US colleges face tougher scrutiny on graduate employment

With Biden set to revive employment yardstick for for-profits, Republicans demand it be universal

February 22, 2021
Person with red wig dressed as a fake banknote as a metaphor for US colleges face tougher scrutiny on graduate employment
Source: Getty

The Biden administration is widely expected to revive an Obama-era crackdown on for-profit colleges over their graduate employment rates, raising political pressure for similar scrutiny across US higher education.

The policy, known as gainful employment, threatened for-profit institutions with the loss of federal student aid eligibility if too many of their graduates got poorly paid jobs and struggled to repay their loans.

After years of political and legal battles, the Obama administration just managed to get a version in place before the Trump administration rescinded it.

That fight now looks set to resume, based on repeated signals from Biden aides who described the administration as being determined to protect students from low-quality institutions as part of its overall push for college affordability.

And yet, said experts, conservative lawmakers already are confronting Mr Biden with a demand that any performance-based sanctions on federal aid be applied to all types of colleges and universities.

“It’s a political battle that the Biden administration may not want to fight against a group that would normally be an ally,” said Robert Kelchen, associate professor of higher education at Seton Hall University, referring to the broader higher education community.

The basic mechanism of the gainful employment policy is a departmental regulation, meaning that Mr Biden has the unilateral authority to impose the terms. The Obama version used measures of graduate earnings and student debt levels to threaten aid-based sanctions on all for-profit colleges and on non-degree programmes at non-profit institutions. The Obama administration also added a “borrower defence” rule that discharged federal loan debts for individual students who could show fraud by their college.

Democrats likely could defeat Republicans who press for changes in law that would impose similar restrictions on a permanent basis across higher education. Mr Biden, however, has cast himself as a political moderate eager for compromises where possible.

Beyond those considerations, there are questions of necessity. Even though the Trump administration revoked gainful employment, for-profit colleges remained greatly affected by it, said industry analyst Trace Urdan.

That’s because the federal government is getting much better at combining its databases to assemble and publish data on colleges and the job market performance of their graduates, said Mr Urdan, a managing director at Tyton Partners. And with that information in hand, he said, investors were increasingly refusing to back for-profit operations that show poor performance.

The same mechanism, in fact, might make gainful employment rules less necessary, said Andrew Gillen, a senior policy analyst at the Texas Public Policy Foundation, a conservative thinktank.

That, Dr Gillen said, was because the US Department of Education has improved its online College Scorecard to the point where applicants and their families can see for themselves the job success rates of particular academic programmes at specific institutions.

The real effect on institutions of the modernised College Scorecard – which now ties worker salaries to the programmes they took in college – is not yet known, Dr Gillen continued, because it became available only while higher education was disrupted by the pandemic. The Trump administration also was accused of manipulating the scorecard’s data presentations in ways that helped to hide some poorly performing for-profit operations.

When college applicants get a full use of that tool in a non-emergency environment, they are likely to get advance warnings of “some really bad outcomes” in certain programmes, even if there’s no gainful employment rule to automatically punish those programmes, Dr Gillen said.

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