Gainful Employment Data Lets Too Many Poor Performers Off the Hook

Blog Post
June 25, 2012

Today the Department of Education released the first round of its much-anticipated Gainful Employment (GE) data, giving us a peek into how programs and institutions might fare under the new regulations. These rules, which went into effect last year, are meant to address concerns about poor outcomes for students in vocational, career-focused programs that receive federal financial aid. Although institutions in all sectors (public, private, and for-profit) have “gainful employment” programs, GE was widely seen as the Department’s attempt to regulate the for-profit higher-education industry, whose students borrow federal loans and default on them at rates that are far disproportionate to their numbers.

Today’s data are informational only—they don’t result in sanctions for programs or institutions. While the data contains few surprises, they underscore the need for a more systematic approach to holding institutions that receive federal financial aid accountable for a bare minimum of outcomes.  

There will undoubtedly be many interesting stories to tell once we dig into the data (and check out The Chronicle of Higher Education’s handy tool to start), but two things jump out right away:  

  • Very few programs are at risk of losing their Title IV eligibility despite serious problems in these programs

In order to lose Title IV eligibility, programs would have to fail all three of the GE metrics—a loan repayment rate of less than 35 percent, an annual debt-to-earnings ratio of more than 12 percent, and discretionary debt-to-earnings ratio of more than 30 percent —for three of four years. If a program fails only one or two of the metrics, they are given a pass—even though, arguably, these programs and institutions are potentially harming students with each metric they fail. According to the informational data, only 5 percent of programs are in jeopardy of losing their aid eligibility because they failed to meet all three of the metrics -- but only if they don’t improve at all between now and 2015. This number isn’t particularly surprising—it’s what the Department predicted. What’s more disturbing is that only 35 percent of programs were able to meet the minimum standard for all three metrics.

Schools that had programs that failed one or two of the metrics, but not all three, may be relieved that they will not be penalized. But these data also highlight just how far some programs have to go to ensure that that they are not setting their students up for failure in the future.

  • While the data are incomplete, they offer the first national picture of how students do once they leave these programs

Only a small percentage of programs were included in the GE calculations. Of tens of thousands of vocational programs, just 3,695 were captured in the data. This small universe is due in part to a lack of timely reporting by schools, and because many of the programs were deemed “too small” to be counted. In addition, two vocal members of the for-profit sector, the Association of Private Sector Colleges and Universities (APSCU) and Education Management Corporation say that there are inaccuracies in the data. Given that this is the first time institutions have had to provide this information, it’s not surprising. This is why this first release of data is informational only—it gives everyone time to work out the kinks before the data “count” towards the GE regulation.

There were some bright spots to the release, however. Despite the “messiness” of the data, this round of GE was calculated using actual earnings data from the Social Security Administration. Rather than relying on spotty survey data or generic Bureau of Labor Statistics data, SSA data allows us to see how students from these programs are actually doing, for better or worse. And for those that are worse, the hope is that institutions and programs will take the time and energy to make necessary changes to improve student outcomes.

The Gainful Employment regulations remain embroiled in controversy. APSCU has sued to try to do away with them. But given the hundreds of billions of dollars that federal and state governments spend on these programs, why is there such a fight about asking programs to meet an incredibly low bar? Is it really too much to ask that no less than 35% of students from career-oriented programs are able to earn enough to pay down their loans?