All across America, hundreds of programs at for-profit colleges are at risk of losing federal funding unless their graduates begin earning higher wages.
The Department of Education issued its first round of data measuring the success of 8,700 career program graduates and their ability to repay their student loans. This stems from the Obama Administration’s new “gainful employment” rule, which aims to weed out programs that leave students with heavy debt and little income.
If a student is paying 30 perfect of their discretionary income or 12 percent or more of their yearly income on student loans, these programs are considered. Programs will lose federal funding should they fail twice within three years or fall into the “warning zone” for four consecutive years.
During the first round of ratings, which is based on students who graduated between 2010 and 2012, more than 800 programs failed and 1,200 others were in the warning zone. Of all programs that were evaluated, for-profit colleges only account for 66 perfect yet of the failing programs they account for more than 98 percent.
Department officials use this data as proof that community colleges are a much better value, and their students fared better than for-profit colleges and their students.
John B. King Jr., Education Secretary, explains “we are giving career colleges an opportunity and in some cases a warning to improve the quality of their programs.” He adds, “far too many hardworking students are graduating with certificates or degrees that have little or no value in the job market.”
For-profit colleges have adamantly opposed these new rules since their proposal back in 2014. Steve Gunderson, Career Education Colleges, and Universities president said the findings should be having been kept private until the schools had a chance to appeal the data.
“The Department’s action today is disappointing and disrespectful,” Gunderson said in a statement, adding “this is all about political motivations and harming institutions, and has nothing to do with expanding higher education access and opportunity or creating sound public policy.”
Some of the nation’s largest chains are included in the failing program data including Devry University, University of Phoenix, and the Art Institutes chain.
Some schools have taken initiative and permanently closed certain programs before the new standards took effect. The University of Phoenix in October told investors that it was stopping enrollment for programs that were likely to fall short; which represented 15% of the school’s total enrollment.
The effect is already starting to be seen since the new rules were proposed. Overall the Education Department says the number of vocational programs since the proposal dropped from 38,000 to 29,000.
“This is the right thing to do,” states Ted Mitchell, undersecretary at the Education Department. “Institutions have improved their existing programs, making them shorter, making them better, so students finish them faster, accumulate less debt, and leave with higher-quality certificates.”
The schools that did fail now have 30 days to inform students that they’re at risk of losing federal funding.
Gainful employment is the latest measure by the Obama administration to hold for-profit colleges accountable. Additionally, the department is working to smooth out “borrowers defense” rules to help students who have been defrauded by schools and has taken action that forced the closure of chains like ITT Technical Institute and Corinthian Colleges.
With President Trump now in office, some experts question what measures, including gainful employment, will survive.