Published: February 2014

Stronger gainful employment rule is needed to protect taxpayers

Stronger reform is needed to protect students and taxpayers from for-profit schools that receive federal funding, but do not meet educational requirements, graduate their students, or provide the skills needed for graduates to find post-graduation employment. Consumer Action and 50 other consumer advocates drafted a letter to the President addressing several flaws in the current gainful employment legislation, proposed by the Department of Education, that aims to protect Americans from for-profit college shortcomings.

In a speech on the topic of gainful employment and for-profit education last summer, the President 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. “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.”

The current regulation legislation proposed by the Department of Education fails to address some of the most critical problems that face students who attend, or attended, for-profit colleges. The current draft 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. By these standards, 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.

Additionally, the current draft 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, these students should receive full loan relief — with all the money coming from the schools’ coffers — for loans taken out to pay for such unqualified programs.

At a minimum, gainful employment regulation should include the following five elements:

1. A repayment rate or another metric to effectively prevent programs with high borrowing and high dropout rates from receiving federal funding.
2. A meaningful approval process to weed out programs that will not prepare students for gainful employment in the specified occupations before they harm students.
3. Borrower relief that is fair and provides a greater incentive to improve weak programs.
4. Meaningful debt-to-earnings standards.
5. Protection for schools offering low-cost programs in which most students do not borrow.

The coalition urges Congress to pass a strengthened gainful employment rule and other urgently needed steps to protect taxpayers, students, and our nation’s economy.

Lead Organization

The Institute for College Access and Success (TICAS)

Other Organizations

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

More Information

For more information, please visit TICAS.

Download PDF

Stronger gainful employment rule is needed to protect taxpayers   (CoalitionlettertoPresidentinsupportofGE.pdf)