Extreme confusion and misdirected anger are just two ways to describe the outrage over proposed legislation that will require academic institutions to provide evidence that their programs are adequately preparing students to enter the workforce. Opponents of the legislation are very careful to describe their academic institutions as “career colleges.” In fact, the terms “career college” and “for-profit” are interchangeable as they pertain to the gainful employment legislation. Because these for-profit institutions serve a large population of minority students, the administration and shareholders associated with these schools have implied that the race of the student body is a factor in the decision to implement gainful employment. In fact, the salaries of the administration and the return on the investments to the shareholders associated with for-profit schools are paid for with federal financial aid dollars.
Let’s take a closer look at how this works. The majority of students fund their education at both for-profit and non-for-profit schools with a combination of scholarships, grants, and student loans. Those lucky enough to receive a scholarship or grant do not have to pay back the money that is awarded to them provided that it is used for tuition or related academic expenses subject to the terms of the award. These awards rarely cover the entire cost of a student’s educational expenses. Therefore, student loans almost always make up at least some portion of the funding. The school receives the federal student loans as payment when the student is approved. The payments are dispersed to the school on behalf of the student. The student is then responsible for paying back the loans. According to the Department of Education’s website, the proposal seeks to protect the students that take out loans in an effort to ensure that they can actually benefit professionally and pay back those loans without any additional hardship. This is the reasoning behind the term “gainful employment.”
Gainful employment legislation seeks to regulate both the academic quality of the program as well as the cost of the program. Contrary to popular belief, a student’s eligibility for student loans is not affected by this proposal. If a school or program is found to be inadequate, the result would be that the school would have to charge less for the service that they are providing or eliminate their program(s) completely. A school that is actually helping students better their lives and enter the workforce without being overwhelmed with student loan debt will not be affected. The vast majority of students that enter a for-profit institution end up incurring much larger amounts of student loan debt compared to their non-profit counterparts. The types of jobs that these students end up with (if they end up with a job at all) actually put them in a worse situation financially because the slight increase in pay still does not cover the additional monthly student loan payments that they are now responsible for.
There are many recent examples of why gainful employment legislation is needed. Career Education Corporation (CECO) offers over 100 programs available at 95 for-profit schools. Their culinary institute, Le Cordon Bleu, was the target of yet another class action lawsuit recently. This lawsuit alleges that students were misled during the enrollment process and that the high cost of tuition makes it impossible to pay back student loans while working in an industry that pays (at best) $12-15 per hour as a starting salary. Le Cordon Bleu boasts a 97% placement rate after graduation, but low oversight on the legitimacy of job placement does not provide data on the identity of the employers. For example, McDonalds is technically part of the restaurant industry. Another popular for-profit, Kaplan University, can’t seem to stay away from controversy either. They were most recently cited for overly aggressive recruitment tactics and misleading students about gainful employment opportunities after graduation. NPR senior news analyst Cokie Roberts predicted that democratic lawmakers will be hesitant to pass legislation in favor of gainful employment because of Kaplan’s affiliation with The Washington Post newspaper.
Still not convinced? According to a Frontline investigation, for-profit colleges are only responsible for only about 10% of all college students in the US, but those students are responsible for almost half of all student loan defaults. For the first time in history, the total of student loan debt in the US has recently exceeded the credit card debt of the entire country. That is $850 billion of taxpayer money according to a recent USA Today report. The next time you see that television commercial for University of Phoenix pay attention because you paid for it.
Tragically, the student is the victim in this whole mess. Student loans cannot be discharged even when declaring bankruptcy. The federal government will eventually garnish the wages of students that are delinquent for extended periods of time. Secretary of Education Arne Duncan clearly stated on the Department of Education’s website that gainful employment will be passed even after a delay caused by public opposition. Belinda Keiser of the Student Access Student Choice Coalition opposes gainful employment legislation. In an interview accessible on the homepage of their website, Keiser voices her opposition to the regulation of student loan repayment plans that are based on a percentage of student income. These plans protect students from having to pay back a larger percentage of their student loans than they can afford at any one time by adjusting the amount of repayment based on the student’s income. Many of the for-profits claim that the struggling economy is to blame for low success rates regarding gainful employment after graduation and the disparity has nothing to do with the quality of their programs. Either way, that statement does not reflect what is in the best interest of the student if the end result is that the student now has more debt than before and little chance of gainful employment.