Washington, D.C. (August 19, 2010) – The public has a rare opportunity to make sure that organizations and institutions treat them fairly. Right now, the U.S. Department of Education is accepting comments on proposed federal regulations that will govern career education programs. These include most programs at for-profit colleges, where about half of undergraduate students are people of color.
Career education is supposed to prepare people for specific jobs in fields like culinary arts, criminal justice, medical assisting, auto repair and many others. But too many for-profit career colleges are roping in students with deceptive marketing and aggressive sales tactics, providing substandard training, and leaving students deep in debt they cannot repay.
A recent Government Accountability Office investigation documented some of these exploitative practices, including lying to prospective students about job prospects and even encouraging them to commit fraud.
For-profit colleges can get up to 90 percent of their revenues from federal student aid, and they are legally obligated to make shareholder profitability their overriding goal. While they enroll less than 10 percent of all students, they account for 25 percent of federal student aid and 44 percent of all federal student loan defaults. Next year alone, students will borrow an estimated $30 billion in federal student loans to attend these colleges.
Federal law requires career education programs that receive federal student aid to “prepare students for gainful employment in a recognized occupation.” The proposed rules define “gainful employment” for the first time, making it possible to enforce this important law. The for-profit education industry is spending hundreds of thousands of dollars on high-priced lobbyists to try to weaken or delay these rules.
“The Education Department has taken an important step in proposing these regulations, but the rules must be stronger to really protect students and taxpayers,” said Lauren Asher, President at the Institute for College Access & Success. “All students need access to quality, affordable education and training and protection from rip-off programs that over-promise and under-deliver. Career education programs that routinely leave students worse off than if they’d never enrolled should not be able to keep profiting from federal student grants and loans.”
A group of nearly 30 organizations advocating for civil rights, consumers, and students (including the Institute for College Access & Success, National Council of La Raza, California Coalition for Civil Rights, United States Student Association, and Consumer Federation of America) have called for tougher rules, so that career education programs that receive federal aid are more accountable to their students and to taxpayers. They have asked the Department of Education to set higher loan repayment standards for career education programs receiving federal student aid; to require programs that have a poor track record to improve in order to keep receiving student aid; to provide equal protection for families with children; and to start protecting students next year.
A broad coalition has also created a new web site, www.ProtectStudentsAndTaxpayers.org, where people can learn more about the regulations and send public comments to the Department of Education. All members of the public are invited to visit the website, educate themselves on the issues, and submit comments to ensure their voices are heard.
An independent, nonprofit organization, the Institute for College Access & Success works to make higher education more available and affordable for people of all backgrounds. The Institute’s Project on Student Debt works to increase public understanding of rising student debt and the implications for our families, economy, and society.
Questions and Answers on the Administration’s Proposed Gainful Employment Definition
Q. Why is the Obama Administration proposing a definition of gainful employment?
• Federal law requires career education programs that receive federal student aid to “prepare students for gainful employment in a recognized occupation.” The proposed rule defines what this means so the law can be enforced.
• The rule is urgently needed to protect students and taxpayers from programs that routinely saddle students with debts they cannot repay and degrees they cannot use.
Q. Will the proposed gainful employment regulation reduce student access to college?
• No. Defining gainful employment is one of the best ways to increase student access to quality, affordable education and training. That’s why more than 35 organizations, including the NAACP, National Council of La Raza and other leading college access and consumer organizations, called on the Administration to issue a strong regulation.
• The rule has no impact on student eligibility for federal grants and loans. It affects only which programs are eligible, preventing rip-off programs from continuing to profit from federal aid at the expense of students and taxpayers.
Q. How will the regulation affect our nation’s ability to train people for high-demand jobs?
• It will increase the number of programs providing needed, marketable skills at a reasonable price. Schools offering low-quality or over-priced programs will have to improve them or risk their federal funding.
Q. Are all college programs required to prepare students for gainful employment?
• Federal law specifies which career education and training programs are required to “prepare students for gainful employment in a recognized occupation” in order to participate in federal student aid programs. Covered programs include most for-profit programs and all public and non-profit programs of less than two years. The majority of covered programs are at public colleges.
• For-profit schools can get up to 90% of their revenues from federal Title IV student aid, and have different financial incentives than other colleges. Publicly traded for-profit colleges are legally obligated to make profitability for shareholders their overriding objective. For-profit colleges enroll less than 10% of all students, but account for 25% of federal student aid and 44% of all federal student loan defaults.
Q. Are student loan default and repayment rates just a function of student demographics?
• No. The Career College Association’s own study concludes that, even after accounting for differences in student demographics, students attending for-profit colleges are twice as likely to default as students at other colleges.
Q. Should the gainful employment measures be “adjusted” for student demographics?
• No. Career education programs should prepare all students for gainful employment and not have different standards for different students. It is outrageous to suggest that low-income and minority students should expect lower salaries and higher debts.
Q. How are loans in forbearance, deferment and Income-Based Repayment treated in the repayment rate measure?
• The repayment rate measures the extent to which former students are successfully paying down their loan principal. Loans in forbearance or economic hardship deferment are not being paid down, so they are not counted as being repaid in the gainful employment measure. Loans in the Income-Based Repayment (IBR) program whose principal is being paid down are counted as being paid down.
• Some deferments are excluded from the calculation entirely, so they don’t affect a program’s repayment rate. These include borrowers in in-school deferment or military-related deferment status. Students eligible for Public Service Loan Forgiveness are also excluded and therefore do not affect a program’s repayment rate.
Q. Is the regulation “retroactive”? Does it give colleges time to improve their programs?
• The proposed rule wouldn’t start protecting students and taxpayers until July 2012 two years from now and wouldn’t be fully effective until July 2013.
• The proposed timing gives schools ample time to improve their programs. Even after a student leaves a program, schools can raise the program’s repayment rate and lower its debt-to-income ratio by providing improved job placement, loan counseling and default management services.
• Only the worst 5 percent of programs will lose eligibility in 2012. Schools providing quality, affordable education programs will benefit.
• The Department has an obligation to enforce the law, and students and taxpayers shouldn’t have to wait any longer for protection from unscrupulous programs.
Q. Is the effective date appropriate in light of the weak economy?
• Economic recovery depends on having a well-trained workforce, and we simply can’t afford to keep funneling taxpayer dollars into ineffective, overpriced programs.
• Thousands of for-profit, non-profit and public programs meet the proposed standards, even in today’s economy.
Q. Why use actual earnings data to determine student debt burden, rather than data from schools or national averages from the Labor Department?
• Some schools have been found to report inflated salaries and placement rates. Federal wage data provide an accurate, unbiased measure that cannot be gamed or manipulated.
• National averages may vastly overstate or understate actual salaries depending on the quality of the program, the local jobs market, and the local cost of living.
Q. Does the regulation usurp the state role in approving educational programs?
• No. Colleges will continue to be free to offer any program authorized by their state. But to be eligible for federal student aid, federal law requires career education programs to prepare students for gainful employment in a recognized occupation. This common-sense requirement protects both students and taxpayers.
Q. Does the Department have the statutory authority to propose these regulations?
• Yes. The Department has broad authority to promulgate regulations to implement programs established by statute. Under section 414 of the Department of Education Organization Act, 20 U.S.C. § 3474, “[t]he Secretary is authorized to prescribe such rules and regulations as the Secretary determines necessary or appropriate to administer and manage the functions of the Secretary or the Department.”