Secretary of Education Betsy DeVos Ends “Gainful Employment Rule”
In 2014, the Obama Administration attached some strings to federal student loan aid going to for-profit colleges and universities. This was the deal: In exchange for continued access to student loan dollars, for-profit schools had to show that students were finding gainful employment upon graduation and paying off their loans. Additionally, the new standard required schools receiving federally-guaranteed loan dollars to disclose debt levels and salary data from their graduates. The rule became known as the “Gainful Employment Rule.”
Betsy DeVos, the 17th Secretary of Education
Supporters of the Gainful Employment Rule believed it was necessary to hold for-profit institutions accountable. Studies had shown that former students of for-profit colleges and universities defaulted at higher rates than those of non-profit institutions and public universities.
Opponents argued that the Obama rule amounted to an unfair burden on these institutions. According to documents from the Department of Education, the Gainful Employment Rule relied on debt-to-earnings formulas that were “fundamentally flawed,” because they failed to account for factors other than program quality that directly influenced student earnings and outcomes.
Additionally, Secretary DeVos held that the rules didn’t provide transparency regarding program-level debt and earnings outcomes for all academic programs and that they wrongfully targeted some academic programs and institutions while ignoring other programs that result in worse outcomes and higher student debt.
Not long after the rule took effect, a number of private institutions collapsed – such as Corinthian Colleges and ITT Tech. Their collapse left current students floundering, having already spent borrowed thousands in tuition money. Others had thousands in student loan debt and worthless degrees.
For-profit industry representatives also argued that the Gainful Employment Rule has already had its desired effect: The worst and most abusive for-profit institutions have already collapsed or closed down under the rule. Since 2010, nearly half of all for-profit colleges then in existence have already closed down. Enrollment has declined by 1.6 million students.
The rule doesn’t formally take effect until July 1st of 2020, but DeVos’s order allows affected schools to implement the change now.
College Scorecard Expanded
In its place, the Department of Education has expanded the College Scorecard – an online resource tool launched by the U.S. Department of Education to help students make informed decisions about their education options after high school. According to the Department of Education, The tool now includes information on 2,100 additional postsecondary education options and more comprehensive information about graduation rates. The Department is also releasing preliminary information on student loan debt by field of study available to download.
“We committed to students that we would continually improve the College Scorecard so that they could access relevant, accurate and actionable data as they make decisions about their education after high school,” said Secretary DeVos. “The updates released today are another step in fulfilling that promise. We look forward to seeing how students, parents, institutions, and researchers utilize this important information.”
For the first time, the College Scorecard consumer tool now has information on 2,100 non-degree granting institutions (institutions that only award certificates). Adding these types of institutions into the consumer site gives prospective students and their advocates a more complete sense of all their postsecondary options. Previously, the Scorecard consumer site provided profiles for approximately 3,700 degree-granting institutions.
The College Scorecard now also includes information on graduation rates for non-first-time and non-full-time students and the percentage of students who transferred or were still enrolled in school. Previously, the consumer site only presented graduation rates for first-time full-time students which may not be representative of all students at many institutions.
According to the Department of Education, repealing the Gainful Employment Rule will cost $6.2 billion over the next decade. This outlay includes grants and loans to students attending for-profit institutions that would not have qualified for funding under the rule.
Career Education Colleges and Universities – an industry group representing for-profit colleges, applauded the Department of Education’s decision. “What the Department has put forth creates a single standard for measuring program quality and empowers prospective students with the information needed to select their preferred academic and career preparation pathway,” said spokesperson Steve Gunderson. “This standard is universally fair and applies to all students, in all programs, at all schools, regardless of sector – something that previous Administrations did not do.”
Congressional Democrats and other interest groups objected to the rule change. Bobby Scott (D-Va.), Chairman of the House Education and Labor Committee, argued that the decision “will prop up low-quality for-profit colleges at the expense of students and taxpayers.” Sen. Patty Murray (D-Wash.), the ranking Democrat on the Senate education committee, calls it a “gift to predatory programs and for-profit colleges that want to take unsuspecting students for a ride.”
Sandy Baum, a non-resident fellow at the Urban Institute, objects. Baum claims that Secretary DeVos and the Department of Education misstated her research as they attempted to justify the rule’s repeal, long sought by for-profit colleges and universities. Specifically, the Department erred in including Associates Degrees in liberal arts fields along with associates-level professional education credentials.
“Our research shows that unlike other community-college credentials, which are valued by employers, associate degrees in the liberal arts hold little labor market value as final degrees,” writes Baum in a letter cosigned by Harry Holzer, a Georgetown professor and her co-author on the 2017 book “Making College Work.”
“The Education Department uses this finding to argue that the gainful-employment rules — which actually apply to non-degree programs at all institutions, not just the for-profits — unfairly singled out the for-profit institutions. The department rescinded these rules rather than applying them strongly and sensibly or improving them.”
“Most for-profit programs explicitly promise students preparation for specific occupations. General associate degrees are not directly career-oriented; instead, they are designed to lead to transfer to four-year programs.” she continued.
Sandy Baum, Co-Author of “Making College Work.”
Jason Van Steenwyk is an experienced financial industry reporter and writer. He is a former staff reporter for Mutual Funds, and has been published in SeekingAlpha, Nasdaq.com, NerdWallet, Value Penguin, RealEstate.com, WealthManagement.com, Senior Market Advisor, Life and Health Pro and many other outlets over the past two decades. He is also an avid fiddle player and guitarist. He lives in Orlando, Florida.