The DOE’s draft regulation [PDF] is specifically directed at educational programs “intended to prepare students for gainful employment in a recognized occupation,” so this isn’t concerned with the success of students getting degrees in History or English.
As the draft reads now, a career education program would be would be considered a failure and could lose access to federal funding if its graduates have debt exceeding 12% of their annual earnings and 30% of their discretionary earnings. Discretionary income is defined as above 150% of the poverty line and applies to what can be put towards non-necessities.
The new regulation could have a huge impact on for-profit schooling field. For-profit schools often offer these sorts of educational programs targeted at specific careers, but have often been criticized for spending more on marketing and attracting new students than they do on actual education. Community colleges and other lower-cost schools would also be included in the regulation, but would probably not be as affected, as they are less reliant on federal aid for their students.
Some applaud the intention of the DOE’s draft rule, but believe it currently leaves certain loopholes that would allow schools to game the system and avoid being penalized.
Among the biggest concerns is that the DOE would only look at debt-to-earnings ratios of the programs’ graduates. This not only doesn’t account for all the people who leave these programs early, even more ill-prepared and still burdened by debt, it gives schools a way to play with the numbers.
“This is like measuring the success of a baseball team by counting only the games it won and ignoring the ones it lost,” says the Center for Responsible Lending in a statement about the draft regulation.
According to the CRL, at least one for-profit school has laid the groundwork for an end-run around such rules by retroactively offering scholarships to students who are doing well. Essentially, it is cherry-picking good students so they will have less post-graduation debt. Meanwhile, those who don’t graduate are left with mountains of debt that isn’t calculated in the school’s success rate.
In addition to suggesting that the DOE look at the earnings of all attendees of these career education programs, CRL says the rules could be bolstered further by looking at programs’ ability to help students meet licensing standards for jobs that require that level of certification.
“The Department’s draft regulation does require institutions to disclose whether a career program meets licensure requirements,” writes the CRL, “but this modest standard does not ensure that students are given enough information to assess their likelihood of finding employment after completing the program. And it does nothing to protect U.S. taxpayers funding career education programs that do little to help graduates get the jobs needed to repay their loans.”