Exploring the Merits of the Gainful Employment Rule

The following interview is with Steve Gunderson, president of the Association of Private Sector Colleges and Universities (APSCU). Gunderson and APSCU have been active in the discussion surrounding the gainful employment rule, which has dominated major higher education policy conversation over the past year. In this interview, Gunderson shares his thoughts on the current draft of the proposed rule and discusses the changes necessary to protect programming for non-traditional students.

1. How does the gainful employment rule impact new-traditional adult students?

It’s really important that we understand who the new-traditional adult students are. These are the adults who are returning to school with one or more challenges to success; it could be a period of time away from college, it could be that they are parents, it could be a whole series of things like that, that would impact the challenges they face that a traditional high school graduate going straight into a college full-time wouldn’t face.

How would gainful employment impact them? Well, this is what we’ve been so concerned about. The calculations of the research we have seen suggested as many as two million students could be impacted over the course of this regulation. There’s something like 11,300-and-some programs that the Department of Education would seek to review and they would say, “We won’t allow student financial aid to be used for a student enrolling in this program or that program or that program.” It doesn’t only hurt those students who depend on financial aid; pretty soon, that school says, “I can no longer provide that program because I don’t have enough students enrolled in it that makes it feasible for us to do so.”

When we look at the studies, we’re really seeing a significant number — literally 140,000 veterans, probably a half million African-Americans, about 300,000 Hispanics, over a million Pell-eligible students alone — would be impacted. We’re quite worried about the impact of this at a time we’re trying to find a way to get postsecondary career skills leading to real jobs, real incomes, for people who seek that opportunity.

2. What would gainful employment do to the programs that would provide a negative outcome?

What gainful employment seeks to do under the present draft of the proposed regulation [looks] at two different tests. One of those was to look at a debt-to-earnings test and said that if students have a ratio of debt to their earnings in their third year of income on the job that exceeds eight percent, there would be problems. If it’s over 12 percent, it’s a failure.

The other would impose not only school cohort default rates, but specific program cohort default rates. So even if the majority of students were paying back their loans in a particular program, you could still have a cohort default rate that could be problematic and it would result in the program no longer being eligible for any student who is dependent on federal student aid.

3. Do you think there is any value to having loan repayment criteria included in a gainful employment rule?

We believe that employment ought to be criteria, without question, and we believe that income ought to be a basis, one of the elements for it. We literally suggested that a pilot project be developed that would determine eligibility for student financial aid based on five criteria. They are:

• Retention;
• Graduation;
• Employment;
• Earnings or salary gains over a period of time, not one year;
• Student satisfaction

We’re not against employment being in outcome metrics and we certainly support outcomes being the basis by which we judge schools, not the inputs.

What we don’t agree with is a specific formula that has been used by the Department which says quality of academics now will no longer be determined by the quality of academics. It will simply be determined by an income metric that we think is faulted.

4. What do you think of the most recent draft of the gainful employment regulations, released in November 2013?

We think this is a very bad signal and precedent by the Department to suggest that we will determine the successful outcomes of postsecondary education not based on academic quality, but on either lifetime earnings or year three earnings by a particular student.

All of a sudden, everything that accreditation does in American postsecondary education — to ensure the academic quality of the program — doesn’t matter. If you are a student who goes into a career that is personally rewarding but probably not financially rewarding and you are low income, and you work either in rural America or in the intercity, you are now being told you can’t do that anymore, even though that’s what you wanted to do.

That’s the kind of dynamic we’re very concerned about and we really believe that the Department needs to step back and have a serious conversation with all of higher education — and with the Congress as a part of reauthorization — as to what are the outcome metrics that we ought to develop? And how do we develop them going forward not just for our schools — who happen to serve students most at risk — but all of higher education?

5. What do you think is the best way to measure education’s return on investment, both for the student and the taxpayer?

We’re not even against using income as a basis. But we’re a little hesitant when they use social security data that nobody else can verify and they tell us that, “Your programs are noncompliant,” and there’s no way the school can even know whether that is or is not true because social security data is not shared.

One of the things I’ve talked a lot about is the importance in the value of postsecondary education. Roughly, we know that a student with a career program will earn roughly $243,000 more in lifetime earnings than just a high school graduate. We know that an associate’s degree is usually going to earn about twice as much as that; it’s about $423,000 in additional lifetime earnings over a high school graduate.

Now, obviously, you can even look at specific careers and get highs and lows. Some of the trades are higher; some of the healthcare areas tend to be lower. But what we do know is that lifetime earnings matter.

Certainly, we don’t want a student to take on a debt level that has no potential to either earnings gained or repayment. Second, we believe placement is important. Our sector is always focused on that; we think all of higher education should [be].

While learning for the sake of learning is obviously a great value in all of higher education, the reality is that if we are concerned about the student’s financial situation we ought not be encouraging students to go into careers where the likelihood of placement is not good at all in their region or even beyond that, in terms of a national basis.

6. Is there anything you’d like to add about the gainful employment rule and your perspective on how it should be changed to overcome some of the obstacles you’ve noted, or whether there’s value in exploring a gainful employment rule at all as a piece of legislation?

Neither I nor my colleagues in the career college arena are opposed to outcomes. It’s really important that everyone understand that we shouldn’t judge students by their financial status when they come into college. In other words, don’t judge them if they are low-income and they have a disproportionate amount of student financial aid. That’s unfair to the student; they probably need it more than anybody else.

What we ought to do is judge every school on a series of risk-based outcome factors. Now when I say that, our schools ought to be held to the same standards for outcomes as every other school. But when we develop those outcomes, we ought not have one set of outcomes for wealthy upper middle-class white students and, frankly, first-generation minority students with low incomes from the inner city and say, “We need to have exactly the same outcomes from these students,” even though there’s nothing in their life that’s prepared them for similar outcomes in higher education.

A set of uniform risk-based metrics; and the National Governors Association has developed the risk-based metrics that easily could be employed here. You don’t have to take ours or anybody else’s. Take a neutral third-party’s analytics in this area and put that into play. But, if you’re going to do this, you really need to do this as a part of reauthorization

This interview has been edited for length.

For an alternate perspective on the gainful employment rule, please read Current Iteration of Gainful Employment Will Punish Community Colleges Most with AASCU Director of Federal Relations and Policy Analysis Barmak Nassirian.