Arne Duncan to For-Profits: If Grads Don’t Get Gainful Employment, You Lose Federal Aid

Posted Wednesday, June 27, 2012 by Christopher Boan

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  • Arne Duncan to For-Profits: If Grads Don’t Get Gainful Employment, You Lose Federal Aid
Secretary of Education speaking at a Center for American Progress event

SOURCE: The Center for American Progress

Secretary of Education Arne Duncan discussing ways to revitalize the country’s education system at a Center for American Progress event.

Secretary of Education Arne Duncan announced the release of new data from yesterday on how career colleges have done in meeting a series of benchmarks the federal government has set for them on student employment upon graduation. If colleges miss all three benchmarks for three out of four years, they lose federal aid.

“Career colleges have a responsibility to prepare people for jobs at a price they can afford,” Duncan said. “Schools that cannot meet these very reasonable standards are on notice: invest in your students’ success, or taxpayers can no longer invest in you.

The data shows that 5 percent of colleges that offer “career training” programs missed all three metrics and risk losing their federal aid.

The three measures for the new "gainful employment" rule are based on the loan repayment rate, debt-to-earning annual ratio, and debt-to-discretionary-earnings ratio of a college's students. At least 35 percent of a college's students must be repaying their loans, and average loan payments cannot exceed 12 percent of a graduate's total earnings or 30 percent of their discretionary earnings.

Duncan pointed out that these vocational programs are supposed to ready future generations for immediate employment, and therefore should have better employment statistics than other postsecondary school institutions.

Only 35 percent of career training programs met all three benchmarks; another 60 percent either met one or two. The remaining 5 percent of programs– comprising a total of 193 programs at 93 schools-- did not meet any of the criteria.

Many higher education experts have chastised the failed schools, saying the benchmarks should be easily attainable for all legitimate institutions of higher learning.

“These aren’t the strictest standards,” said senior policy advocate at the New America Foundation, Stephen Burd. “That there are programs at 93 schools that don’t meet any of the three [standards] should raise alarms, and the fact we aren’t doing anything about them for a long while from now is worrisome.”

Some of he programs that failed the gainful employment test include Everest College’s paralegal training in Salt Lake City and more than 40 other programs operated by Corinthian Colleges, one of the nation’s largest higher education companies; chef training at Le Cordon Bleu College of Culinary Arts in Austin, Texas; and the medical assistant program at Sanford-Brown College in McLean, Va.

The Department of Education released the results so schools could start revamping troubled programs before enforcement starts this fall. The program would not punish failing schools until 2015.

Twelve percent of all students in higher education attend a for-profit institution, yet they represent nearly half of all student loan dollars in default. Meanwhile, for more than a quarter of for-profit schools, 80 percent of their revenue consists of federal student aid.

The DOE has also published a list comparing the most and least expensive colleges in the country, with the goal of helping Americans decide how to pick the most feasible college for their needs.

“We want to arm students and parents with information they need to make smart educational choices,” said Duncan. “Students need to know up front how much college will actually cost them instead of waiting to find out when the first student loans bill arrives.”

The Department's program will cover 3,695 programs at 1,336 schools nationwide over the next two years, with the aim of helping America’s next generation find work upon graduation.

“[Students] want to know if they are likely to get a job,” Duncan added. “These informational rates are for transparency purposes and will help unravel the mystery of higher education quality and pricing.”

Christopher Boan is a journalism intern with Campus Progress.

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