Tough tests for career colleges

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We get the idea behind the gainful employment rule – but does it “hinder access” to higher education?

The U.S. Department of Education’s (DOE) proposed “gainful employment” rule is one issue that conservatives and liberals can agree upon.

They don’t like it.

That’s because it’s come at a time of high unemployment, opponents say, and could hurt the most vulnerable students: low-income minority students who most need federal financial aid to pursue an education, and in turn, a career.

Education Secretary Arne Duncan has said the intent of the proposed rule is to crack down on deceptive practices at for-profit colleges. It turns out the Government Accountability Office (GAO) drafted the proposal in response to an undercover investigation in which the GAO sent investigators posing as students to 15 for-profit colleges.

The investigation found schools had given varying degrees of false or misleading statements about their accreditation, requirements for repayment of student loans, graduation rates, job placement promises and unrealistic projections of expected earnings upon graduation.

As a result, many students found themselves incurring large loan debts and defaulting on repaying them, thus costing the federal student loan program billions of dollars.

The new rule would set a calculation based on the relationship between total student loan debt and average earnings after students complete their training program. If the college companies don’t meet the formula, they would be ineligible for federal aid.

Under the proposed formula, colleges can get access to government-backed student loans for some programs, if they show that 45 percent of former students are repaying loans, or if student loan debts don’t exceed 8 percent of the college’s total income or 20 percent of discretionary income.

The aid cutoff would apply only to certain training programs that fail both tests rather than entire schools, the DOE says.

Students, elected officials and the for-profit colleges whose earnings (and stock share prices) are at stake, have all sent the DOE their two cents.

So did the Congressional Hispanic Caucus and the National Hispanic Caucus of State Legislators. Both groups urged the DOE to keep access to career colleges and focus on increasing the quality of higher education, while removing the industry’s bad actors.

Mario Lopez, president of the Hispanic Leadership Fund, told a congressional hearing, “Students have the right to choose the education and career path that they will pursue, and not have it restricted by arbitrary debt-to-income ratios.”

Even Jesse Jackson took his turn swinging at the bureaucratic piñata, writing the DOE to say, “The proposed approach will hinder the access of minority students to higher education and will make it more difficult to realize President Obama’s goal of leading the world in the percentage of college graduates by 2020.”

The Career College Association says that 43 percent of the 2.8 million students enrolled in career colleges and 39 percent of their graduates are minorities. Hower, studies show that more than 67 percent of two-year, for-profit schools have less than 45 percent of loans being paid down.

The DOE defended its rule. “Our proposal is to protect students from taking on debt they can’t afford in exchange for a certificate they can’t use,” said Justin Hamilton, Duncan’s press secretary.

We just hope the remedy is not worse than the disease.

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