2-Pronged Strategy Against ‘Gainful’ Rule

When the Department of Education gathered comments this summer ahead of an overhaul of its gainful-employment rule, it heard a litany of familiar refrains from representatives of the for-profit college sector.

They argued that the rule, which holds career programs accountable for graduating students with debt they can’t repay, should apply to all programs regardless of tax status, that it should reflect long-term earnings, and in some cases that it should not be tied to federal aid.

Whether the department crafts a new gainful-employment rule that reflects those broad goals will have implications for the accountability measures currently in effect for career programs and the kind of data it would provide students.

It’s broadly understood both by advocates and administration officials that Congress would have to rewrite current law for the rule to apply more broadly -- unless it is turned into a pure transparency measure, akin to the College Scorecard. And publishing typical earnings for a given profession by region, as for-profit representatives are seeking, would mean an end to publication of program-level outcomes. That's information consumer advocates say is essential to understanding which programs are doing well (or not).

A new rule from the department is a long way off -- an appointed negotiating panel won’t be seated until later this fall and it will likely be another year before new regulations are finalized -- but the for-profit sector isn’t waiting on the administration for a friendlier outcome. While Career Education Colleges and Universities, the sector’s biggest trade group, makes its case at the department, it’s also pushing for redress on Capitol Hill.

CECU throughout the summer has shopped legislative language to lawmakers that would make the changes it’s advocating in the rule-making process. Steve Gunderson, the group’s president and CEO, acknowledged that legislation altering the rule likely won’t move forward soon and, even if it found wide support, was unlikely to be passed before the rule-making process concludes.

But the group hopes that a gainful-employment bill would inform the committee’s process -- and the rule the department eventually issues.

“We are moving forward on parallel tracks for all the right reasons,” Gunderson said. “We believe until there’s a clear regulatory solution, we should pursue a legislative solution. Until there’s a legislative solution, the regulatory provisions of rule making are equally important.”

Regulatory Overhaul

Education Secretary Betsy DeVos announced in June after months of speculation that she would overhaul gainful employment and borrower defense, another Obama administration higher ed rule, via a bureaucratic process known as negotiated rule making.

DeVos suspended the borrower-defense rule before it was set to take effect in July. Although gainful employment remains on the books, she has delayed several provisions of the rule this year. And the department reported to Senate Democrats last week that it had “no timetable” for sending institutions data that are a first step to producing graduates' debt-to-earnings ratios that determine the ratings for programs subject to the rule.

When the department held the first of two public hearings on the overhaul of both rules last month, consumer advocates, traditional higher ed groups and representatives of the for-profit sector jumped at the chance to weigh in.

The chief complaint from the for-profit sector about gainful employment, which applies to all programs at for-profit colleges and nondegree programs at public and nonprofit colleges, has been that the rule does not apply uniformly to all sectors of higher ed. CECU has insisted it would support any rule that applied to all higher ed institutions; Gunderson offered that the department could do so if it made gainful employment an informational tool without federal student aid attached.

But the for-profits' problems with the rule don’t stop there. CECU argues that it's unfair to rate the success of programs based on graduates' income three years after leaving.

"The premise that income in year three ought to guide a student's career decision is without merit," Gunderson said.

Instead, the department should use Bureau of Labor Statistics data for a given career in a given region. Students could then compare the costs of programs in their field with that figure in mind, Gunderson said.

Amy Laitinen, director for higher education at New America's education policy program and a proponent of the gainful-employment rule, said by advocating for BLS income data, for-profits are pretending to seek transparency with a metric that masks real differences between programs.

“The whole point of program-level data is precisely so programs can’t hide behind averages,” she said. “Students aren’t going to average programs. They are paying for particular programs.”

Laitinen said she’s open to the idea of a gainful-employment measure that applies to all higher ed programs, if Congress considers such a change in the course of a reauthorization of the Higher Education Act. But she said the broadly applied gainful rule CECU is advocating for would just water down the current regulations.

“For a lot of the folks who are saying ‘gainful [employment] for all,’ what they really mean is gainful for none,” she said.

Laitinen’s New America colleague Kim Dancy found in May that chefs in the Chicago metropolitan area averaged $48,870 per year, according to BLS data. Yet earnings outcomes of graduates who attended programs in that career pathway were significantly lower. And studies on career earnings have shown that graduates who earn less early in their careers are likely to have lower midcareer earnings as well.

The first set of gainful-employment data released in January found 98 percent of programs failing the current gainful-employment standard were at for-profit institutions.

The Department of Education received more than 1,700 submissions in a public comment period preceding the appointment of rule-making panels to consider changes to both borrower defense and gainful employment.

An Education Department spokeswoman, Liz Hill, said she couldn't address specific input but said each comment will be reviewed by staff and taken into consideration before the rule-making committee begins deliberations about the regulation.

"Under the previous administration’s rule-making process, too many voices were left out of the discussion, which led to a set of rules that targeted schools by tax status," she said. "It is this administration’s intention to ensure that all appropriate stakeholders are at the table and as a result rules are developed that protect students from predatory practices while treating all institutions of higher learning equitably."

Gunderson said he believes the department has the legal authority now to expand the rule to all higher ed programs. But answering whether gainful employment should continue to be an accountability tool or only be used for transparency purposes would help resolve many other questions about how to modify the rule.

Different Critics, Different Suggested Changes

Whether CECU gets significant support for its point of view on Capitol Hill remains to be seen. The group is still seeking bipartisan co-sponsors for legislation but hopes to see a bill introduced when lawmakers return from recess.

A Democratic aide on the House education committee said expanding application of the rule would be hard without rewriting the definition of gainful-employment programs in current law.

Representative Virginia Foxx, a North Carolina Republican and chair of the House education committee, has long been a vocal critic of the gainful-employment rule.

"We continue to have serious concerns regarding the gainful-employment rule, and we are pleased the department has recognized and considered the concerns voiced by the committee," a GOP committee aide said. "We look forward to addressing these concerns through the [Higher Education Act] reauthorization."

And a spokeswoman for Senator Lamar Alexander, the Tennessee Republican who chairs the Senate education committee, said he "looks forward to reviewing the outcome of the Education Department’s rule-making process and working with the department on holding all schools accountable to their students and taxpayers.”

Representative Paul Mitchell, a Michigan Republican who sits on the education committee, is a former for-profit college president and has taken an interest in improving federal data on higher education outcomes. He said he doubts that a bill addressing gainful employment could clear Congress before the department's rule-making process concludes. But he's highly critical of the regulation because it assesses only vocational programs.

"I think consumers should make the decision, not the government," he said. "Let's empower the people who pay taxes, who need the education, to decide what's in the best interest of them and their family."

Supporters of the rule, however, say that empowering consumers with information is exactly what the rule does.

Even among conservatives and others sympathetic to career education programs, there isn't a uniform assessment of the current gainful-employment rule or how it should be modified.

Beth Akers, a fellow at the Manhattan Institute, argued in January that standards should not be rolled back, but expanded to institutions regardless of tax status. She said while gainful-employment metrics could be better calibrated, the idea of holding programs accountable for poor student outcomes such as high loan default rates was the right one.

And Trace Urdan, an independent analyst of the sector, has argued that the regulations went too far but says investors want more, not less, information about the performance of individual programs. Relying on BLS data is what led schools to create poor programs in the first place, he said.

"It's imprecise, trailing and essentially irrelevant in any particular geography," he said. "From an investor perspective, the program-level, school-level data is vastly superior. If it's BLS data, it turns [gainful employment] and specifically consumer disclosure into mere window dressing."