May 24, 2017
Recently, the Career Education Colleges and Universities—a lobbying association representing more than 1,500 for-profit colleges and universities—recommended changes to the Higher Education Act. One suggestion is to replace the Obama-era gainful employment (GE) regulations, which penalize career programs whose students fail to meet specified debt-to-earnings ratios, primarily affecting for-profit and community colleges. Instead, CECU recommends using regional estimates of average earnings for all employees in the occupation for which a student is training.
Such an idea would be terrible for students. Using regional averages suggests to prospective students that all training programs in an area are identical in the quality of student outcomes, but existing earnings outcomes by program and college show that, in reality, there is substantial variation in the financial prospects of students at different institutions. CECU’s proposal seeks to protect low-quality institutions, by deliberately masking the earnings outcomes of actual students. It also hurts schools that provide high-quality training by obscuring the higher returns for students in those programs. But students have a right to this kind of program-specific information--not just occupation-wide averages--when making decisions about where to invest their time and money.
Making matters worse, the logistical barriers of implementing such a solution are far more cumbersome than it might seem at first glance. Take, for example, chefs working in the Chicago metropolitan region. The Occupational Employment and Wage Estimates constructed by the Bureau of Labor Statistics (BLS) for this group are $48,870 annually. According to the Department of Education, there are a number of different pathways for entry into this field, including short-term certificates in culinary arts, catering, food preparation, meat cutting, culinary science, and baking and pastry arts. Schools in the city of Chicago alone offers at least ten programs in these fields, ranging from short-term certificates to bachelor’s degree. Yet the actual earnings outcomes for all of these programs are substantially lower than the BLS averages for all workers in the region, ranging from $21,647 annually for an associate degree in baking and pastry arts from Le Cordon Bleu, to $37,236 for an associate in culinary arts from Kendall College.
The earnings estimates provided through BLS are much more realistic for other occupations where these students might end up: in the Chicago area, fast food cooks earn an average of $21,230 per year, while cafeteria cooks earn an average of $28,250. Even so, because of variation in both the labor market and in the value of a specific credential from a particular institution, BLS average earnings for an area aren’t always representative of the experiences of actual students in that region. Yet students deserve to know what their actual earnings potential is likely to be before investing substantial financial and time resources pursuing a degree. Providing the average earnings in a related field is a far cry from knowing what their actual opportunities will look like, or from seeing program-level data on the actual experiences of similar students.
There are a variety of explanations for why OES estimates might not reflect future earnings for many students. Perhaps most critically, OES estimates are not broken out by educational attainment--, nor does it account for students who end up unemployed or working in an unrelated field. This means that for students considering fields like accounting, 95 percent of positions require a Bachelor’s degree, yet nearly 100 programs subject to GE offer credentials in accounting and related fields below this level. In these cases, graduates almost certainly won’t be able to find jobs that pay as well as someone with a bachelor’s degree in accounting, even if they are able to get a job in a related field. And that means OES estimates are very unlikely to reflect student’s own labor market experiences. Using that information without context risks deliberately misleading students about where to invest their time and money.
The basis for CECU’s suggestion is to acknowledge that early career earnings are likely lower than mid-career averages, another possible explanation for why OES earnings differ from those captured in GE measures. But if early career earnings are lower for graduates of a particular program, mid-career earnings are likely to be as well, particularly for students who do not pursue additional education. For instance, the Hamilton Project at the Brookings Institution has found that computer science majors with a Bachelor’s degree outearn most other majors with comparable educational attainment at every stage of their careers, and in many cases these earnings gaps widen as time goes on. While the earnings do tend to increase with experience for students in all majors, students in lower-paying fields do not “catch up” to graduates in higher-paying fields unless they are willing to invest even greater amounts of time and money pursuing graduate education. Information on early career earnings is thus the most helpful financial indicator when deciding between two programs of study.
CECU also suggests that such a framework would avoid creating differential regulation about transparency of post-college outcomes according to tax status of an institution, suggesting that these questions aren’t important solely for for-profit colleges. In this regard, they are right: With students across all kinds of colleges and universities reporting getting a good job and making more money as top reasons to attend college, they deserve to know what their financial prospects might look like, no matter what or where they chose to study.