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“Gainful Employment For All” Isn’t Enough To Hold Higher Education Accountable

“Gainful Employment For All” Isn’t Enough To Hold Higher Education Accountable


Preston Cooper
October 19, 2022
The Biden administration is likely to reinstitute the Gainful Employment (GE) rule, a federal regulation which aims to kick low-value higher education programs off federal student aid. Critics of GE point out, quite correctly, that the rule is unfair because it exempts degree programs at public and private nonprofit colleges. Some argue that Congress should apply GE to all of higher education. While this would be a step in the right direction, “GE for all” would still fall short of protecting students from low-quality higher education, particularly at the graduate level.
How Gainful Employment tries to hold programs accountable
As currently proposed, GE would subject higher education programs to a two-part test; programs must pass both “prongs” to continue receiving federal funding. One part compares program completers’ earnings to those of the median early-career high school diploma holder in the same state. This provision is more applicable to short-term certificate programs. As I explain in a previous post, the test unfairly penalizes some postsecondary certificate programs that provide their students with a moderately positive return on investment.
But for the degree programs that would be newly subject to GE if Congress applied it to all programs, the second part of the test is the more relevant. To run the second part, the Department of Education estimates degree completers’ annual loan payments, assuming borrowers with bachelor’s and master’s degrees repay over 15 years. For a program to continue receiving federal funding, students’ estimated loan payments must be less than 8% of their median annual earnings.
However, the Biden administration’s version of GE includes an “escape hatch” for high-debt programs such as master’s degrees. The Department of Education also divides estimated annual loan payments by students’ median discretionary income, which is equal to median annual income minus $18,735. If this ratio is below 20%, the program passes the test even if the “standard” payment-to-earnings ratio exceeds 8%.
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