Gainful Employment and Higher Ed Funding: Investing in Programs That Work

It's time we look to them as the most obvious source of funding to support our public colleges and start investing our money into a system that we know works.
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It may be a legend, but the infamous thief Willie Sutton is widely credited with saying that he robbed banks because "that's where the money is." True or not, the idea has become Sutton's Law, used in medicine to diagnose by first considering the obvious. For-profit colleges know to go where the money is -- U.S. taxpayers' pockets -- squeezing billions out of the federal government, but providing sub par education. It's time we look to them as the most obvious source of funding to support our public colleges and start investing our money into a system that we know works.

In 2010, Tom Harkin, now retiring Chairman of the Senate Education Committee, released a report uncovering the startling rate of students leaving for-profit colleges with high levels of debt and no diploma. "The farther we take this investigation, the clearer it becomes that many for-profit colleges view students as no more than cogs in the profit-making machine, with little concern for their education or success," he said.

The Obama Administration has been working to limit the most ineffective programs that receive government funding. On October 30, the U.S. Department of Education released its final "gainful employment" regulation. This regulation requires that workforce-training programs, across higher education, prepare students for graduation and well-paying jobs. If not, the least performing institutions would lose their access to federal aid grants and loans. The important measure for program success is that graduates must have annual loan payments less than 8 percent of total earnings or less than 20 percent of discretionary earnings. Transparency about program performance is another critical part of the rule.

It seems that both Republicans and Democrats would want to rein in an industry charging an inflated rate without delivering its promised product, yet for-profits have been thriving on this model. The Department of Education estimates that under these final rules, which some advocates contend have been watered down, about 840,000 students are currently enrolled in programs that would not pass the new requirements, and 99 percent of them are in programs at for-profit institutions.

In a week's time, the regulation was challenged in federal court by The Association of Private Sector Colleges and Universities, a for-profit college trade group. Even if the regulation holds up in court, lawmakers can work to block it, which looks even more likely following midterm elections. This spring, a letter signed by 36 lawmakers was sent to the House Appropriations Committee suggesting that gainful employment regulation would negatively effect low-income and nontraditional students and that it "could force some of the most flexible and innovative programs to close, reducing education choice and opportunity for students."

The letter hit the nail on the head in terms of the purpose of career-training programs: they're meant to quickly transition people into the middle class by providing affordable training for well-paying and in-demand jobs. However, true innovation is the opposite of what is happening at for-profits; it is community colleges, struggling with limited resources, creating industry partnerships and programs that quickly pipeline students into growing job markets. Publicly funded community colleges nationwide, for example, offer degree and certificate programs, accessible to low-income students of all ages and abilities, preparing them for the workforce or an affordable transition into four-year colleges.

While the letter was bipartisan, one has to wonder whether campaign contributions from the for-profit sector shape the congress members' thinking. Thirty-one of them have taken a total of $1.2 million from the industry over the course of their careers.

It's become clear that the need for some kind of smart regulation is long overdue. Without federal oversight, for-profit colleges have only the interests of their shareholders in mind. The vast majority of their revenues come from tax payer-funded federal aid; almost half of students do not complete their programs and many of those who do are saddled with debt and often underprepared to enter the work force. Meanwhile, public colleges are losing financial assistance they desperately need. It's a lose-lose-lose situation. The only winner here is the for-profit sector.

While thinking about gainful employment, two recent reports come to mind. The Center for American Progress proposes the creation of a federal grant program encouraging states to re-invest in their public colleges and universities. Noting disinvestment in higher ed across the United States and the marked effect it has on community colleges and low-income families, the Center's report suggests a federal-state compact that would create reliable funding, make college affordable, improve performance and remove barriers to education.

A J.P. Morgan Chase report, while focusing on New York City, is the first in a series that will report on job markets across the United States and in Europe. It reveals that while unemployed New Yorkers search for jobs, tens of thousands of middle-skill positions sit open because employers struggle to find candidates with the necessary skill sets. We certainly already had an inkling about this: if we could create an effective pathway to get those unemployed the skills they need for growth fields like health and technology, we could move them into well-paying jobs that don't require a bachelors degree, ultimately moving them into the middle class.

Does this sound like the type of program that for-profits advertise and lawmakers are afraid gainful employment will squash? Sort of. The skills gap report is recommending investment and innovation in "programs that best prepare workers for high-demand, middle-skill jobs, with career mobility," as well as "criteria for program investments including factors like living wage salary....[to] ensure that both the system's and job seekers' investments will have a payoff in the labor market." In part, this is the criteria that gainful employment regulation might enforce.

So while lawmakers in opposition to "gainful employment" have yet to offer a different solution, let us imagine an alternative for our current higher ed ecosystem: One in which less federal dollars are being used to fund ineffective education at for-profit colleges, and fewer low- and middle-income students are incurring debt. Instead, those federal dollars are more wisely invested in public colleges and universities or even a federal matching grant program to spur state investment. Public institutions then have more funds to not only help students graduate faster, but to also develop critical skills training programs to pipeline the unemployed into the workforce. Lower-income families are able to secure middle-skill jobs with the opportunity for career growth and enter the middle class. As a result, state economies grow, increasing the ability for further investment in higher ed on the state level and growing our national economy all the while.

Now we're really getting somewhere.


Dr. Gail O. Mellow is President of LaGuardia Community College (of the City University of New York) and co-author of Minding the Dream: The Process and Practice of the American Community College.

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