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Colleges Face New 'Gainful Employment' Regulations For Student Loans
HughPickens.com writes: Education Secretary Arne Duncan says the Education Department wants to make sure loan programs that prey on students don't continue their abusive practices. Now Kimberly Hefling reports that for-profit colleges who are not producing graduates capable of paying off their student loans could soon stand to lose access to federal student-aid programs. In order to receive federal student aid, the law requires that most for-profit programs, regardless of credential level, and most non-degree programs at non-profit and public institutions, including community colleges, prepare students for "gainful employment in a recognized occupation" (PDF). To meet these "gainful employment" standards, a program will have to show that the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of total earnings.
"Career colleges must be a stepping stone to the middle class. But too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable," says Duncan. "These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes. We will continue to take action as needed."
But not everyone is convinced the rules go far enough. "The rule is far too weak to address the grave misconduct of predatory for-profit colleges," writes David Halperin. "The administration missed an opportunity to issue a strong rule, to take strong executive action and provide real leadership on this issue." The final gainful employment regulations follow an extensive rulemaking process involving public hearings, negotiations and about 95,000 public comments and will go into effect on July 1, 2015.
"Career colleges must be a stepping stone to the middle class. But too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable," says Duncan. "These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes. We will continue to take action as needed."
But not everyone is convinced the rules go far enough. "The rule is far too weak to address the grave misconduct of predatory for-profit colleges," writes David Halperin. "The administration missed an opportunity to issue a strong rule, to take strong executive action and provide real leadership on this issue." The final gainful employment regulations follow an extensive rulemaking process involving public hearings, negotiations and about 95,000 public comments and will go into effect on July 1, 2015.
Why the emphasis on "for-profit" schools. Are non-profit and/or state-sponsored schools immune from irresponsible and predatory behavior, in the authors opinion? Is a 100K student loan and a useless degree in Whatever-Studies from Big-State-U any less of a swindle than a 100K student loan and a Whatever-Tech degree from DeVry?
Damn, you're right...a quick and easy solution for the colleges to continue business as usual, and the students who would've had a hard time finding a job before as graduates may have an even harder time finding one as dropouts.
"When information is power, privacy is freedom" - Jah-Wren Ryel
well its a start in the right direction. I blame the idea of federal loans for the high cost to begin with
,and it always costs us avg americans the most
lets face it, college is not for everyone. but since the failure known as the dept of ed, and the student loans for all, the colleges have little incentive to ensure their students do well, their only goal is to ensure the students can pay. and if the government is footing the bill, its in their best interest to enroll as many people as possible, as they will get paid regardless by the feds (the tax payers)
unintended consequences seem to sneak up everytime the feds try and do anything
have you seen my sig? there are many others like it but none that are the same
In theory restricting by college is a good idea, but it's complex and doesn't hit the root cause.
What allows availability to loans to go nuts is the fact that you can't use bankruptcy to get out of loans. If bankruptcy were an option, lenders would be significantly more careful about who they lend to, and we wouldn't need an extra law aimed at specific questionable institutions.
What I find disturbing is that at age 18, we're allowed to go to war, vote, enter contracts and do just about anything (except drink alcohol... that's another weird one). Yet, we still seem to treat these same 18-year-olds like children when it comes to them understanding the loans that they voluntarily enter into. I never found loans to be a difficult concept. You borrow money now, you pay it back later with interest.
If you don't want massive loans, pick a state school. There's a lot of state schools that offer in-state tuition rates to out-of-state students, in addition to your own state's schools. There are a lot of choices without picking private for-profit schools. Now, there might be some more niche degrees only offered by a limited number of colleges, but those are much, much more fewer than the number of students who claim to be victimized by student loans.
I'm not saying that *no* colleges have predatory loan practices, or that *no* students are victimized. I'm just saying that a great deal of students who claim to be victimized are experiencing something closer to buyer's remorse at the first major, adult decision. Some of the blame for the student loan situation *should* sit with the students who entered into these agreements.
If you go to university to get job training you are doing it wrong. That is not what university is meant to be.
Tell that to HR will you?
Great post. One point you missed, though:
Suddenly non-university vocational institutes were looked on as crappy and inferior, and it became a mantra (for no good reason) that you needed a 4-year college/university degree
It's the "no good reason" part that's the real problem - because there are reasons and they are good for some people, if not most.
First, there's an oversupply of workers for an undersupply of jobs, so why not be picky with your applicants if you're an employer? A stupid regulation like "4-year degree required" gets rid of more potential bad employees than it excludes potential good employees for many jobs. Part of this is that high school diplomas are merely attendance certificates now, but that's only a tiny part. A bigger part is a slowing of the economy, in real terms, since the early 70's, and a lack of real, good jobs. Stagflation was papered over with sheets of hundred dollar bills - the structural issues were never "solved" and still aren't. We're about twelve miles up on the structural Jenga stack at this point.
The result was a massive spike in the number of people going to 4-year colleges--that number has sextupled or so over the past 60ish years
Yes! There's your oversupply.
and a massive decline in the number of people going to vocational and technical schools
and there's definitely an undersupply there. Why? One is heavily subsidized and one is not. The one that gets the massive subsidies (grants, student loan programs below market rates, etc.) gets two things - an influx of demand, and a concomitant increase in price. It used to be 4-year students could work during the summers to pay for their tuition - but they didn't get Pell Grants, so that was awful.
Tech school prices are nowhere near as inflated, at least yet. People can still afford to go to tech school, and they're, in large numbers, starting to wise up about that. Let's hope nobody starts trying to heavily subsidize it.
But why did the US go full-on socialism with the 4-year student loan program, in particular? There's an assumption that if only the US can produce a huge number of university brainiacs then it can maintain its economic leadership position in the world, maintain its high tax base despite the competition from cheaper labor doing the same work, and therefore maintain its World Police stance. Because if it can't, China is going to eat the US's lunch, and that would be bad for the people in power. People in Power who have lots of university degrees and are, upon self-reflection, smarter than everybody else in the room, so the degrees must be causal.
Dirty secret: populations are, on average, just as smart from generation to generation, no matter how diplomas are being hung on walls.
Second dirty secret: a China-dominated world will cause the citizens of the US to be as miserable as the citizens of Luxembourg and Denmark are today. I'm just hoping the death throes of the Empire don't include firing shots at the new guy. I'm sure some school offers a degree in how starting unwinnable wars is good for an economy.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
from the summary:
A secret about those private "not for profit" colleges which the Department of Education exempted from that regulation. They are for profit. Huge profits. The distinction is not that these institutions do not earn profits, but rather that they are exempt from business taxes on those profits and the income accrues to the administration and faculty instead of to business owners.
So I had a friend in college who worked part-time in the payroll office and had access to the campus salary database. From her dorm room. So one evening she asks if I want to know what any of my professors make. Looked them all up. In 2014 dollars the mid-level salary for recently-tenured faculty was about $300,000 / year. Deans, provosts and presidents made much more.
Subsidized college loans have created a glut of education dollars and "not-for-profit" educators are raking them in. They are not opposed to earning huge profits themselves, the just do not want competition from other colleges which are run as business. So they lobbied Arne Duncan to enact a regulation which, for no legitimate rationale, applies only their competition.
Don't believe me? Universities try to keep this information locked away tightly but occasionally it leaks out. Here, for, example, is what Treasury Secretary Jack Lew received as severence pay from New York University:
NYU is a private "non-profit". And, as that link indicates, as such they receive additional benefits from the federal government beyond tax exemption.
Ceci n'est pas une signature.
Well, if someone comes from a wealthy family and can afford it, sure they can take nothing but philosophy and underwater basket weaving all they want.
But it makes sense that if loans that need to be paid back are being given out, it makes sense that you lower the risk of default (or misery of lifetime debt) by loaning to those that are studying something with real potential to go on in life and repay the loans.
It doesn't make sense to give $120K in loans to someone taking Medieval Lesbian Literature studies as a major, does it? How the hell will they ever pay that back with their glorious career as a burger flipper at McD's?
Most people go to college to get a degree to get them a foot in the door at a good job at the end. It makes sense to loan out in amounts equitable to what they likely will make at the end of their degree run.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Every high school counselor in the country as well as a fuckton of parents believe otherwise. College is the new high school. Try getting a so-called "entry-level job" without a degree and without multiple years of experience you can't get without already having the job. Granted, it can happen, but there's a reason that lots of people have been unemployed for months or even years. Employers want employees that require zero training, despite the harsh reality that employees can't do the job from day one without having already received training from an employer anyway.
They're just lazy and making a life choice to be poor
Ignoring the trollish intent for a moment - if you graduate with a degree with "studies" in the name, as opposed to one with "engineering" in the name, or a handful of others, you have made a life choice to be poor.
The fundamental problem, and it's one of America's worst right now, is that you made an uninformed choice to be poor! If the point of a specific university program is to make you a wonderful well-rounded person with no marketable skills, then great, offer that, but tell the high school kids (and their parents) honestly "you have $100k in debt and no employment prospects with this program". Truth in labeling! (And maybe some trust-fund babies will take you up on it.)
Where I went to school, you didn't have to commit to a major right away, and several of the engineering programs made a visit to all of the student dorms to recruit, which was always a mix of "look at the cool things we do" and "we're the Nth best paying major the year after you graduate". IIRC, Materials Science was on top, followed by Chemical Engineering (this was in Texas), followed by CS. But the point is we knew that a non-STEM degree, other than accounting, was the bottom half of that list, and a really poor career prospect.
BTW, apparently an Anthropology degree give you the highest chance to still be working retail after graduation, with Arts/Graphic Design, Sociology, English, and "anything Studies" all on the to-be-avoided list, at least if you're planning for a career outside of the fast-food industry.
Holding all universities' funding hostage to their graduates actually finding work (beyond retail) would be a vast improvement to American life!
Socialism: a lie told by totalitarians and believed by fools.
It doesn't make sense to give $120K in loans to someone taking Medieval Lesbian Literature studies as a major, does it?
It makes even less sense to take out $120k in loans to study Medieval Lesbian Literature. Let's put some of the blame where it belongs -- on the students who take out ridiculous loans to study financially worthless subjects.
If you tie government funding of colleges to the salaries of the graduates, you pretty much eliminate the option for someone to take Medieval yada yada because the college won't be able to afford to offer it. This will be just one more step into turning colleges and Universities into trade schools.
How the hell will they ever pay that back with their glorious career as a burger flipper at McD's?
By arbitrarily raising the minimum wage, of course.
It makes sense to loan out in amounts equitable to what they likely will make at the end of their degree run.
It makes more sense to take out loans only "equitable" to what you expect to make in income.
Well, if someone comes from a wealthy family and can afford it, sure they can take nothing but philosophy and underwater basket weaving all they want.
"I'm sorry, but the philosophy and basket weaving departments are being eliminated because there is insufficient funding to hire the professors that teach those topics."
Make the school jointly liable for their students' loans. So, if the student defaults, the college is on the hook. R
Damn, you're right...a quick and easy solution for the colleges to continue business as usual, and the students who would've had a hard time finding a job before as graduates may have an even harder time finding one as dropouts.
Those higher standards would make the college degree mean something, and dissuade people from spending time in college if they weren't going to finish.
Objective still accomplished.
Only in order to cover the cost of labor, a burger goes up in price ~$0.12.
Mean while, the employee gains $3/hr, $24/day, $120/week. That $120/week then gets spent on groceries/entertainment/rent/etc... which increases demand on those products/services.
The increase in demand of the bottom 5% of our workforce getting a nearly 50% raise has an immediate and significant impact on gross revenue and employment demands, which causes that same burger flipping joint to need to hire an additional burger flipper just to keep up with all of the new customers.
This is a true scenario so long as demand lags behind supply (which it currently is). Raising the minimum wage when supply lags demand causes immediate inflation (the same volume of goods are available, but more people have the purchasing requirements, so the purchasing requirements raise).
This has already been proven (many thousands of times over through out history) numerous times in the last few years in the US. One town in Oregon (IIRC) raised their minimum wage to $15. The same companies that screamed bloody murder before the wage hike (a restaurant and a hotel) have actually seen the biggest boosts to their business. States that have already raised their minimum wage north of $10/hr are seeing lower unemployment and faster economic growth than states that are still sitting on the federal minimum wage.
Economics is an incredibly complex field. But there is a pretty clear picture painted by case study after case study: raising the minimum wage does not cause a significant spike in inflation.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
That someone made bad choices in no way entitles Mickey Dee to be effectively subsidized by tax money in their quest to give as many people as possible various horrible metabological illnesses. Minimum wage needs to be high enough that the employee doesn't need any kind of additional support, otherwise you're simply building a corporate welfare state.
Also, I'm not entirely certain what you mean by "deserving" here. Are bad - by which I presume you mean economically unsuccesfull - choices some kind of sin that needs to be punished?
An intelligent human should also realize that a society where people can't afford to have children is doomed. A Mensa member might comprehend that it's not possible to know your economic fortunes for two decades or so it takes to rise a kid. And a once-in-a-century genius could even hypothesize it's cheaper to ensure children have a stable and safe environment to grow up in than to deal with the consequences if they don't, even after we factor in the horrendous consequence of poor single mothers not having maximally miserable lives.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.