NHCSL & Hispanic State Legislators Oppose “Gainful Employment” Regs

Thebattle is on over regulation of the nation’s fastest-growing higher educational sector: the for-profit career colleges. Sen. Richard Durbin, D-Ill., summarizes problems at these colleges regarding course quality, overly aggressive marketing, low completion rates and high loan default rates as “sub-primes go to college.” He supports strict “gainful employment” rules to bring them under control.

But Illinois state Sen. Iris Y. Martínez, president of the National Hispanic Caucus of State Legislators (NHCSL), worries that the proposed rules “will have unintended consequences that will negatively affect Hispanic students. We applaud efforts to address the bad actors in the career college industry,” Martínez writes. But in a resolution passed unanimously by Hispanic state legislators in November, her organization urges that the impact of the gainful employment rule be studied further, and a more comprehensive approach to the problem be developed.

Durbin expressed passionate concern at the growing number of career college students taking on burdensome long-term student loan debt in order to cover high tuition costs at career colleges who “end up with low-quality degrees or none at all.” Career colleges have proliferated mainly due to the fact that most of their some two million students use federal loans and grants to pay for their education, according to the Democratic senator. At a June press conference in Washington, D.C., Durbin announced that he and then-Senate Education Committee Chair Tom Harkin, D-Iowa, “were ready to take action.”

The senators support proposed regulations that have come to be known as “gainful employment” or “the 8 percent rule.” The labels are based on the mission of federally supported education institutions to “enhance the gainful employment of their students.” The regulations propose a formula for measuring a program’s gainful employment rating based on both its student loan debt to prospective earnings ratio (no more than 8  percent annually) and its degree/certificate-completionand loan default rates.

Not surprisingly, the career colleges and their proponents have been fighting the proposed regulations. The for-profit sector comprises a wide variety of institutions ranging from small privately owned institutions to publicly traded corporations. Thirty-nine percent of their degrees are completed by minorities (compared to 20 percent at public and 17 percent at private not-for-profit institutions). But 90 percent of their revenue is generated by federal student grants and loans, according to Forbes magazine, citing recent government studies. Withdrawal of eligibility for the funds would cause significant financial loss for the institutions.

Implementation of the gainful employment act could “provide a significant moment in the Obama administration’s attempt to regulate – and arguably rein in – the sector,” according to Inside Higher Education.

The NHCSL calls the gainful employment rule “the most contentious of all the policy changes recently recommended by the Department of Education that threaten to disqualify specific institutions and programs from receiving federal funding. The same individuals for which federal funding is targeted will be those who are the most impacted by this proposal. It is concerning that the gainful employment rule may impact a student’s ability to train in a field that could get them a real job upon graduation,” states the organization’s policy brief, “The ‘Gainful Employment’ Rule and Hispanic Students.”

“All must recognize that loan repayment is a serious responsibility and that they should not stretch themselves too thin. However the strict guidelines may deny aid to students with a particular passion for a vocation that is not particularly high paying by making it impossible to qualify.”

In July, the Department of Education announced that it would delay any immediate implementation of the gainful employment rule and would issue proposed rules in November.

In its unanimously passed resolution, the NHCSL urges the Department of Education to “hold implementation until other specific remedies to address the abuses by some within the career college industry could be considered.” Recommendations include the requirement that career colleges evaluate the employment demand for graduates of given programs, with intent to achieve graduate employment rates of 65 percent; and to admit only students the institution deems have the ‘ability to benefit’ from its degree programs.

But there is also another deeper underlying issue in this controversy: the virtual targeting of only for-profit colleges.

“Any policy change in higher education should treat all institutions the same,” said New Mexico state legislator Nora Espinoza, a Republican who moderated the panel on gainful employment and the education industry at the November NHCSL conference in San Antonio. The organization’s resolution includes a resolve to establish the same or similar rules and standards across all areas of higher education, including public and nonprofit institutions.

“One of the most disturbing and divisive trends in America today is the trend toward a two-tiered system of post-secondary education,” the NHCSL policy brief states. “Increasingly our nation’s higher education opportunities are becoming polarized into a system of “haves and have-nots,” based not only on the ability to pay but also on the perceived ability to pay back (federal loans). Many are concerned that the proposed rule may further exaggerate this by making even generally effective programs ineligible for financial aid.”

“It is a shame that the gainful employment act discriminates against career students by restricting their access to student loans,” wrote Alma Morales Riojas, president and CEO of MANA, a national Latina organization, in the Daily Caller. “These schools provide unique opportunities to Hispanic Americans in cities around the country that traditional college simply do not. Most Hispanics – like more and more people from every background in America these days – simply cannot take four years off to further their education; they have to support themselves while doing it. Career colleges give them a real chance for success.”

“Of course, such accountability must apply to all postsecondary education institutions, not just the for-profits,” Durbin hastily added, when questioned at the June press briefing at the National Press Club.