The U.S. Department of Education has released new gainful employment rules that essentially target all programs offered by private, tax-paying colleges. The new rules do not apply to degree programs offered at public and private nonprofit institutions, which face zero accountability even though they represent the vast majority (80 percent) of college enrollment. As a national leader in postsecondary education, I welcome the Biden administration’s fervor for higher education accountability, but the double standard of gainful employment rules not applying to all programs— regardless of an institution’s tax status— is a fundamental flaw and a massive disservice to students and taxpayers.
The gainful employment rule was intended to ensure that college students attending certain programs secured meaningful employment after graduating, and without incurring too much debt. Under this rule, institutions falling short of that mark would lose their access to federal financial aid programs. The newly proposed regulation suffers from the same fatal design flaw from previous versions that the Department of Education has yet to address. It was applied selectively, almost exclusively targeting tax-paying institutions. This targeting led to skewed results.
A report by the non-partisan Texas Public Policy Foundation (TPPF) demonstrates that when gainful employment metrics are applied equally across all types of schools, the error of only applying accountability selectively becomes clear. Their report shows only about 60 percent of programs at private nonprofit institutions, and 70 percent of those at public colleges and universities, would pass the gainful employment test if it were in place and applied equally across all types of institutions. This indicates that the assertion that “tax-paying” schools are uniquely bad actors is simply wrong; as a group, their performance is quite like that of nonprofits. Unfortunately, the disproportionate focus of gainful employment rules on these privately-run schools missed the forest for the trees, according to the TPPF study.
Why are public and nonprofit private colleges and universities exempt from the regulations? Simply put, because the gainful employment rule sought to put tax-paying institutions out of business based on a maligned view that providing choice and access to education should only be a nonprofit endeavor. Even though they are called “nonprofits,” traditional colleges and universities make far more money than it costs to educate most students. According to a Cato Institute analysis, undergraduate education is a highly profitable business for institutions that do not pay taxes.
The reality is that career training schools, regardless of their tax status, fill a critical need in American postsecondary education by providing vital access to short-term career and vocational training programs. According to the National Skills Coalition, the majority of American jobs (52 percent) require training beyond high school, but not a formal four-year degree. The institutions delivering these types of programs have demonstrated expertise with student success for many years, providing a quality education often at a fraction of the cost and time compared to a traditional four-year degree. They have a significant role in their communities, and in the greater postsecondary educational system.
As an educator with more than 30 years of experience, I have been saying it for years: what matters most in gauging student success in postsecondary education are student outcomes such as student retention, progression, graduation, and employment rates. These are the best metrics to show quality and value. The Biden administration would better serve students and taxpayers with a regulatory framework built around these key metrics rather than gainful employment alone. Neglecting to incorporate a broader range of measurements that are applied equally to all institutions is a disservice to students and simply cultivates misperceptions about the educational value of “tax-paying” and nonprofit programs.
All postsecondary educational programs that rely on federal funding should be held equally accountable for their student outcomes. The new gainful employment rules would unfairly penalize trade and vocational schools while letting wealthy universities with expensive programs off the hook.
Fardad Fateri, PhD, is the Chairman and Chief Executive Officer of International Education Corporation (IEC), which owns and operates accredited colleges across the United States including Florida Career Colleges, Sage Truck Driving Schools, United Education Institute, UEI Colleges, and U.S. Colleges.
