Next July, (barring pending litigation, injunctions, or a highly unlikely change of heart) the US Department of Education will begin to apply its newly announced gainful employment rules. The new rules apply to for-profit colleges, private non-profit colleges, and public institutions that offer certificate programs. For several years, WCC has gone all-in on its certificate strategy. It currently offers about twice as many certificate programs as degree programs.
The new rules require the affected programs to demonstrate both of the following:
- Earnings premium: At least half of a program’s graduates must earn more than a person with only a high school diploma.
- Debt-to-earnings ratio: program graduates don’t spend more than 8% of their gross income or 20% of their discretionary income on student loan payments
Programs that fail to meet the new standards two out of three years will no longer be eligible to accept federal financial aid dollars. The Education Department clearly intended to aim the new rules at for-profit institutions, but colleges like WCC will get caught up in ED’s new, wider net. That’s largely a consequence of WCC’s certificate strategy. Some time ago, someone at WCC decided that offering certificates was desirable – probably because it offered the opportunity to game Michigan’s state aid formula.
Now, that same certificate strategy will mean running the risk of losing federal financial aid if at least half of WCC’s certificate earners on a program-by-program basis don’t also turn out to be money earners. It is important to understand that WCC is a significant outlier among Michigan’s community colleges in terms of the number of certificates it issues each year.
Earnings premium test throws a wrench into certificate strategy
The earnings premium test is going to be harder to meet, given that the average wages for high school graduates have increased remarkably over the past few years. Currently, the average high school graduate makes about $17 per hour. For full-time work, that’s an annual salary of more than $35,000. According to the College Scorecard, which uses data WCC submits to the Department of Education, WCC’s average graduate makes $36,000. That figure accounts for all graduates, including those in high-wage degree programs like nursing.
Next summer will be interesting, for sure. If I were a betting person, I would expect to see the “retirement” of a large number of certificate programs over the next year. Now that there is a certain degree of risk associated with certificate programs, perhaps the Board of Trustees should “advise” the President to develop more degree programs. They might be just as useless as some of the certificate programs, but at least they won’t have to pass the gainful employment tests.
Photo Credit: elycefeliz, via Flickr
