193 Vocational Programs Fail 'Gainful Employment' Test

June 26, 2012

About 5 percent of vocational programs that are subject to the Education Department's controversial gainful-employment rule failed to meet the regulation's three key benchmarks that will eventually be required for them to receive federal student aid, data released by the department today show.

The graduates of 193 programs at 93 different institutions, all of them for-profit, are carrying debt-to-income ratios that are too high and have loan-repayment rates that are too low under the benchmarks the Department of Education established in the rule, issued in June 2011.

None of those programs will receive any sanctions because the data were released for informational purposes only. Full enforcement of the regulations will be phased in over the next several years. Starting in 2013, the affected vocational programs must meet at least one of three benchmarks in at least three out of four consecutive years in order to remain eligible for federal student aid.

In order to meet the first benchmark, at least 35 percent of a program's graduates must be actively repaying their student loans. In addition, under the rules the median student-debt burden of a program's graduates cannot exceed 12 percent of those students' aggregate annual total income, nor 30 percent of their annual discretionary income.

The gainful-employment rule applies only to nondegree-granting vocational programs, which include 42,000 programs at public and private colleges, and roughly 13,000 programs at for-profit colleges. Many vocational programs are exempt from the regulation, however, because they have fewer than 30 student-loan borrowers.

The data released today cover 3,695 vocational programs at 1,336 institutions, which enroll 43 percent of all students in career-training programs, according to the Education Department.

Although the 5-percent failure rate for the programs is in line with the department's estimate, the data shed new light on the repayment rates and debt-to-income ratios of specific programs. Among the vocational programs included in the data set, those that train students for security services, medical-office assistance, and law-enforcement administration had the highest percentages of failing all three of the gainful-employment metrics, according to an analysis provided by the department.

The aim of the gainful-employment rule is to ensure that federal dollars are helping students attend programs that are good investments and help prepare them for jobs that pay well. But the rule has been heavily criticized by for-profit colleges, which strongly lobbied against it last year, and other higher-education groups. Those groups were able to successfully convince the Education Department to soften some of the regulations.

Congressional Republicans have been critical of the rule, which they say unfairly targets the for-profit college sector. Democrats have been more supportive of it. Some, such as Sen. Tom Harkin, an Iowa Democrat who has led an inquiry into the for-profit sector, have said the regulations aren't strict enough.

Education Secretary Arne Duncan said in a statement: "Career colleges have a responsibility to prepare people for jobs at a price they can afford. Schools that cannot meet these very reasonable standards are on notice: Invest in your students' success, or taxpayers can no longer invest in you."

The Association of Private Sector Colleges and Universities, the main trade association for for-profit colleges, reiterated its staunch opposition to the gainful-employment rule in a statement on Monday night.

The regulation uses "a faulty metric that does not accurately measure the services provided by career colleges and universities," said Steve Gunderson, president and chief executive officer of the group. "This burdensome regulation, if implemented as currently construed, will deny access for hundreds of thousands of Americans such as working parents, veterans, and other nontraditional students who have oftentimes taken a different path when seeking and obtaining their postsecondary education."