The U.S. Department of Education this hour has released the first round of measures under its new gainful employment rule, which tests which career college programs, though a combination of high prices and low quality, leave too many of their graduates with overwhelming student loan debt.
The requirements of the final gainful employment rule are fairly weak, punishing only some of the most egregious abusers. Operators of some of the biggest for-profit colleges, especially those with better records of performance, have ensured investors that they can keep or bring their programs into compliance with the rule. But in Washington, lobbyists for the industry have engaged in a sustained freakout over the rule since the Obama Administration started pursuing it in 2009, because the industry's lobbying agenda has always emphasized shielding the worst of the worst behavior.
And, indeed, the new data from the Department shows that, although the rule covers 29,000 programs at all kinds of career colleges -- public and non-profit, as well as for-profit -- and for-profit colleges accounted for 66 percent of the programs, they accounted for 98 percent of the 800 programs that failed the gainful employment test. Those failing programs collectively produced some 116,000 graduates in the years measured, 2010-12; many of these former students, therefore, are now in financial peril. The programs could lose eligibility for federal student grants and loans if they maintain such bad performance levels for two out of three consecutive years. (Another 1200 programs fell in the "zone" just outside the failure measure; those programs could lose eligibility if they remain in the zone for four consecutive years.)
The new data shows there were one or more failing programs at many of the biggest for-profit college companies: the University of Phoenix, the Graham family's Kaplan chain, Education Management Corp.'s Art Institutes, Career Education Corp.'s Sanford-Brown College, DeVry University, Laureate's Walden University, the Mitt Romney-affiliated Full Sail University and Vatterott College, the demised ITT Tech and Corinthian's Everest College, and many others.
"Zero community colleges failed," Under Secretary of Education Ted Mitchell emphasized on a call with reporters this afternoon.
The Department of Education, after decades of tolerating egregious fraud and abuse by many for-profit colleges, has finally removed the gloves in recent years, standing up to predatory schools and their lobbyists and rapidly improving protections for students and taxpayers. Today, the Department, in a press release, did not hesitate to say that for-profit colleges are often a bad option for students: "The data released today provide further evidence that community colleges offer a better deal than comparable programs at for-profit colleges with higher price tags. As these new data depict, when student debt is taken into account, community colleges--where students borrow at lower rates and lower dollar amounts--perform particularly well when matched up against comparable for-profit programs."
In November the Department released data showing (1) that mean earnings of graduates of public undergraduate career training certificate programs are nearly $9,000 higher than mean earnings of graduates of for-profit undergraduate certificate programs; and (2) that nearly a third of for-profit certificate students graduated from programs where the typical graduate earned less than what a full-time minimum wage worker earns in a year--compared with only 14 percent in the public sector.
The Department had previously reported that 72 percent of the for-profit college programs it analyzed produced graduates who, on average, earned less than high school dropouts. A May 2016 study published by the National Bureau of Economic Research concluded that for-profit college students, graduates and dropouts combined, earned less after leaving school than they did before they enrolled.
"It's clear that poor performance is concentrated in the for-profit college sector," Mitchell concluded on today's press call. Seems that way.
Not to mention that many for-profit colleges have been under law enforcement investigation for deceptive recruiting and other misconduct.
The Department's release also uses refreshingly candid language to describe the efforts by wealthy Wall Street barons and their lobbyists to derail the gainful employment rule, despite all the evidence of abuses: "The Department faced unprecedented opposition from the for-profit industry throughout the process. The U.S. District Courts for the District of Columbia and the Southern District of New York and the U.S. Court of Appeals for the District of Columbia affirmed the Department's regulations, rejecting the industry's attempts to fight basic accountability measures - a clear sign that the courts continue to recognize both the Department's legal authority and its reasonable approach in establishing these important consumer protections."
Big for-profit schools whose programs flunked the initial trial run of the gainful employment rule in 2012 included Education Management Corporation, Career Education Corporation, Kaplan, Full Sail, and Corinthian.
The industry fought not only against the measures and penalties in the rule, but even against being required to disclose to students truthful information about the costs and benefits of their programs. Today the Department unveiled a new disclosure template, to be implemented later this month, that it will require schools to use to give information to prospective students.
There is still much work to be done, including to provided loan forgiveness to ripped-off students, and to stop the flow of federal money to some of the awful for-profit colleges that continue to enroll students. But that work is now endangered.
The for-profit college industry and its paid GOP pals on Capitol Hill are salivating over the fact that the next President of the United States was previously the president of Trump University. They hope he will dump the gainful employment rule and other accountability measures implemented in recent years.
Although Trump appears bent on breaking many of his promises -- to drain the DC swamp, to reduce the influence of Goldman Sachs, to help working people, to root out government waste, fraud, and abuse, etc. -- we can at least hope that his team is not dumb enough to revert to a time when fraudulent college operators were raiding the Treasury at will.
Trump's nominee for Education Secretary, Betsy DeVos, will surely be asked about all this at her hearing, scheduled for Wednesday.
UPDATE 01-09-17 5:40 pm:
CECU, the troubled trade association for career colleges, confronted today with more evidence that many for-profit schools are a bad deal for students, has tried to invent a procedural objection, claiming that the Department's release of the data "is disappointing and disrespectful" because "the Department should provide every school with the 14 days to file a notice of appeal, the 60 days to file the appeal, and the appropriate time for the Department to review such evidence and rule on the appeal before any public disclosure is made." CECU claims that the Department's action to publish the data now "makes clear this is all about political motivations and harming institutions... We had hoped this Department would comply with the timelines and procedures it had established. Unfortunately we should not have expected even this minimum level of decency from them."
CECU's whining is uncalled for. In fact, the Department has observed the timelines and procedures required under the regulation. The Department sent colleges their draft data in October, and the schools were able to file challenges, which the Department was required to review before publishing today's data. None of that was made public. Under the rule, schools now have fourteen days to indicate if they plan to appeal. This process is consistent with the procedures for evaluations of college default rates, another measure that determines eligibility for federal aid: The draft rates are shared only with schools, schools can privately challenge them, the final rates are publicly disclosed, and then schools can submit appeals.
This process makes sense. The school gets an opportunity to engage with the Department initially in private, but at some point -- at least when a school is contesting a determination by Department officials -- the public is entitled to know what is going on.
This article also appears on Republic Report.
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