This week, members of the newly established Institutional and Programmatic Eligibility Committee, appointed by the U.S. Department of Education, began a negotiated-rulemaking process that should ultimately strengthen federal accountability regulations for colleges nationwide. Among other topics on the virtual table, the negotiators will attempt to find consensus on reinstating the gainful-employment rule, which was rescinded by the Trump administration.
The gainful-employment rule would provide a safeguard against career-focused education programs that saddle students with high loan debt without providing them with sufficient skills to generate incomes high enough to pay back that debt. The rule would require that each program’s graduates meet benchmark debt-to-earnings ratios, and it would apply to for-profit colleges’ programs across career fields, as well as to all nondegree certificate programs in the nonprofit private and public sectors. It is especially important to promote quality in the for-profit-college sector; those colleges enroll about 8 percent of postsecondary students but confer nearly one-third of all certificates.
During negotiated rulemaking, we expect representatives of the for-profit industry to make a variety of arguments against gainful employment that will be familiar to people who have tracked these colleges over the years. Notably, they will falsely contend that the demographics of their students play an outsize role in their programs’ failing accountability measures under gainful employment. They will also probably seek to gain allies from other institutional sectors by asserting that a reinstituted gainful-employment rule will similarly affect other institutions that disproportionately serve students from marginalized communities. Leaders of those sectors should reject the overtures.
When the rule was in place, not a single program at an HBCU failed gainful employment’s debt-to-earnings test.
For-profit representatives are poised to claim that reinstituting the rule would unfairly single out institutions — including public historically Black colleges and universities and other minority-serving institutions that states have underfunded — whose graduates encounter systemic racial wage discrimination. As a result, they will contend that their graduates experience more difficulty in repaying loans because of income disparities beyond the control of the colleges they attended. But there is no evidence that gainful employment’s debt-to-earnings metrics disproportionately harm institutions or programs that serve larger shares of students of color.
In fact, when the rule was in place, not a single program at an HBCU failed gainful employment’s debt-to-earnings test.
It is shamefully true that racial income disparities exist due to systemic labor-market discrimination. White workers are paid more than their nonwhite colleagues with comparable levels of education across the board. However, for-profit colleges’ recruitment, enrollment, and program-delivery practices show why they are concerned about the gainful-employment rule beyond persistent income inequality in the labor market.
First, there’s the cost of for-profit colleges. These institutions, on average, charge more than four times the tuition of their community-college counterparts, around $15,000 compared with $3,600 per academic year. Three-quarters of for-profit-college students take out student loans, compared with one in five at community colleges and just less than half at public four-year colleges. When they take out loans, they take on significantly more debt as well.
Second, multiple studies of the labor-market outcomes of for-profit-college students show low postcollege earnings, even after carefully controlling for demographics. Moreover, student demographics do little to explain the disproportionate borrowing by for-profit-college students and the struggles that far too many of them experience in repaying loans after attending.
The correlation between gainful-employment failure and the share of Black students at a college is close to zero.
Further, analyses have shown the specific debt-to-earnings metrics and thresholds used in gainful employment have little correlation with an institution’s share of students of color. The Department of Education’s 2014 regulatory-impact analysis demonstrated as much. A more recent analysis of the 2017 gainful-employment data shows that the correlation between gainful-employment failure and the share of Black students at a college is close to zero. Programs at HBCUs are less likely to fail gainful employment than are programs at other types of institutions.
For-profit colleges often concentrate on recruiting and enrolling students from communities most marginalized by our educational and economic systems. In turn, they encourage students to take out large loans — loans that become profits for colleges’ bottom lines but too rarely set up graduates for success.
This cycle of exploitation must be broken to rein in the worst practices in the for-profit sector. The gainful-employment rule must be one part of the federal government’s approach to breaking it.
