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May 11, 2010 1:36 PM On Gainful Employment

By Daniel Luzer

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As the Education Department and representatives from for-profit schools attempt to hash out a compromise on the rules for gainful employment, various people have thrown out their views about how this ought to work. The debate concerns the fact that in order to have access to federal financial aid graduates of a school must earn enough—be gainfully employed—to pay back their loans without undue hardship.

But how much do they need to make for this to work? That’s the question. Under current rules proposed, schools wouldn’t be eligible for federal financial aid if average graduates need to spend more than 8 percent of starting salaries to service student loans.

In a line of reasoning curiously similar to that of the Career College Association, former Washington, D.C. Councilman Kevin Chavous argues in the Washington Times that:

Under a proposal being considered by the Obama administration’s Department of Education, those students’ access to loans would be severely impacted. The so-called gainful employment regulations purportedly would assess the vocational and most course offerings at for-profit institutions by linking the prices those schools charge and the debt-service ratio of their students to federal financial aid. In other words, the department is raising the loan-qualifying standards for the population with the most acute loan needs.
The proposed gainful employment regulations would decimate the college student-loan program and limit many students’ access to college. Without those loans, the vast majority of the nearly 3 million students enrolled in these programs would not be able to attend college. More than 500,000 of those students received degrees in 2008, which instantly enhanced their careers. All of that progress and future potential would be lost instantly.

Lost instantly! Well not if schools prepare for this change and learn to operate more effectively. That’s what federal rules are supposed to do, prevent abuses. There’s no natural reason for for-profit schools to saddle their students with debt repayments that constitute more than 8 percent of their incomes. The proposed regulation is supposed to promote reform; there’s no reason it will force proprietary schools down. A good law encourages changes in these schools to make them more effective.

The fact that for-profit colleges enroll Americans “with the most acute loan needs” doesn’t mean those students are actually benefiting from those loans. If students graduate from for-profit schools and don’t earn enough so that their student loan payments are manageable, they haven’t really “instantly enhanced their careers,” have they? In fact, these students haven’t been served by for-profit schools; they’ve been screwed. [Image via]

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • Dolores Mirabella on May 13, 2010 4:31 PM:

    As a complement to your article please check out the following:

    Below is a link that describe Washington State's IBEST (Integrated Basic Education and Skills Training) program which is being practiced in several of the state's community colleges.

    http://www.highereducation.org/reports/Policy_Practice/IBEST.pdf