Gainful Employment tried to identify college programs where students accumulated excessive student loan debt. The regulations would then cut off future federal financial aid for programs in which recent graduates did not earn enough to allow them to afford their student loan payments.
Higher education does need tougher accountability, and the 2014 gainful employment regulations got two important things right.
The first was its focus on programs rather than entire institutions. A program is defined as a combination of credential, major, and college, such as a bachelor’s degree in biology at Texas A&M. Focusing on outcomes aggregated across an entire institution (e.g., Ohio State University) paints with too broad a brush. With institution-level analysis, low-performing programs could escape accountability if they were located at generally high-performing institutions, and high-performing programs could nevertheless face sanctions if they were located at low-performing institutions. Gainful Employment was the first federal accountability policy that avoided these problems by focusing on program-level outcomes.
The second improvement that Gainful Employment pioneered was the use of earnings outcomes as an accountability metric. As New America’s Rachel Fishman documents, around 90% of students rate getting a good job or earning more money as an important reason for going to college, yet until Gainful Employment, these outcomes were ignored by federal policy.
As the Biden administration considers reviving the Gainful Employment regulation, it should replicate these two improvements while avoiding a repeat of its major mistake.
The 2014 Gainful Employment regulation suffered from a fatal design flaw. It was applied selectively, almost exclusively targeting the for-profit sector. This targeting led to skewed, and even absurd results.
Here’s what I mean: The exact same program, such as a bachelor’s degree in nursing, was subject to Gainful Employment if offered at a for-profit college but not if it was offered at a public or private nonprofit school. Similarly, a master’s in social work offered by a for-profit was subject to Gainful Employment, but a master’s in business administration (MBA) program at a public college was not, on the grounds that it was not a vocational program – clearly an Orwellian abuse of language.
Accountability, when only selectively applied, is not real accountability. An additional benefit of Gainful Employment was greater transparency, providing potential students with valuable information regarding the labor-market outcomes of recent graduates. But selective application of Gainful Employment denies that transparency to students enrolled in public or private nonprofit colleges.
What I found in a new research report is that selective targeting unreasonably and unfairly penalizes the for-profit sector for two main reasons.
First, a college program that leaves students with excessive loan debt is undesirable regardless of the type of college. Students who graduate with excessive debt from a public or private nonprofit program are no better or worse off than those who graduate with excessive debt from a for-profit. It is the outcome – graduating with excessive debt, or not – that matters, not the tax status of the college.
Second, the for-profit sector does not stand out as an underperformer. If Gainful Employment were to be applied to all college programs, as I did in the new report, for-profits account for 11% of failing programs, not the 98% that had previously been cited.
It is undeniable that we need more accountability in higher education.
Gainful Employment was on the right track in some respects. The focus on program-level evaluation was a quantum leap in our approach to accountability and should be replicated. Using post-graduation earnings in accountability metrics was also a huge step forward.
In next week’s negotiated rulemaking, when policymakers attempt to build on Gainful Employment’s innovative approaches to accountability, they should avoid repeating the mistake of applying accountability selectively. Repeating the same design flaw would leave more than 75 percent of the nation’s 26 million college-going students without the benefit of this consumer protection simply because of their institution’s tax status.