Gainful Employment Standards

The growing burden of student loan debt coupled with a stagnant economy remains a roadblock to the economic well-being of millions of young Americans.  At the end of 2013, collective student loan debt topped $1.08 trillion.[1]  Approximately 60 percent of students who earned a bachelor’s degree in 2011-12 graduated with an average debt loan of $26,500.  However, rather than working with Congress to identify and remedy the problems, the Administration yet again has chosen to arbitrarily target a segment of the higher education community and the students that it serves.

Since 2010, the Administration has used the regulatory process and a “gainful employment” standard to unnecessarily target certain institutions by setting benchmarks around graduates’ repayment rates and a debt-to-earnings ratio.

In 2012, a court threw out the regulation and its requirements finding no basis for the requirements.  However, last summer the Administration gave notice that it would bring the back. On March 25, 2014, the new draft rule was published in the Federal Register. This time, the draft regulation is more onerous – doubling in length from 436 pages to 841.  This rule now requires all programs at career colleges and non-degree programs at non-profit institutions such as community colleges to maintain a programmatic cohort default rate of less than 30 percent. It also requires programs graduates to meet lower thresholds for two debt-to-earnings ratios.  Finally, it requires institutions to certify all gainful employment programs meet applicable accreditation requirements and state and federal licensing standard and requires institutions to publicly disclose information about program costs, debt, and performance of gainful employment programs so that students can make informed decisions.[2]

Both Republicans and Democrats have criticized the proposed rule stating that they will “threaten postsecondary institution’s ability to continue to serve students and communities well.”  This includes the low-income and non-traditional students who rely on student loans in order to pay for a post-secondary education but need the flexibility provided by career colleges.

The growing student loan debt burden is significant, especially given the weak recovery and poor economic forecasts for young Americans, and needs to be addressed.  According to a Gallup poll conducted in February, 29 percent of adults under the age of 35 live at home, including 51 percent under the age of 23.[3]  Yet, targeting institutions and those in the higher education community with more regulation is not the answer and will do nothing to improve the economic climate for our nation’s youth.[4]