Graduates of career-training programs at public colleges earn nearly $9,000 more than those who attended comparable programs at for-profit institutions, according to a report released Thursday by the Education Department.
The findings are part of a larger effort to hold vocational programs accountable for student outcomes under “gainful employment,” a controversial regulation that threatens to withhold federal financial aid from institutions whose graduates fail to land jobs earning enough to repay their education loans. Gathering the data is a critical step in calculating debt-to-earnings rates that determine whether a program is leaving students with unaffordable loans and poor employment prospects. The future of this effort, however, is unclear as the Obama administration comes to an end.
“We can’t speculate on what the next administration will do, but we’re seeing the difference that these regulations are making already in that institutions have made decisions about which programs to continue,” Education Secretary John B. King Jr. said Thursday during a conference call with reporters. “Students are benefiting, families are benefiting and that will make a strong case for continuing to build on this.”
Education officials looked at the earnings of 1.3 million people who obtained certificates from 28,817 programs at about 3,700 for-profit and public institutions between 2008 and 2012. Average earnings of graduates in the same field were higher at 80 percent of the public programs, while the average difference in pay was about $2,700 more for programs at public colleges. The median earnings of nearly one-third of graduates of for-profit undergraduate certificate programs are less than the annual income of a full-time worker pulling in the $14,500 federal minimum wage, according to the department.
The variation in earnings is due in part to the programs offered at for-profit and public institutions. More than half of the people who attended public institutions completed certificates in higher-earning fields, such as nursing, compared with 17 percent of graduates of for-profit schools. A high percentage of graduates from for-profit programs received certificates to become cosmetologists, medical office assistants or massage technicians, earning less than $18,000 a year.
Tressie McMillan Cottom, assistant professor of sociology at Virginia Commonwealth University, said the department’s findings are in line with her own research that shows inequity in income, wealth, and access to quality, low-cost higher education compounds inequalities for women and people of color, who disproportionately attend for-profit schools.
“When you start off with lower income potential and are more likely to attend a for-profit college and a shorter-term degree program as a result, you are more at risk for high debt that impacts your income potential,” said McMillian Cottom, author of the forthcoming book Lower Ed: The Troubling Rise of For-Profit Colleges. “It is a vicious cycle.”
Representatives of the for-profit colleges say the department’s data lacks context and ignores the variation of wages across the country.
“It is absolutely absurd to compare totally different fields of study and suggest that programs traditionally taught in public institutions have higher incomes than programs taught in proprietary colleges,” said Steve Gunderson, president and chief executive of Career Education Colleges and Universities. “This reflects the continuing ideological bias of this department against our sector and is yet another example of why Americans are tired of out-of-touch bureaucrats in Washington.”
Thursday’s findings leave the Education Department open to criticism that it is biased against for-profit schools and in favor of community colleges, which come out on top in the report. For-profit operators were already suspicious of the Obama administration, which supports providing free community college and has asked public two-year schools to accept the academic credits of students affected by the closure of ITT Technical Institutes.
Many consider such moves as an indication that the Obama administration wants community colleges to supplant for-profit schools, an accusation that the Education Department denies.
“We care far less about tax status than we do about student outcomes,” Undersecretary of Education Ted Mitchell said on the call. “The big takeaway from the data is there’s high variation in outcomes, and the institutions as wells as individual students and families need to attend to that.”
In January, education officials will release the debt-to-earnings rates, and they will strip programs that fail the metric of eligibility to receive federal student aid, a critical source of revenue in higher education. A program is considered to lead to gainful employment if the annual loan payment of a typical graduate does not exceed 20 percent of their discretionary income or 8 percent of their total earnings.
Schools offering career training must, at the beginning of the year, inform current and prospective students of program earnings, along with costs and graduation rates, as well as whether they are falling short of the gainful standards. The program-level data will also be added to the government’s College Scorecard.
The Obama administration championed the gainful employment rules in 2009 as a way to protect students from programs that could leave them drowning in debt. For-profit colleges, which get most of their revenue from federal student aid, argued that they were being unfairly targeted and that the regulations would hurt low-income students.
More than 100 campuses run by for-profit companies have closed in the past two years, including locations of the Art Institutes, Le Cordon Bleu and Brown Mackie College, and many have cited the employment regulations as the root cause.
Congressional Republicans and the for-profit lobby worked to stop the government from instituting the rules through legislation and lawsuits that failed, but the shift in power at the White House may yield new results. However, repealing the regulation, which is already in effect, would mean going through the same lengthy rulemaking process.
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