Gainful employment rules are applied unequally to colleges

by Grace

The Obama administration’s new “gainful employment” regulations hold for-profit schools to higher standards, obligating their graduates to maintain minimum income-to-loan ratios not required from graduates of most non-profit and public colleges.

A million students may lose financial aid thanks to rules that don’t apply to public universities.

The gainful employment regulation were supposedly created to protect against “burdensome student loan debt”.

… This regulation prohibits students enrolled in programs at certain institutions of higher education—primarily for-profit institutions—from receiving federal student aid unless the program can show that their graduates’ annual loan payments do not exceed 20% of discretionary income, or 8% of total earnings.

But non-profit and public universities get a pass when their programs do not meet these same gainful employment rules.

… if you applied the regulation to a law degree from George Washington University, a bachelor’s degree in hospitality administration from Stephen F. Austin State University or a bachelor’s in social work from University of Texas, the programs would all fail to meet the standard.

According to Education Department data, if the regulation were fairly applied across all of higher education, 43% of graduates from public colleges and 56% from private nonprofit colleges would fail the department’s debt-to-earnings standard and their programs would lose access to federal financial aid. The Education Department gives these institutions a pass while coming down hard on students attending for-profit institutions.

Opponents of the new rules include minority Members of Congress, understandable since the penalized schools “educate a disproportionate number of poor and minority students”.

… the rule would “severely limit some students’ ability to use federal student aid at the college of their choice” and institutions “affected by this regulation predominantly serve lower-income students from nontraditional backgrounds.”

Protecting some colleges?  An argument could be made that some colleges are scamming students into believing their education will lead to a living wage, but it’s clear that argument would not be limited only to non-profit schools.  It seems the administration is propping up some scammers while coming down hard on others.


Steve Gunderson, “Making ‘Profit’ a Dirty Word in Higher Education”, Wall Street Journal, Nov. 12, 2014.

“Disdainful Employment Rule”, Wall Street Journal, Nov. 16, 2014.

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