The Gainful Employment Rule and Student Debt: A Breakdown
The U.S. Department of Education, under the stewardship of Betsy DeVos, recently issued a notice of proposed rulemaking to eliminate the Obama-era gainful employment rule. The rule was intended to hold for-profit schools accountable for their students’ job placement.
Accountability is certainly an important and noble endeavor, and for-profit institutions have seemingly done a less-than-stellar job of preparing their students for gainful employment.
So once again, we have both sides of the political aisle spewing doom and gloom scenarios that won’t happen, but that do stir up their bases.
Student debt is unarguably a problem. The causes, responsibilities, and possible remedies are complex and debatable. Taking sides without considering the merits of any other opinions is ignorant and dangerous. It’s also a common political approach.
Student Debt by the Numbers
The overall numbers paint a bleak picture. Forty-four million people owe $1.5 trillion in student debt. This is in federal student loans and private loans combined.
Women owe a full 60 percent of this debt — $900 billion. Approximately 56 percent of enrolled students are women, indicating they may tend to borrow slightly more than their male counterparts. But having more debt and earning less does not bode well for their ability to improve their situations.
The typical college graduate with debt walks off stage owing around $30,000.
While not everyone who goes to college takes out loans, about 42 percent of those who graduate used loans to get there. For graduates under age 30, over 50 percent used loans.
A 2017 Federal Reserve report seems to indicate that this isn’t a huge problem. Typical payments fall in the $200- to $300-a-month range. Shouldn’t this be affordable for college graduates? Don’t they make at least a few hundred a month more than nongraduates?
Student loan payment problems can be linked to several factors. For one, educational attainment is related to an improved likelihood of repayment. There are relatively fewer defaults on loans for graduate degrees than there are on loans for undergraduates.
Loans used to fund attendance at for-profit institutions have significantly more problems than those used in the not-for-profit sector, again relative to their usage. This is where the gainful employment rule came in.
The Gainful Employment Rule
The Obama administration imposed gainful employment rule on for-profit colleges. It required the institutions to report students’ placement and income results. These schools could potentially lose access to federal loans for students if they failed to meet performance standards.
There is an issue of fairness with this rule, as it singled out institutions based on their tax status and no other criteria. Not-for-profit schools aren’t immune from graduating students who aren’t readily employable. Nor are they required to prepare students for employment as a condition of accepting federal loan money.
The present proposal seeks to address this unlevel playing field. The original rule targeted for-profit institutions.
While some politicians may claim that these colleges are the offenders, the gainful employment rule wasn’t written to apply to offenders. Rather, it targets for-profit institutions without regard to their offender status and likewise targets not-for-profit institutions without regard to their offender status.
The rule applies to schools that cater to nontraditional students. These schools may be more accessible or more open in their admissions policies. However, they serve a population that needs the benefits that accrue from education. The solution shouldn’t be to remove opportunities for underserved populations by targeting schools. There has to be a better way.
The Purpose of Education
Education for education’s sake seems to have become a luxury. Well-rounded students who have been exposed to a variety of disciplines and understand different approaches would seem to be a desirable commodity.
But education has moved to favor career prep over liberal arts. Engineers and accountants are readily employable. But that’s not how we lend money.
You can get student loans to go to trade schools or to get a degree in computer science — or in engineering, basket weaving, or surfing.
Perhaps employment for recent graduates with degrees in basket weaving or surfing is quite good. I don’t have an answer there.
But some fields seem to be more career oriented and are more likely to produce employment prospects that would align with the ability to pay back student loans. Prospective students should have access to this information for all schools and for all degrees. Not just a select — or targeted — few.
For example, they should be able to see how many of the engineering students obtained jobs in their fields, as well as salary information. And the same thing for basket weaving and surfing. And they should also be able to see how many people obtained jobs outside their majors and their salary information — all schools, all majors.
Then prospective students have something to compare. They can make informed decisions, and so can policymakers and taxpayers. They should be able to see that information as well. Hopefully that will be in the finalized rule.
This doesn’t mean that students should flock to the highest paying, most employable degrees. That’s a prescription for misery. A miserable career spent scratching for dollars when you have no interest in what you’re doing doesn’t serve you or society. But some bad decisions could be avoided with better information.
What Will Happen Next?
You can kiss the gainful employment rule goodbye. The public comment period has ended and the rule will go away, most likely early in 2019. It did provide a mechanism for some students to shed their debt, claiming they were misled about employment prospects. The taxpayers took that hit.
No school can — or should — guarantee employment. Schools facilitate education. Students need to make themselves employable.
The transition from child to adult is often difficult. Oftentimes the first choice for a major isn’t the final or best one. Kids need our support and guidance. But they also need to be responsible. Being able to walk away from your debt if you’re unhappy with the results of your education isn’t the solution.
The real solution will require participation from both sides of the aisle. Advocates of free-for-all education neglect to address that nothing is actually “free” — someone pays for it.
We need education of all forms, trades, academic, everything — even basket weaving and surfing. But we also need transparency and disclosure. And the gainful employment rule didn’t solve anything. Perhaps we need our politicians to stop making noise and start working on a real solution.