‘Gainful employment’ rule drops defaults

Community college leaders like the U.S. Education Department’s final gainful employment rules, which focus on graduates’ debt-to-earnings ratio, but don’t consider default rates.

The new regulations “protect students from predatory programs that lead to high levels of indebtedness,” said J. Noah Brown, president of the Association of Community College Trustees in a statement. “The final regulations contain a critical modification sought by community colleges, and the result is a stronger and simpler framework.”

Because tuition is low, only nine percent of certificate students at public two-year institutions take out federal loans, said Brown. Community colleges feared losing aid eligibility because of high default rates for a small number of students.

However, some consumer groups said the new rules are too weak.

 

“The final gainful employment regulation does not do enough to stop the fleecing of students and taxpayers,” according to the Institute for College Access and Success (TICAS).

Dropping the default rate opens “a giant policy loophole,” writes Ben Miller on EdCentral. The debt-to-earnings measure holds career colleges accountable for their graduates’ success. The default rate included borrowers who dropped out. That’s a large group.

We know that dropouts, especially those with debt, are substantially more likely to default on their student loans, be unemployed and suffer other negative consequences. In fact, dropouts account for more than 60 percent of defaulters. Ignoring these issues could encourage colleges to be judicious about who they allow to graduate and could lead to tactics like giving retroactive scholarships to students who are about to graduate just so they can keep their debt balances down.

Career colleges will be “at liberty to defraud students with impunity, so long as they make sure they don’t graduate,” said education policy analyst Barmak Nassirian.

For-profit career colleges “will feel almost all of the sting from gainful employment,” predicts Inside Higher Ed. Education Secretary Arne Duncan estimates that 1,400 academic programs with 840,000 students will fail to meet the standards, unless they improve. Ninety-nine percent of those programs are at for-profit colleges, he said.

The for-profit colleges’ trade association said the new regulations are based on an “arbitrary and capricious” metric. “The latest version of the gainful employment regulation has done nothing to fix this fundamentally flawed and misguided proposal,” said Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities in a statement.

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