Proposed Rules on Measuring ‘Gainful Employment’ of Graduates Please For-Profit Colleges

For-profit colleges are happy about an aspect of a new draft of the U.S. Department of Education’s proposed rules that spell out how the institutions must show that their graduates are adequately prepared for jobs.

To be eligible to participate in the federal student-aid program, providers of vocational programs are required to prepare students for “gainful employment in a recognized occupation.” But federal regulations do not define “gainful employment” or how institutions should measure their own performance on that score, and the department has been preparing new rules to spell out how that standard needs to be met.

The sector has been criticized for charging too much tuition without adequately preparing students for jobs. Many students at for-profit colleges also take on large amounts of debt, which compounds their financial problems if they don’t secure employment after graduation.

The draft rules, which have not been made public, were sent from the Education Department to the White House Office of Management and Budget for vetting, according to an Education Department official. Analysts at Credit Suisse and others have said that the draft regulation includes an exemption from the “gainful employment” requirement for institutions with a completion rate of at least 50-percent and a job-placement rate of at least 70 percent.

An earlier draft of the rules had set the completion rate at 70 percent. The job-placement rate was the same.

The regulation on “gainful employment” is one of 14 rules that a panel of stakeholders had examined over a three-month-long process last fall and early this year. Because the panel could not reach consensus on all 14 rules, the department is now charged with drafting the regulations.

The Education Department is expected to publicly unveil the draft rules in May or early June. Final regulations are expected to be out by November.