51 Groups Call On President To Not Let For-Profit Colleges Weaken “Gainful Employment” Rule

Last summer, the Dept. of Education began the process of reviewing a new rule aimed at those educational institutions that failed to demonstrate their students could find gainful employment in the fields in which they had been trained. The for-profit college industry has managed to weaken the rule, but today more than 51 different groups — including advocates for consumers, veterans, and students — asked the President to help prevent this rule from becoming toothless.

The letter [PDF], signed by our own Consumers Union, cites the President’s own words from last August, in which he talked about big-ticket for-profit schools that get billions in federal money through student loans but have remarkably high dropout and unemployment/underemployment rates for their graduates.

“Students aren’t getting what they need to be prepared for a particular field,” explained the President at the time. “They get out of these for-profit schools loaded down with enormous debt. They can’t find a job. They default. The taxpayer ends up holding the bag. Their credit is ruined, and the for-profit institution is making out like a bandit. That’s a problem.”

In the months since Education began the process of refining the rule, which required all schools that get federal funding demonstrate they “prepare students for gainful employment in a recognized occupation,” the for-profit college industry has managed to effect numerous changes that would weaken the rule.

“The changes would have made the regulation so weak on predatory colleges and so hard on low-cost, high-performing colleges that not a single negotiator voiced support for the Department’s last proposal,” reads the letter, which calls on the President to propose a stronger version of the rule in time for it to be finalized by the Nov. 1 deadline.

The letter addresses several failings of the current draft of the rule and minimum standards for what these groups believe the rule should include.

DROPOUT RATES AND OR LOAN REPAYMENT RATES
The current draft of the legislation only considers the employment and debt levels of graduates of a school. It does not take into account dropout rates or the debt levels of those students who do not finish their education during a given number of years.

“This is like measuring the success of a baseball team by counting only the games it won and ignoring the ones it lost,” the Center for Responsible Lending, one of the signers of the letter, explained back in September.

The new letter points out that, by the standards of the current draft of the rule, “programs where 99% of the students drop out with heavy debt” would still be allowed to continue receiving federal funding, as these dropouts and their debt are not taken into consideration.

In advance of these rules, and to paint a rosier public image of their graduates, some schools have been accused of “rewarding” students who do well and will graduate on time with retroactive scholarships. This effectively lowers their debt on graduation. While there’s no problem with providing incentive to good students, the concern is that the schools are attempting to manipulate their stats by saying to regulators, “Look, our graduates are not leaving school with mountains of debt.”

The current rule also only takes into account loan default rates, but the letter says this doesn’t consider the large number of student loan borrowers who are not in default but occasionally miss payments or need to make partial payments to avoid default.

PROGRAMS THAT AREN’T PREPARED TO TRAIN
It’s one thing if a former student can’t get a job in his or her field of training because their teachers weren’t very good; it’s another if that school takes thousands of dollars and its graduates are not allowed to even attempt to get a legitimate job in that field.

The letter gives the example of a dental assisting training program that receives federal funding but whose students didn’t receive the proper coursework (or the school lacks the proper accreditation) for its graduates to then take the required licensing exams.

“Subsidizing such programs misleads students, who trust the federal government to fund only worthwhile programs and is clearly inconsistent with the statutory requirement that all career education programs receiving federal funding ‘prepare students for gainful employment in a recognized occupation,'” reads the letter.

BORROWER RELIEF
The current does allow for partial loan relief — relief that does not come out of taxpayers’ pockets — for students who borrowed to pay for schools that are deemed to be unfit for federal funds.

However, the letter’s authors state that these students should receive full loan relief — again, with all the money coming from the schools’ coffers — for loans taken out to pay for such unqualified programs.

“Providing full relief to all such students is not only fair, it also provides a more effective incentive for schools to improve their programs so they never have to provide such relief.

DEBT-TO EARNINGS RATIO
Part of how the draft rule determines a school’s worthiness to receive federal funds is the debt-to-earnings standards for its graduates. So if a school’s graduates consistently have a level of debt that is disproportionate to their income, the school risks losing its ability to get federal funding.

However the letter claims that the latest version of the rule is so weak that “literally thousands of programs with median and mean debt levels that exceed their graduates’ entire discretionary incomes would not fail the standards.”

JOB-PLACEMENT TRANSPARENCY
While the above topics represent the core of the authors’ concerns about the draft rule, the letter also discusses issues with misleading and inconsistent job-placement statistics used by colleges in their marketing.

“[T]he Department’s proposals do nothing to increase the accuracy or comparability of the job placement rates that schools advertise to students,” reads the letter. These claims — like “70% of our students find jobs in their field” — have been the subject of numerous lawsuits filed by former students and attorneys general around the country who claim that the stats used in some marketing materials are either misleading or flat-out false.

The state of California is currently suing Corinthian Colleges Inc. (operators of schools like Everest, Heald and WyoTech colleges) over these sorts of job-placement allegations.

Even when a school is not lying to applicants and students about placement rates, it’s hard to know what calculations are being used to arrive at these numbers. The letter points out that the only thing that seems to be a standard among the rates used by schools is that they exclude deceased students.

The following groups signed the letter addressed to President Obama:
AFL-CIO
The American Association of State Colleges
and Universities (AASCU)
American Association of University Professors (AAUP)
American Association of University Women (AAUW)
American Federation of Teachers (AFT)
Americans for Financial Reform
Association of the United States Navy (AUSN)
Center for Law and Social Policy
Center for Public Interest Law
Center for Responsible Lending
Children’s Advocacy Institute
Consumer Action
Consumers Union
Consumer Federation of California
Council for Opportunity in Education
Crittenton Women’s Union
East Bay Community Law Center
Generation Progress
Initiative to Protect Student Veterans
The Education Trust
The Institute for College Access & Success
Institute for Higher Education Policy (IHEP)
Iraq and Afghanistan Veterans of America (IAVA)
The Leadership Conference on Civil and Human Rights
Mississippi Center for Justice
National Association for Black Veterans, Inc. (NABVETS)
National Association for College Admission
Counseling National Consumer Law Center (on behalf of its low-income clients)
National Consumers League
National Education Association
The National Guard Association of the United States (NGAUS)
National Women Veterans Association of America
New Economy Project (formerly NEDAP)
NYPIRG
Paralyzed Veterans of America
Public Advocates Inc.
Public Higher Education Network of Massachusetts (PHENOM)
Public Citizen
Rebuild the Dream
Service Employees International Union
Student Veterans of America
United States Student Association
U.S. PIRG
Veteran Student Loan Relief Fund
Veterans Education Success
Veterans for Common Sense
VetJobs
VetsFirst, a program of United Spinal Association
League of United Latin American Citizens
Vietnam Veterans of America
MALDEF
Young Invincibles

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  1. KyMann says:

    Many of the groups on that list are leeches — they’re just trying to muscle out the competition for Fed money.

    For-Profit colleges wouldn’t exist if taxpayer-supported colleges actually served their communities. It’s impossible for a working person to get a degree at most of them, and academia finds offensive the idea that someone wants a degree in order to get a job.

    Like any other activity, some people game the system and get rich at the expense of others. There are a lot of For-Profit colleges that are great, and they shouldn’t suffer because a few are rip-offs.

    • CommonC3nts says:

      @Kymann
      Why do you lie?

      For-profit colleges are leeches who only exist to take the money of people who dont know any better.
      90% of for-profit colleges are scams who don’t care about educating, but only about making money. They have counselor’s who are just telemarketers who lie to 18 year olds to trick them in taking out 10s of thousand in loans to go to their worthless scam college. They will say anything about job placements and how great their school is to trick them.

      The 10% of the for-profit colleges that are not scams are the ones that people go to for advanced degrees and where those people get pre-approval from their company’s HR that their company will give them a promotion if they get a degree from that school. Without pre-approval from their companies HR then no one would go to those schools.

      If you dont know 100% that the job you want will take a degree from that for-profit college then never chance it. Your only sure bet is to go to an accredited state school as then you know it is a real degree.

      Any 17 year olds reading this, please dont be tricked into go to some for-profit scammy college. Your state community college would be 100 times more prestigious and would have a legit degree.

      • KyMann says:

        Sorry that the facts provoke such a knee-jerk reaction in you.

        Try these simple tests:
        1) Check with your local colleges to see how long it would take for you to earn a degree while still working. Out of all those I’ve looked into over the years, in a variety of states, there’s only been one where it was even possible (and it’d take at least twelve years!).

        2) Ask the counselors at your local community colleges if all your credits transfer to a state university or if your AA will transfer. Most of the time (except where required by state law), anywhere from 1/4 to 9/10 of the credits won’t transfer, and the degrees are worthless if you want to continue school.

        3) Look for For-Profit colleges in your area. You might be amazed! I’m sure you know of a few because their ads are everywhere, but there’s a lot of good ones you probably don’t know about. It’s the ones who aren’t in your face all the time which are doing the good work.

        Whenever I had to fill an entry-level position which didn’t, by law, require a degree, I usually chose someone with a degree from a For-Profit because I knew the person worked for it and hadn’t just done four years of partying on their daddy’s dime.

        The best advice I can give 17 years-olds — find out if what you want to do actually requires a degree! I’ve known lots of people who’ve gone to work for companies that didn’t have a ridiculous “all applicants must have a degree” policy. Four years later, they had work experience that made them attractive to prospective employers while people who went to college were saddled with debt and scrambling for any sort of work.

        Everyone screams about the low employment rates for For-Profit college grads, but there are, and always will be, a very high percentage of cab drivers and janitors with degrees from taxpayer-supported colleges.

  2. CommonC3nts says:

    FYI, if you allow people to be able to file bankruptcy to get rid of student loans then all of this BS stops anyways.
    It was insane when they made that no-bankruptcy provision in the 1st place as it has allowed for-profit companies to profit greatly from student loans for worthless degrees. All the no-bankruptcy did was open the door for people to be taken advantage of.

    No one is going to give loans out for worthless schools and majors if a student can get out of paying for it by declaring banktruptcy.

    • furiousd says:

      Especially if the federal student loan portion of that bankruptcy was shifted back to the school

    • MissPurdy says:

      Amen to that. I would bet that the overall cost of college would decrease as well knowing that the free loan floodgates were tightened somewhat.