Look at outcomes for all colleges

Federal aid is subsidizing colleges with low graduation, loan repayment and employment rates, writes Judah Bellon on Minding the Campus. Instead of singling out for-profit higher education, regulators should scrutinize the outcomes of all colleges and universities that rely on federal loans and grants.

For-profit colleges enroll more black, Hispanic, low-income and older students than public and nonprofit institutions. Their no-frills programs attract working students who need a flexible schedule, writes Bellon. Technical training is the strong suit of for-profit colleges, which adjust quickly to employer demand.  For-profit students are more likely to complete certificates and associate degrees than community college students.

However, for-profit students are much less likely to complete four-year degrees and much more likely to default on student loans. That inspired the U.S. Department of Education’s attempt to enforce “gainful employment” rules limiting aid to programs whose graduates don’t earn enough to pay back their loans.

Regulate the bad applies, writes Bellon. But don’t single out for-profit higher education. If students are failing to graduate for jobs or unable to pay back their loans, it doesn’t matter if they attended a for-profit, private nonprofit or public institution.

‘Gainful employment’ regs will return

The U.S. Education Department will rewrite “gainful employment” regulations fought bitterly by for-profit colleges, according to a notice published in the Federal Register. The department plans to use “negotiated rule-making” to move forward its agenda on college aid and affordability, substituting regulation for legislation, notes Inside Higher Ed.

The traditional venue for enacting long-term changes to help students afford, attend and graduate from college would be the Higher Education Act, the massive law governing federal financial aid programs that is periodically rewritten to account for changing times or to pursue new policy goals.

Usually, negotiated rule-making comes after the revised act is signed into law, to wrangle with details and write more precise regulations to put a legislative vision into practice. The Education Department convenes a panel of stakeholders — representing different sectors of higher education as well as some advocacy groups — to hammer out new regulations for colleges to follow.

The Obama administration has proposed expanding Perkins Loans and federal work-study to reward colleges that offer “good value” by keeping cost-per-degree numbers down. However, spending more will require legislation.

The department used “negotiated rule-making” to write the “gainful employment” rule, which was partially overturned in court last year.

Congress members are pushing back. House Committee on Education and the Workforce Chairman John Kline, R-Minn., Rep. Virginia Fox, R-N.C., and several Democratic representatives sent a letter urging Secretary of Education Arne Duncan to “abandon these harmful regulations and instead work with Congress to strengthen the nation’s higher education system through reauthorization of the Higher Education Act.“

Judge strikes ‘gainful employment’ rule

Parts of the Education Department’s “gainful employment” rule are invalid, a federal judge ruled Saturday. The for-profit colleges’ trade association had challenged the rule, which could cut off student loan eligibility to vocational programs whose graduates don’t earn enough to pay off their loans. The department has authority to regulate career programs based on graduates’ earnings and debt levels, ruled Judge Rudolph Contreras of the U.S. District Court for the District of Columbia. However, the rule requiring at least 35 percent of graduates to be repaying their student loans was “arbitrary and capricious.”

. . . Judge Contreras says the department failed to provide a factual basis for why a repayment rate of 35-percent would be a “meaningful performance standard.” Instead, he wrote, it has said it chose that figure “because approximately one quarter of gainful employment programs would fail a test set at that level.” But the department could have chosen a percentage under which only one-tenth of the programs would have failed and justified it by the same rationale, he said.

The rule’s other provisions, which compare graduates’ debt to earnings, “were based upon expert studies and industry practice—objective criteria,” the judge ruled.

But because the debt-to-income measures were intertwined with the debt-repayment measure, he said, he had to vacate them too.

By the same reasoning, he also vacated two other provisions that rely in part on the debt-repayment measure: one that requires institutions seeking to offer a new vocational program to get prior approval from the Education Department, and one that requires institutions to provide data to the department for calculating the debt measures.

The Education Department also ordered institutions to disclose a vocational program’s costs, on-time graduation rate, job placement rate and median loan debt to potential students. That part of the rule will stand.

A 35 percent repayment rate is embarassingly low, writes Ed Sector’s Kevin Carey. Can the industry really make an argument for a lower rate? 

The for-profit industry’s trade group is standing up in front of the world and saying it can’t live with a rule that excludes programs from federal financial aid only if two-thirds of students are failing to pay loans back and–emphasis, and–the program also fails both debt-to-income measures, for three out of four years.

The Education Department is likely to appeal the ruling. The judge wants more justification for the repayment rate. That ought to be doable.

5% fail ‘gainful employment’ test

Five percent of college career programs — all at for-profit colleges — have failed all three “gainful employment” rules, the U.S. Education Department announced Tuesday. The rule covers non-degree programs.  Here’s a chart showing the programs.

Vocational programs must show that 35 percent of former students are repaying their loans, repayment takes no more than 12 percent of earnings for the average graduate and debt is no more than 30 percent of discretionary income.  Starting in 2015, if programs have failed those tests in three out of four years, students will not be able to use federal aid to enroll.

The Education Department’s data is inaccurate, some for-profit colleges charged. “The Department of Education’s so-called ‘gainful employment’ regulation has always been and remains today a faulty metric,” said Steve Gunderson, president of the Association of Private Sector Colleges and Universities. The APSCU is challenging the regulations in court.

Some career fields showed more problems, notes Inside Higher Ed.

More than half of all programs in criminal justice, as well as those that prepare secretaries, medical assistants, and pharmacy and medical records technicians, failed to meet any of the department’s standards. Other programs — including photography, interior design and certificate programs for licensed professional nurses — fared relatively better, with more than 70 percent meeting at least minimum standards.

. . . About one in 10 programs at the for-profit Art Institutes, owned by the Education Management Corporation, also fell short.

Several community college programs failed two of the three tests, including programs at McLennan Community College and Trinity Valley Community College, in Texas.

What for-profit colleges do right

For all the failings of four-year for-profit colleges, the two-year for-profits do a good job graduating students, writes Jordan Weissmann in The Atlantic. Nearly 60 percent of students at for-profit schools earn an associate’s degree or professional certificate within three years, compared to 22 percent of community college students.

Including community college students who transfer to a four-year institution before earning an associate degree might boost completion stats to as much as 40 percent, according to the American Association Community Colleges. In addition, for-profit colleges award a greater percentage of certificates, which are faster and easier to complete. But there’s still a lot to learn from the for-profit colleges’ success with hard-to educate students, Weissmann concludes.

For-profit colleges have been singled out for “gainful employment” regulation that should apply to all colleges, editorializes the Wall Street Journal.

The Obama Administration argues that for-profits present a bigger risk. While they educate 12% of students, they receive a quarter of federal student aid and account for nearly half of loan defaults. However, career and technical schools also enroll a larger share of “high risk” students who are more likely to be poor, racial minorities, single parents and first-generation students. Studies that control for such factors find similar default rates among students at for-profits, community colleges and historically black colleges.

If gainful employment rules were applied to all colleges, “many historically black colleges and community colleges in the inner cities where wages are lower would also be barred from taking federal student aid,” the Journal argues.

Obama: Raise tuition, lose federal aid

College affordability was the theme of President Obama’s speech at the University of Michigan yesterday. He called for spending more on Perkins loans and work-study programs — going from $3 billion now to $10 billion  – but only at colleges and universities that provide “value.” Students at colleges that raise tuition could lose access to loans and work-study jobs.

In addition, the president’s plan (pdf) includes a $1 billion “Race to the Top for college affordability” and a $55 million “First in the World” competition to encourage productivity innovations, reports the Washington Post.

Higher education — including community colleges and lifelong learning for workers — is “an economic imperative,” Obama said. While he proposed increasing tuition tax credits and keeping interest rates low on student loans, he said that’s not enough. “Look, we can’t just keep on subsidizing skyrocketing tuition.”

So from now on, I’m telling Congress we should steer federal campus-based aid to those colleges that keep tuition affordable, provide good value, serve their students well.  (Applause.)  . . . If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down.

If “provide good value” and “serve their students well” means anything, it means the federal government will monitor graduation rates and employment outcomes, as well as tuition, for the entire higher education sector. Currently, “gainful employment” rules, which monitor former students’ earnings and ability to pay back loans, cover only for-profit colleges and community college vocational programs.

Following the speech, Molly Corbett Broad, president of the American Council on Education, issued a statement saying there’s concern that the proposal would “move decision-making in higher education from college campuses to Washington, D.C.”

Sen. Lamar Alexander, R-Tenn., a former education secretary, said the autonomy of U.S. higher education is what makes it the best in the world, and he’s questioned whether Obama can enforce any plan that shifts federal aid away from colleges and universities without hurting students.

“It’s hard to do without hurting students, and it’s not appropriate to do,” Alexander said. “The federal government has no business doing this.”

President Obama also touted college “report cards” showing college costs and how well graduates do in the job market.

The U.S. Education Department and the Consumer Financial Protection Bureau are working on Know Before You Owe, a financial aid shopping sheet that will let future students estimate their debt, monthly payment and likely ability to repay loans. Parents and students also have requested a breakdown of college costs and information on repayment rates for graduates at each college.

Repayment study left out blacks

A U.S. Education Department analysis on the relationship between race and repayment of student loans left out black students, skewing results used to justify the gainful employment rule, reports Inside Higher Ed.

For-profit colleges, which enroll many minority, low-income and older students, argue the high-risk demographics explain their students’ higher default rates on student loans. Not so, said the department in June, concluding that only 1 percent of the variance in repayment rates could be explained by the racial composition of enrollment. Sorry, never mind.

But by failing to count black students, the study understated the impact of race: the actual variance at for-profits is 20 percent over all, and 31 percent for four-year institutions, the department said in the December filing.

Eduardo Ochoa, the department’s assistant secretary for postsecondary education, said “accurate figures would have had no impact on the final regulations.”

Interesting.

The Association of Private Sector Colleges and Universities, the for-profit trade group challenging the gainful employment rules, charges the new figures show that “schools that enroll a higher percentage of minority students are more likely to fail the department’s repayment test.”

President Obama talked about defunding colleges that raise tuition in his State of the Union speech, writes Andrew Kelly on the Enterprise Blog.  That means shifting “some Federal aid away from colleges that don’t keep net tuition down and provide good value,”  according to a White House blueprint (pdf). Deciding whether a college is providing value for the money will require collecting gainful employment data on all higher education sectors, writes Kelly.

Obama’s college confusion

President Obama is confused about his college goals, opines Rick Hess. The president wants more Americans to earn college degrees and everyone to get at least a year of postsecondary education. But his administration is trying to shut down for-profit colleges, “the only institutions eager to help fulfill his grand ambitions.”

Obama’s Justice Department is suing Education Management Corp., the nation’s second-largest for-profit college company, charging it violated federal law by paying recruiters based on students enrolled.  Obama’s Department of Education has pushed “gainful employment” regulations that could “stifle for-profit institutions whose graduates don’t earn enough.”

Between 2000 and 2009, for-profit institutions increased enrollment by 300 percent, while public colleges and universities grew by 27 percent. For-profits have rapidly grown capacity and customized services for nontraditional students, even as public colleges and universities have shown little appetite for revamping established routines.

To meet “gainful employment” rules and reduce defaults, for-profit colleges will have to turn away bad risks, Hess writes. For example, blacks and Hispanics are more likely to enroll in for-profit colleges. Overall, 54 percent of students in for-profit two-year colleges are classified as “high-risk,” compared to 36 percent in community colleges.

Graduates of for-profit college programs that last two years or less, report a 50 percent increase in annual income, according to U.S. Education data, Hess notes. Of course, community colleges could provide the same boost — if students could get in and get the classes they need.

Unfortunately, where for-profits are growing like kudzu, community colleges are turning away students. In California, for instance, the community college system turned away 140,000 potential students this year.

Why would financially pressed community colleges turn away students, given that more students bring more dollars? . . . California’s community colleges cost students $1,080 per year, but they also cost the state another $5,000 in subsidies. When those state subsidies aren’t forthcoming, community colleges slam the doors on would-be students.

It’s the for-profits that have a selfish, practical incentive to find ways to add students, even those with families, obligations and unpredictable schedules. Of course, this aggressive competition can result in unseemly, unsavory or outright fraudulent behavior — but you’d think a president championing post-secondary access would be a lot less willing to toss out the baby along with the bathwater.

Obama is trying “to drive a car with one foot on the gas and one foot on the brake,” Hess writes.

We need for-profit colleges, adds New York Times columnist Joe Nocera. State universities are too expensive for poor and working-class students. Community colleges are too crowded.

The for-profits can offer class times that are convenient for students, rather than for professors. They can offer online classes, which many traditional universities have been reluctant — or unable — to dive into. They pay professors to teach, not conduct research. A well-run for-profit college could teach its nonprofit counterparts a thing or two about efficiency and innovation. That’s the part of the profit motive that grades well.

Nocera endorses two ideas floated by Robert Silberman, CEO of Strayer Education. Force the for-profits to share in the losses when students default and set up a national test to screen out students who lack the skills to attend college.

Better measures of success

Community colleges have been judged by the graduation rates of first-time, full-time, degree-seeking students, even though they’re the minority on campus. To evaluate colleges’ performance, the U.S. Education Department named a group of policy experts to develop new measures of success that include the academic and employment outcomes for part-timers, returnees and transfers, reports CollegeBound.

The Committee on Measures of Student Success released its draft report last week.

Changes in reporting student outcomes are needed to take into account the broad mission and multiple role of community colleges, the committee concluded.

For instance, students often see community college as a stepping stone to a four-year institution and transfer before getting a degree. Also, workers come to campus to take a few classes to upgrade their skills. And more than half now attend part time.

The federal Integrated Postsecondary Education Data System (IPEDS) reports graduation rates only for full-time students. Students who transfer to a four-year college or university before completing an associate degree are considered drop-outs.

Among the preliminary recommendations:

-Report graduation rates of part-time, degree-seeking students;
-Distinguish between remedial and nonremedial students in IPEDS graduation rates;
-Create a reporting category that reflects students who transfer to other institutions;
-Voluntarily collect, disclose, and report measures of student learning and employment.

Still deadlocked on employment outcomes, the committee will meet again, reports Inside Higher Ed.  Some members want to require college to report graduates’  employment and salary; others — “especially those representing two-year institutions” — did not.

The federal gainful employment rule issued in June is intended to evaluate whether students in vocational programs actually find work in their field and earn enough to pay off their student loan debt. While it applies to certificate and non-degree programs at community colleges, it has not been applied to liberal arts degrees or other programs that are not strictly vocational in nature.

“I think this is weak,” said Harold Levy, a former New York City schools chancellor and managing director of Palm Ventures, who led the fight for more data collection and disclosure on students’ job prospects. “This is not asking for much. This is not asking for anything terribly useful.” Palm Ventures has invested in for-profit colleges, and many for-profit college advocates are in favor of applying the gainful employment rule to a broader range of institutions.

The gainful employment rules makes sense for students in job training programs, but not for liberal arts students, said Wayne Burton, president of North Shore Community College, in Massachusetts.

The ‘gainful employment’ debate

New York Times’ Room for Debate looks at how to regulate for-profit career colleges.

National Journal’s Education Experts also are debating the “gainful employment” rule.