The U.S. Department of Education’s long-anticipated Gainful Employment (GE) draft rule has finally been
released
. The effort to hold a subset of predominantly for-profit colleges and universities accountable has been in the works for over 14 years. Now that it is one step closer to becoming a reality, the public finally has a chance to weigh in. So, what is GE, and why all the fuss?
The words “gainful employment” originated in the Higher Education Act differentiating traditional colleges from for-profit colleges (and some community college programs), the latter of which must “prepare students for gainful employment in a recognized occupation” in order to be eligible to receive federal aid. Under GE, however, the Biden administration transformed this simple phrase into a complex formula involving students’ after-graduation debt and earnings. Poor performance could result in a loss of financial aid eligibility if these metrics fell below acceptable levels – a death penalty for almost any college, regardless of economic circumstances or whether colleges were preparing cosmetologists or engineers.
While much attention has deservedly been paid to the Biden administration’s free college agenda, as I
noted
back in 2021, this is only half of the story. The other half is designed to limit the ability of for-profit actors, who the administration views as basically illegitimate in higher education, to benefit from the new subsidies going to public and nonprofit higher education institutions. The GE rule is a key part of this, but so too is the Administration’s effort to go after for-profit vendors in higher education, which has received
broad pushback
, including from public and nonprofit universities.
Even though the for-profit sector only serves about 10% of students, the GE rule could still have an outsized, direct impact on the national economy. The reason is that for-profit institutions are dominant in preparing students for certain occupations such as cosmetology, where state occupational licensure barriers are high, but public community colleges have traditionally been unwilling or unable to serve these students well. Recent
estimates
suggest that a rule of this kind could knock out up to 98% of cosmetology programs and 70% of medical assisting programs. This substitutes students’ judgement for that of the Department, denying opportunity, while driving up costs and lowering the quality of service for consumers.
While some may welcome any form of accountability in higher education, this rule is fundamentally flawed in a number of ways. Chiefly, the scope is limited to mostly for-profit colleges and universities when it doesn’t need to be. If the goal is to protect students, why not propose something that protects all students?
For example, the department could exercise its authority under
section 454 of the Higher Education Act
, which “provide[s] for the implementation of a quality assurance system” to determine eligibility for federal aid. Such a
proposal
was offered at the rulemaking and rejected by the department out of hand. The department eventually agreed to a “transparency” provision for other schools that will likely have little impact because the
College Scorecard
already serves this purpose fairly well.
The rule also relies on backward-looking metrics to determine whether a school is deserving of federal aid or not, making it near impossible for the department to practically differentiate good programs from bad ones. Higher education is complicated and diverse, much more so than K-12, where everyone is receiving instruction on reading and math. As a result, a simple-sounding
idea
like, “protect students from programs that fail to deliver real value,” quickly turns into a
200-page mammoth
, which must specify the exceptions to the exceptions to the exceptions.
Finally, even if this rule was written with the best intentions for the for-profit sector, any rule based on student debt and income will likely measure the strength of a national or local economy just as much as it measures the quality of individual programs. If we enter a recession, expect many more programs to fail as out-of-work students seek more training.
The public will have 30 days to comment on the rule (they can do so
here
). After that, the Department will respond to comments and hope to publish a final rule before November 1 so that it can take effect by July 1, 2024. Meanwhile, advocates should look for more constructive outlets to ensure meaningful accountability for all institutions serving students.
The best solution?
Lend to institutions instead of students
, let each school work with its students to devise a financing option that works for them, and then ensure that each institution pays the taxpayer back first. This “skin in the game” approach can inject both innovation and accountability into higher education without a top-down government administered formula that is likely to insufficiently measure quality with untold negative effects for both students and the economy at large.
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This article originally appeared in the AEIdeas blog and is reprinted with kind permission from the American Enterprise Institute.
