The U.S. Department of Education on Monday released the first-ever debt-to-earnings ratios for graduates of career and technical training programs, required under the Department’s Gainful Employment (GE) rule. Overall, 803 programs (9 percent) failed to meet the minimum debt-to-earnings threshold required by the rule, while an additional 1200 (14 percent) were considered “in the zone”, the Department term for schools that neither passed nor failed to meet the GE standard. For the remaining programs (74 percent), completers’ earnings were high enough to justify the debt burden their graduates took on.
While these numbers cover just a fraction of colleges and programs that receive subsidies through the federal student aid programs, it marks a clear first step toward bringing meaningful quality assurance in higher education for students and taxpayers. Many supporters of the GE rule have expressed concerns the incoming administration will immediately roll back these and other Obama-era higher education regulations. But rather than retreat from this first foray into accountability and transparency in higher education, the Trump Administration should adopt the GE standard for all postsecondary education programs that enroll students who receive federal grants and loans. Doing so would help students make more informed decisions about where to attend college and how to finance their education. In addition, holding all colleges accountable would protect the government from using taxpayer dollars to make loans that are unlikely to be repaid.
Take cosmetology, for example. As the graphic below shows, these programs have earned themselves a bad reputation for their low earnings potential, despite wide popularity among students, who generally need to take out federal loans to attend them. Of the programs subject to GE regulations in this field, nearly half of the 891 programs that are offered failed to meet the GE threshold. Legal Assisting earned a similar rate of success: just 56 of 109 programs met this benchmark. For students attending these programs, the odds of picking a worthwhile program are barely better than a coin flip. Taxpayers funding grants and loans to students in these programs will be left covering costs for students who are likely to default on their loans because their debt payments are expected to make up an unreasonable share of their income.
While many college leaders and lobbyists will argue that higher education is about far more than economic gains, establishing a GE threshold as a minimum outcomes standard does not preclude institutions from helping students achieve the many other benefits higher education provides. In fact, ensuring students are able to find employment that enables graduates to provide financially for their families and repay the debts owed to taxpayers are a prerequisite for many of the other benefits that higher education provides. In other words, as my former employer Dr. Anthony Carnevale often says, “It’s hard to live fully in your time if you’re living under a bridge.” Student surveys have echoed this sentiment: while students care about things like learning, building their confidence, and meeting new people when deciding whether to enroll in college, these concerns fall well below their expectations that college will help them get a good job and make more money.
Yet, while college in general is sold to students as the clearest pathway to the middle class, particular schools sell themselves on the basis of reputation, “fit”, and in extreme cases, the quality of their football program. A clear disconnect exists. Schools like Vatterott College, which has the largest number of programs failing or in the zone according to the GE benchmark, are not doing right by their students. Similarly, Education Management Corporation’s Arts Institutes, a nationwide network of schools offering arts education shown in the interactive graphic below, offer very few programs that pass the GE benchmark, indicating a severe structural problem in the company’s business model. At ITT Technical Institutes, the for-profit corporation that closed down earlier this year after years of allegations of fraudulent behavior, only a third of its programs passed the GE rule. These schools owe it to their students to improve quality and reduce costs. None of this information was previously available to taxpayers or students. Imagine what more we could learn if earnings outcomes and debt levels for students in traditional programs were made available as well.
Ultimately, GE is about value. The costs to students for a degree should not exceed the earnings potential associated with their course of study, particularly if they are taking on federal loans that taxpayers will be on the hook for if they are not able to repay. That’s true not just of career and technical programs, but of all undergraduate and graduate-level programs as well.