of Visual Arts would be penalized and ultimately shut down as a result. The non-profit schools get a free pass.

Another, much more personal example involves the institution where I work, Monroe College in the Bronx, NY.

Given the negative media attention surrounding for profit education, anyone watching the news might be surprised to know that there are for-profit institutions offering students better outcomes than our public or non-profit competitors. Monroe College is one of them.

Founded more than 80 years ago, we are a time-tested pioneer in educating minority and lower-income urban students, a segment of the population that has been largely underserved by post-secondary education institutions. Our campuses in the Bronx and New Rochelle provide focused, career-oriented, quality education to approximately 7,000 students each year. 

Students choose Monroe because of our strong reputation and outcomes, which run counter to common misperceptions about the value of for-profit programs. Our graduation rate is in the top 5 percent of all degree-granting institutions in the United States whose student body is comprised of a majority of Pell recipients and according to U.S. News & World Report, we are the leading regional university for graduation rates that considerably exceed expectations based on student demographics. 

Moreover, Monroe is a New York state leader in graduating African-American and Hispanic women with Associate degrees. We have an award-winning culinary program that competes for students almost exclusively with culinary programs at public and non-profit colleges, including some of the biggest names in culinary education.

That culinary program also competes with a culinary program at a regional non-profit college that is exempt from GE’s mandates. Looking broadly across all programs at the two colleges, Monroe has a 53 percent graduation rate, compared to 11 percent at the non-profit college. We also have a 5.7 percent student loan default rate, versus 17 percent at the non-profit college. Yet, if our program fails under GE, we would be required to post a warning notice to prospective students that, among other things, directs them to information on competing programs like the one where the outcomes clearly trail Monroe’s.

Here’s the irony: As the Department’s College Scorecard itself shows, the typical student at that college will finish the program with nearly $5,000 more in student debt and can expect to make less salary than those who went to Monroe’s program can. 

Students comparing the two programs, however, won’t be given this critical information unless they seek it out themselves. Unlike Monroe, the other college would be under no obligation to proactively share program outcomes to prospective students. It makes no sense to refer a student to a program at another college with inferior outcomes just because that program is non-profit. 

So how can the Department right the unintended wrongs stemming from GE’s design flaws and help vulnerable quality programs now that the Rule is in effect?

First, requiring that ALL institutions disclose earnings and debt by program data would be a step very much in line with the Department’s commitment to help higher education consumers make better-informed decisions. Requiring performance disclosures from some programs and not others does a disservice to students and simply cultivates misperceptions about the educational value of for-profit and non-profit programs.

Second, the Department should revisit the wisdom of penalizing institutions before they have a chance to see their data and make constructive changes.

Currently, failing a single metric signals the death knell for a program; there is no meaningful opportunity to take remedial actions that would bring failing programs in compliance with the regulation. The so-called transition period that was intended to do so uses retroactive data in the first few years, rendering it ineffectual. There’s nothing a college can do to change data from the past. As such, program closure is the harsh penalty that immediately results.

Here’s another way to think of it: Imagine you are the president of a college subject to the GE Rule and you received results showing that graduates of a program have too much debt in relation to their earnings. Even if you made the bold decision to make the program completely free for all students, effective immediately, the program would still fail the Rule since doing so would only help future students. The Rule judges program value solely on the past.

Quality programs delivering strong outcomes for students deserve a viable chance to make improvements. Ethical institutions receiving information for the first time should have the ability to make appropriate changes to help students. The current regulation doesn’t permit this common sense response. 

The Gainful Employment Rule was intended to make sure that college students attending certain programs secured meaningful employment without too much debt and that institutions falling short of that mark lose their access to federal financial aid programs. But because of its uneven application, some bad programs will be protected while some good ones will be punished. 

As a member of the Gainful Employment Negotiated Rulemaking Committee for the Department of Education back in the Fall of 2013, I advocated to have this design weakness rectified, but to no avail. Fortunately, there’s still time for the Department to change the GE Rule before it does serious harm.