How Much Would it Cost For-Profit Colleges to Pass Gainful Employment?

"Yesterday, Secretary of Education Betsy DeVos announced that the Trump Administration would be revisiting the Obama-era gainful employment (GE) regulations finalized in 2014," Ben Barrett writes for New America. "This news has many worried that the Department of Education (ED) will completely defang these important measures in the coming year. By weakening GE requirements, which hold career training programs accountable for the amount of debt students take on relative to their income after graduation, ED could cost taxpayers over a billion dollars and will remove critical protections for borrowers. But how much would it cost failing programs to pass ED's gainful employment benchmark?"

"Given the high stakes associated with failing the GE accountability metrics, the regulation has generated significant pushback from institutions at every step -- particularly for-profit colleges, which stand to lose the most. Despite their objections, however, currently failing certificate programs at for-profit colleges could meet existing regulatory requirements if they lower their net tuition or other costs by an average $3,534 per graduate over the course of the program. To uncover how much a program needs to lower costs per graduate, we calculated the average principal loan amount required to pass the GE rules and then subtracted it from the actual principal loan amount that graduates borrowed (See below).

Failing or Zone Undergraduate Certificate Programs at For-Profit Colleges  
Average Principal Borrowed per Program Graduate $13,556
Average Principal Required to Pass D/E Ratio $10,022
Principal Debt Reduction Needed to Pass D/E Ratio $3,534
 

As a reminder, in order to pass ED’s gainful employment benchmark, the average* graduate from any for-profit educational program, and any certificate program offered at a public or nonprofit college, must have an annual student loan payment that is below 20 percent of his annual discretionary income or 8 percent of his total annual income.** If the program fails the debt-to-earnings ratio for two out of three consecutive years, it loses federal financial aid eligibility. As of January, 2,042 career training programs across 777 colleges had failed the benchmark in GE’s first year of implementation. And of the affected colleges, all but 34 are for-profit."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented. 

 

Publication Date: 6/19/2017

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