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Gainful employment specter may haunt public schools

Yesterday, I wrote about the Department of Education’s latest pass at a gainful employment mandate. The next step in reviving the rule is the release of a report, which the Department of Ed plans this spring.

The previous implementation of gainful employment took aim at private, for-profit schools. Those providers are naturally a little gun-shy about resurrecting the rule. After it took effect the first time, the gainful employment rule took down some of the largest for-profit schools in the nation. At the same time, ED largely shielded public and non-profit private institutions from the wrath of the GE rule.

The revised rule may offer a more even-handed approach to the gainful employment rule, if it applies to all higher education institutions that accept federal financial aid. Unlike the first implementation of the rule, which took aim at institutions, the new rule will likely be applied to programs.

That means the rule can be more precise about excising low-performing programs without also eliminating programs at the same school that perform at or above the threshold for action. One of the biggest questions will be the yardstick(s) by which programs are measured. The new rule could use the earnings of high school graduates as a basis for comparison, under the assumption that a college degree should yield a higher annual salary than that of a high school graduate.

Other possibilities would tie the earnings of a program graduate to some factor of the federal poverty level or to minimum wage earnings. If the median annual income of program graduates does not exceed the designated amount, the program would likely incur federal financial aid sanctions.

Gainful employment could target thousands of programs

The most interesting possibility, however, remains the notion that the new gainful employment rules could apply universally. Studies of post-secondary programs show that literally thousands of them across the full degree spectrum could be at risk if the new rules apply equally to all education providers. That raises the stakes substantially for programs that don’t deliver consistent results.

Taking the so-called “death penalty” off the table for for-profit schools also raises the possibility that they will improve the quality of their product. Increasingly aggressive competition for a shrinking market is the last thing that low-performing public institutions need right now.

It would certainly put education providers on notice that the Department of Education expects extraordinarily expensive education to produce measurable economic gains. ED’s position makes a lot of sense, given that ED holds about $1.75T in student loan debt owed directly to the Treasury. Much of that could be uncollectable if borrowers’ post-graduation earnings can’t pay the bills.

Schools that have gone all in on low-value programs that lead to low-wage employment should rethink their strategy quickly and carefully. It appears they may no longer be able to rely on their public status to cover for inadequate performance.

Photo Credit: James Delaney , via Flickr