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The long history of gainful employment regulation in America by the Department of Education involving student loans and colleges would almost certainly fill an entire textbook. The regulation has gone through many iterations as the policy has been in a constantly evolving state of development since 2009.
The initial version from 2012 was immediately disputed by The Association of Private Sector Colleges and Universities which filed suit claiming the rules were “arbitrary and capricious.” Their lawsuit led to policy revisions and a new set of regulations which came into effect in 2015. Again, the new version was disputed, and once again, an even newer version of the policy was released to be effective on July 1, 2017.
The political track record behind gainful employment and student loans quickly leads one to wonder what the regulations entail and why they may have caused such ripples within post-secondary education. The policy was originally crafted to protect graduates from low-quality and unsuccessful educational programs offered by post-secondary institutions. Throughout its various forms, the policy has generally attempted to gauge the validity of certain college programs by comparing the student debt of current students versus the income of graduates.
How Exactly Does the Gainful Employment Regulation Work?
While the exact ratios and numbers have been in fluctuation throughout its history of revisions, the methodology of the gainful employment act has mostly remained the same. It compares the average student loan debt a given educational program to earnings data of former students who graduated from the same program. If monthly loan repayments surpass a specific percentage of monthly income, the program fails the gainful employment test.
The most recent iteration of the policy placed the magic debt repayment ratio between eight to twelve percent of monthly income. For example, if a graduate made $1,000 per month, student loan debt would need to be less than $120 per month for the program to pass the gainful employment test.
Gainful employment ties into student loans because the policy will qualify (or exclude) a college program for federal student financial assistance. The Department of Education’s original intent was to weed out lackluster programs that encouraged students to take on far too much debt without providing a sufficient education that could eventually pay it off.
If an educational program adequately prepares students for gainful employment then its students will be able to qualify for financial assistance. If a program fails the test then students will not be able to access federal funding. The idea is to reduce the participation at programs that would leave students hampered with significant debt and an insignificant degree. By reducing the number of students who access failing programs, these problematic education programs would theoretically be forced out of the market without federal support or qualification.
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Where Does Gainful Employment Currently Stand?
The Department of Education under Betsy DeVos seems to be signaling a reversal of support for the newest variation of gainful employment which came into effect July 1, 2017. Under the mandate of regulatory reset, the department has halted implementation of certain reporting until 2018. This decision means that institutions do not need to release gainful employment statistics to prospective students.
Given the problematic history of the gainful employment rules, it’s not surprising that there are still many kinks being worked out. Student advocacy groups continue to push for these policies because they believe the rules are vital to protecting students from incurring excessive debt from attending low-quality programs. On the other hand, colleges and universities have continually resisted many aspects of the policy because it limits access to programs for low-income students. Many institutions also take issue with the invasive and potentially inaccurate calculations which rate individual programs on a pass or fail basis.
Some politicians and organizations support the rule by claiming it will save the Department of Education money.
One study estimates federal savings of roughly $4.2 billion over ten years through a reduction of financial aid expenditures. The Center for American Progress predicted that nearly all students who attended the 2,042 failed programs would eventually qualify for federal debt forgiveness programs which amounted to an average of $22,000 in debt forgiveness per eligible student after two decades.
Whether the potential government savings, movement for deregulation, or call for student protections win out remains to be seen. At any rate, the policy is up for debate like any other federal initiative.
Author: Jeff Gitlen