Higher Education

Skills Beyond School: An International Look at American Higher Education

July 11, 2013
Within the United States and abroad, Career and Technical Education (CTE) often exist in a world completely separate from that of traditional postsecondary education. This divide is exacerbated by the sometimes baffling array of options available to students upon completion of secondary school. With such a wide variety of degrees, certifications, credentials, career training, and other learning opportunities, it can be a challenge for students to discern which options provide superior quality, accurately value the benefits of their options, and determine the clearest pathway toward the career to which they aspire.
Yesterday, the Education Policy Program at the New America Foundation hosted an event marking the release of a new report by the Organization for Economic Cooperation and Development (OECD) that underscores these significant challenges for students entering the United States higher education system.
While emphasizing the urgency of the challenges our higher education faces, the OECD report also provides recommendations and action items for addressing them. The action items put forward by the OECD report are aligned toward building quality, transparency, and continuity between and within these presently disparate pieces of the American education system. For more information about the recommendations of the report, see yesterday’s post on the report. Strengthening the integration of CTE with secondary learning and other postsecondary education options is a critical piece in addressing the needs of students, as they navigate their pathways to the workforce.
Throughout the event, 20 distinguished speakers and panelists shared their insights about the challenges facing students today and their wide-ranging consequences for the labor market and the economy if these inefficiencies in education and training remain. As Amy Laitinen, deputy director of higher education at the New America Foundation, pointed out, “The OECD’s report uses the word ‘risk’ 41 times, and it’s for a good reason: most prospective students don’t know the expected earnings of the credentials they’re seeking and employers don’t know what students with these credentials actually know or can do.”
The U.S. Department of Education representatives speaking at the event were receptive to the report’s findings, and emphasized their commitment to reform. During her remarks yesterday morning, Brenda Dann-Messier, assistant secretary for the Office of Vocational and Adult Education and acting assistant secretary for the Office of Postsecondary Education at Department, emphasized the need for greater clarity amidst the higher education landscape. “Postsecondary CTE programs cannot exist in isolation from higher education, K-12, or systems for workforce training. To achieve their maximum potential, they must be part of a broader career pathways system for all students in order to meet our education and skills challenges in the future.”
For who were unable to attend the event yesterday, a webcast – featuring an overview of the report findings, followed by three panel discussions on the three primary issue areas identified by the report – is available on the New America website in full. An infographic produced by the New America Foundation that depicts the report’s main components is also available here.

The Vibrant Diversity of America’s Career and Technical Education “System?”

July 10, 2013
Publication Image
Today, the OECD released a comprehensive review of Vocational Education and Training (VET) in America, A Skills beyond School Review of the United States. While those immersed in the higher education landscape might find many of the recommendations familiar, echoing calls for reform advanced by a wide range of education stakeholders, the review provides a refreshing outside perspective on Career and Technical Education (CTE) and higher education more broadly.
The report is charitable in their praise of the ‘vibrant diversity’ brought forth by the United States’ decentralized postsecondary CTE system. The overarching recommendation put forth by the review is to balance this approach with a more strategic pursuit of quality, coherence, and transparency. In the context of what the review further refers to as ‘The US ‘system’ of CTE,” it becomes clear that the American system of postsecondary CTE is in urgent need of reform.
Authors Malgorzata Kuczera and Simon Field quickly address central issues facing postsecondary education in the United States, highlighting three broad recommendations – funding for quality, anchoring credentials in the needs of industry, and building transitions that work – which are bolstered by several more specific action items.
1.      Substantially strengthen quality assurance in postsecondary education and its links to title IV student aid.
The review outlines six considerations that provide urgency for the strengthening of quality assurance. Many of these recommendations, especially in regard to federal financial aid reform, coincide with the recommendations put forward by the New America Foundation in the report, “Rebalancing Resources and Incentives in Federal Student Aid.”
While many of the considerations put forth by the authors point toward new reforms, it is worth pointing out that the third points to current requirements of quality assurance that are not being enforced. Citing the 2010 U.S. Government Accountability Office (GAO) investigation of several (vibrant) private for-profit institutions, they point out the finding that four institutions clearly promoted fraudulent practices, and all made ‘deceptive or otherwise questionable statements’ in materials for students. While pursuing further reform is necessary, reviewing the implementation of prior efforts is equally important. 
2.      Establish a quality standard for certifications and obtain better data on both certifications and certificates.
In a section aptly entitled “Confusing choices and quality challenges” the authors begin with the following data from the U.S. Department of Labor: “Tour guides can choose from among nine credentials; chemical technicians decide between 22, while computer network support specialists can choose out of no less than 179 different credentials.” And it is incredibly difficult to determine whether those nine tour-guiding credentials lead to either higher wages or career advancement. The report points out that the American National Standards Institute (ANSI) estimates that less than a fourth of certifications currently offered would meet the standards that their organization has published. If the GAO conducted an investigation of American certification programs, they may find a great deal of ‘deceptive or otherwise questionable statements’ being made to students about the value of the credentials they are offering.
3.      Building transitions in CTE into postsecondary programs, within postsecondary education, and to the labor market.
The final recommendation distinguishes between the differentiated needs at each transition point within postsecondary CTE – not only entering from secondary school and exiting to the workplace, but also the unique challenges faced by students who seek to move between institutions. While funding for quality and establishing standards for certifications would go a long way in addressing some of these transition challenges, especially in regard to information asymmetry, the authors also point toward strengthening CTE in high schools as a method for building stronger transitions. It harkens back to a discussion in the first chapter pointing out America’s partiality for generalized high school education – or aversion to anything that could be perceived as “tracking.” The authors’ perspectives on building high school CTE transitions are a noteworthy addition to the review.
The diversity of CTE in the United States has by and large created a “system” that is not optimally serving students. While decentralization can promote rapid response and innovation, in absence of discerning funding, quality assurance, reliable information, and clear pathways forward, decision-making is a quagmire for students. In one way, the CTE system is quite vibrant – it is alive, constantly changing and evolving. As reforms move forward, it will be important to implement flexible approaches that will grow with the ever-changing landscape of labor and careers throughout the country.

The Mythical College Savings Penalty

July 8, 2013

Richard Vedder has a column over at Bloomberg View today exposing what he labels the "stealth tax" on family savings. Citing uncited "considerable anecdotal evidence," Vedder claims that savers pay almost three-quarters of their earnings for college, a much higher rate than a family of comparable wealth with no savings. It's an alarming argument, but it's also a largely unsourced account, lacking lacking any information about how savings and their treatment in financial aid calculations actually work.

Most Families Save Through Mortgages or Tax-Advantaged Accounts...

Financial aid formulas do not treat all savings as the same. Most middle-income families today save money either though building up home equity or making use of tax-advantaged retirement savings vehicles like 401(k)s, Individual Retirement Accounts (IRAs), Roth IRAs, etc. Someone under 50 can contribute $17,500 to the 401(k) and $5,500 to the IRA, netting them $23,000 in annual savings plus whatever they are building up through a mortgage. And since accounts are for individuals, a married couple with two incomes could potentially double those amounts. It's after these limits that folks would likely turn to other investments that do not have special tax treatment.

 ...And the Federal Government Doesn't Touch Them for Student Aid Calculations

The Free Application for Federal Student Aid (FAFSA) does indeed ask students (and parents if the student is a dependent) for information on their assets. But the instructions for the form (see page 2) explicitly exclude: the value of the home the parents/student live in, retirement plans, such as 401(k)s, non-education IRAs, pension plans, annuities, etc., and life insurance In other words, before the family has entered a single cent, the form already excludes the predominant savings vehicles used by most families. 

Remaining Assets are Heavily Discounted

Knocking out retirement plans and main residences still leaves behind other assets, such as stocks or mutual funds held outside of tax-advantaged accounts or other real estate holdings. But what remains is then heavily discounted by the formula the federal government uses to calculate aid eligibility. The federal formula immediately assumes about 45 percent of the assets do not exist thanks to an asset protection allowance. It then only considers 12 percent of that already reduced amount to generation a contribution from assets that is functionally pennies of every dollar in assets. And even after that, only about 40 percent or so of parents' combined income and assets are used to generate the actual contribution. The result is that $100,000 in non-retirement savings adds at most a few thousand dollars to the expected contribution. (If you want to follow the whole process yourself check out page 9 here or put in different values into the Department of Education's FAFSA4caster.)

You Get Credit for Assets, But Not for Most Debts

Another suggestion in Vedder's argument is that free-spending is actually rewarded. But apart from non-business real estate, where the amount counted is the value minus remaining debts, balances on credit cards, auto loans, etc. are not deducted treated as "negative" assets. And the contribution from assets cannot be negative, so you can't use being underwater on a second home to try and offset contributions from income.  Heavy debts may reduce the amount of cash in checking and savings accounts treated as assets, but the large protection allowance probably makes that meaningless. 

So how much is that savings penalty really?

Vedder's example for the savings penalty involves two otherwise identical families that both make $125,000 a year, with one having $100,000 in savings and the other having nothing. If the $100,000 is held entirely in retirement accounts, then there's no difference in the expected contribution for the thrifty versus free-spending families. If those additional savings are held in assets that are counted, then the contribution for the saver is about $4,000 higher. Yes, that's a bigger contribution, but the family also has $100,000 more in assets to make paying for college easier and avoid debt. If anyone thinks that's an unfair trade and would like to trade me $100,000 for $4,000 feel free to contact me. 

A Glimmer of Truth in Institutional Aid

While Vedder's argument falls apart with respect to federal aid, it's nearly impossible to evaluate his claim with respect to institutional aid.  That's because many of selective, private nonprofit institutions rely on additional documentation through the CSS/Financial Aid Profile to calculate aid based upon a completely opaque and customized "Institutional Methodology." There is no public base formula and it varies by school so there's no way to compare it to the federal formula. (The Financial Aid Journal has a summary here and a less clear brochure from College Board is here.) The institutional formula does include houses, so it's possible that those who save though their homes could be hit more than non-savers, but it still relies on a very low share of assets--between 3 and 5 percent depending on the level.  

Wrong Argument, Mostly Right Conclusion

The irony is that while Vedder's arguments on the savers' tax are dubious, his conclusion that aid determinations should rely largely on income alone makes a lot of policy sense. At this point, getting rid of assets is the next logical step in FAFSA simplification, as that section  presents a lot of questions that take much more time to answer than those related to income and make little difference in the end result. It would also lay the groundwork for experimenting with awarding aid based upon older income information straight from the IRS or other changes that could make it even easier for students to get aid. Sure it might have some small effect on contributions for richer people, but probably not enough to offset the gains at the other end of the income spectrum. 

Simplifying the federal formula will go a long way, but it won't do enough as long as a select group of colleges keep relying on additional information and opaque formulas to generate aid estimates that are wildly different than what the federal government suggests. Such machinations in the name of rooting out every last little false positive do nothing to help lower-income students understand what college is actually going to cost and likely increases confusion for everyone about how their aid packages really work. And that's before colleges start deviating from the expected contribution through so-called merit aid, tuition discounts, gapping, and the like. When it comes to stealth penalties, the issue isn't taxing savers, but what schools are doing for low-income students and how they get there.

It’s Official: Interest Rates on Subsidized Stafford Loans Double

July 1, 2013

Interest rates on a subset of federal student loans officially doubled today from 3.4 to 6.8 percent. The rates apply only to newly issued Subsidized Stafford loans, affecting about 7.4 million students next year. But the increase in interest rates could have been prevented – and many members of Congress tried.

The scheduled increase has been circled on many stakeholders’ and policymakers’ calendars since Congress granted a one-year reprieve last summer. Unlike last year, though, Congress debated a host of reform proposals, many of them market-based (tied to the rate on the 10-year Treasury note), rather than just a simple one-year extension. The latest plan, a bipartisan proposal from Sens. Joe Manchin (D-WV), Angus King (I-ME), Tom Coburn (R-OK), Richard Burr (R-NC), and Lamar Alexander (R-TN), was immediately rejected by Senate Majority Leader Harry Reid (D-NV).

Though the House and Senate haven’t yet managed to agree on a plan, it is still possible that Congress could vote to retroactively reset the rates before students start school in the fall. Working with Slate, we developed a calculator that explores several of the proposals on the table: the bipartisan Senate plan, a similar proposal from President Obama, a temporary extension of the 3.4 percent rate, and the now-effective 6.8 percent rate. Enter your loan amount for next year, and see what your interest rates and monthly payments could be under each of the plans:

Bipartisan Student Loan Interest Rate Reform Bill Released in the Senate

June 27, 2013

Would Senate Democrats walk away from a chance to cut interest rates and payments on student loans below where they would be if Congress enacted a one-year extension of current policy – a 3.4 percent interest rate for Subsidized Stafford loans and a 6.8 percent rate for Unsubsidized Stafford loans? Would they turn down a bipartisan plan to spend an estimated additional $30 billion over the next five years to lower rates for millions of borrowers? We will soon find out.

Today, a bipartisan group of senators officially introduced legislation, the Bipartisan Student Loan Certainty Act, that would lower rates and payments on student loans below an extension of the current 3.4 percent rate on Subsidized Stafford loans. The bill, led by Sens. Manchin (D-WV), Burr (R-NC), Coburn (R-OK), Alexander (R-TN), and King (I-ME), would tie fixed interest rates on newly issued student loans to the 10-year Treasury note rate – 1.81 percent for the 2013-14 school year – plus a markup of 1.85 percent on undergraduate Stafford loans, 3.4 percent on graduate Stafford loans, and 4.4 percent on PLUS loans.

The rates on the loan would be fixed for the life of the loan, but each year of loans would carry a new rate. The bill would maintain the existing cap on consolidation loans of 8.25 percent, a provision included (albeit not explicitly) in an earlier proposal from Sens. Coburn and Burr.

We’ve written a lot over the past few weeks about this bipartisan Senate proposal and in a recent analysis compare it to other plans. The benefits under the bipartisan plan exceed those of others proposals because it lowers rates on both types of loans undergraduates receive, Unsubsidized and Subsidized Staffords. And because Unsubsidized Stafford loans accrue interest while a student is in school, lowering rates on those loans reduces the amount of debt borrowers have when they leave school, cutting monthly and total payments, too.


Why is the Democratic leadership in the Senate actively trying to defeat this bipartisan bill? And why are student and advocacy groups egging them on? Because they are worried that interest rates might, sometime in the future, on average, end up higher under the proposal than under current law (i.e. 6.8 percent). In that case, 6.8 percent would be a better deal they argue.

Senate Democrats and advocacy groups, in other words, have put their money on a big move up in long-term interest rates. Sure, they could be right, although the 10-year Treasury note would have to return to its 2007 pre-recession level for the rate under the bipartisan plan to exceed 6.8 percent. But what if they are wrong about future interest rates? What if rates stay lower for longer?

Take a look at Congress’ track record on picking interest rates for student loans. The rates are currently fixed at 6.8 percent because back in 2001 legislators picked that number based on Congressional Budget Office interest rate projections.

That should be reason enough to get Congress out of the business of setting student loan interest rates. But armed with another Congressional Budget Office interest rate projection (which simply extrapolates average interest rates from the past into the future), Democrats and advocacy groups are busy making tables and charts showing exactly where interest rates are headed, all to make the case that 6.8 percent is a good rate.

According to Sen. Durbin (D-IL), student groups have told Democratic lawmakers to let the rate on Subsidized Stafford loans double to 6.8 percent rather than consider any of the alternatives currently being floated. When Congress picked the 6.8 percent rate in the early 2000s, student groups rejoiced. They were sure it was a great deal for students. They even took out full page newspaper advertisements thanking Congress for "lowering rates." Later, as everyone knows, Democratic lawmakers and student advocates cried foul when rates plunged but the 6.8 percent rate remained. Could they be wrong again? 

Check back with Ed Money Watch for more details in the coming week.

Harkin Interest Rate Proposal Costs Students More than Bipartisan Bill

June 25, 2013

Less than a week before interest rates are scheduled to double on some federal student loans, yet another proposal has surfaced in the Senate. Sen. Tom Harkin (D-IA), chair of the Senate Health, Education, Labor, and Pensions Committee, is reported to be circulating a proposal similar to one Sens. Manchin, King, Coburn, and Burr released last week, only his plan includes lower rates on Subsidized Stafford loans (but higher rates on Unsubsidized) than the bipartisan Senate proposal and Senator Harkin adds a cap on rates.

Harkin’s plan ties rates to the 10-year Treasury-note rate, plus a 1.5 percent markup for Subsidized Stafford loans; a 3.4 percent markup on Unsubsidized loans; and a 4.5 percent markup on PLUS loans. Stafford loans would be capped at 8.25 percent, and PLUS loans would be capped at 9.25 percent. (Consolidation loans, currently capped at 8.25 percent, would no longer have a cap.) The Manchin-King plan, on the other hand, would start with the same 10-year Treasury rate with a 1.95 percent markup on undergraduate Stafford loans; a 3.4 percent markup on graduate Stafford loans; and a 4.4 percent markup on PLUS loans.

Yesterday, we compared monthly payments for a hypothetical student taking out the maximum in Subsidized and Unsubsidized Stafford loans for four years of school, under several of the existing proposals. (We used the current Treasury rate as a basis for our estimates.) Today, we’re adding the Harkin proposal to those estimates. Readers should note that the bipartisan proposal is still a better deal for undergraduates than the Harkin proposal. And because the bipartisan bill reduces the interest rate for both Subsidized and Unsubsidized loans, more students will  get a better deal.

The bipartisan Senate proposal achieves lower loan balances and overall interest rates for undergraduates than the Harkin plan because it charges graduate students more than undergraduates on Unsubsidized Stafford loans. We think charging graduate students higher rates to provide undergraduates lower ones is smart policy. It’s also progressive. Student loan borrowers with graduate degrees are hardly an economically oppressed class. Meanwhile, too many Americans struggle to obtain an undergraduate degree.

Maybe progressives could learn a thing or two from Sens. Manchin (D-WV), King (I-ME), Coburn (R-OK), and Burr (R-NC). The bipartisan proposal is a better deal for students, and it’s a better solution to the problem.  


Student Loan Interest Rate Compromise: Numbers on the Bipartisan Senate Plan

June 24, 2013

A bipartisan group of senators (King, Manchin, Burr, and Coburn) is reportedly drafting a bill that would prevent interest rates on Subsidized Stafford loans from doubling on July 1. Their proposal would set market-based interest rates on all newly issued federal student loans. It looks similar to proposals from Senators Coburn (R-OK) and Burr (R-NC), President Obama, and the New America Foundation. How does the proposal compare to other options for setting rates? We decided to run the numbers.

You can read the full post on our Ed Money Watch blog.

Senate Interest Rate Compromise on the Way – and it Saves Students Money

June 24, 2013

A bipartisan group of senators (King, Manchin, Burr, and Coburn) is reportedly drafting a bill that would prevent interest rates on Subsidized Stafford loans from doubling on July 1. Their proposal would set market-based interest rates on all newly issued federal student loans. It looks similar to proposals from Senators Coburn (R-OK) and Burr (R-NC), President Obama, and the New America Foundation. How does the proposal compare to other options for setting rates? We decided to run the numbers.

The interest rates would be set at the 10-year Treasury yield plus a 1.9 percent markup for undergraduate loans; a 3.4 percent markup for graduate Stafford loans; and a 4.4 percent markup for Grad and Parent PLUS loans. Media reports indicate that the plan produces budgetary savings over 10 years with a 2.0 percent markup on undergraduate loans, and the bill’s sponsors are likely to further reduce the rates to ensure the compromise proposal is budget neutral. That puts the markup for undergraduate Stafford loans in the 1.9 percentage point range.

Using this information, we ran scenarios comparing the bipartisan Senate bill with an extension of current policy (3.4 percent Subsidized Stafford, 6.8 percent Unsubsidized), current law (both loan types at 6.8 percent), and the president’s proposal, which also pegs fixed-rate loans to the 10-year Treasury note but adds a different markup to that rate.

Our calculations are a bit more complicated than others so as to be more accurate. We account for the fact that undergraduate borrowers typically borrow both Subsidized and Unsubsidized Stafford loans. Our calculations are based on an undergraduate who borrows the maximum in both loan types.

And we account for the fact that lower interest rates on Unsubsidized Stafford loans reduce the amount of debt borrowers have when they leave school (interest accrues on these loans while borrowers are enrolled, so a lower rate means less interest added to the total loan balance while in school). That effect lowers a borrower’s monthly and total payments. We also hold the 2013-14 interest rate constant for four years of borrowing. We don’t profess to know where interest rates are headed; instead, we assume today’s rates are constant.

The tables below show the average interest rate at repayment, the debt at repayment, and the monthly payment under a 10-year fixed repayment plan under each interest rate scenario outlined above for an undergraduate who borrows the maximum. The bipartisan Senate plan provides nearly identical terms as the president’s plan when translated into monthly payments, though the Senate plan has simplicity going for it—both loan types have the same interest rate. More importantly, both plans would be better for students this year than letting the 3.4 percent rate expire, or even extending it.

06242013 Weighted Interest Rate Comparis

The bipartisan Senate proposal could increase the budget deficit by $30 billion in the next five years, a cost that some Senate Republicans are willing to swallow in exchange for a market-based rate. That sure looks like the bipartisan compromise that everyone says they want to see more of in Washington. Amazingly, other Democratic lawmakers cannot decide if a $30 billion rate cut is enough, because interest rates might, sometime in the future, on average, end up higher under the proposal than under current law, negating that new spending. They are, in other words, holding out for a sure thing and more money to boot. But what if rates stay lower for longer? By holding out for more, Democratic lawmakers will have torpedoed their only chance at providing students and parents a shot at those lower rates.

Student advocates and Democratic lawmakers may be looking a gift horse in the mouth. 

Student Stories from Gainful Employment Programs UPDATED

June 17, 2013

Last week, Higher Ed Watch took a look at some of the gainful employment policy questions raised in the over 900 public comments submitted to the Department of Education. While policy discussions will ultimately be the most important considerations as the regulatory process moves forward, it's also important to remember that these issues do affect real people. So today we're looking at what some current and former students at these programs had to say in their comments.

Ambition and hope do not pan out in Wisconsin

For many low-income and non-traditional students, going to college can be a source of hope and a chance for a better life, even in spite of fears about not having succeeded academically in the past. That sense of opportunity is prevalent in a combined set of 13 comments from students who now appear to be enrolled in courses at Milwaukee Area Technical College. These comments almost all start on a hopeful note with a sense of excitement for a better life. Many detail previously unachieved academic successes in these programs--high grade point averages, scholarship-winning essays--the type of accomplishment that shows they are college-caliber material. But then the reversal--a degree with no return, a dispute over further debts, no change in status--that leaves them arguably worse off and in debt. (The original comments have been temporarily taken down from Regulations.gov with a request to remove personally identifiable information, so I created a redacted version here.) 

A story from one woman who enrolled at Sanford Brown to become a probation officer encapsulates this emotional roller coaster:

I was so excited about going to Sanford Brown College. I was sold because I was told I could get small class sizes and get extra help if I needed and graduate faster because the courses were 5 weeks long and you went to school year round until you graduated. 
I went ahead and took the admissions test and paid $50.00 for it. I was told by the financial aid personnel that I could also write a 500 word paper on why higher education was important and win a $1,500 scholarship. I won the scholarship because of the paper I wrote. I was so excited and proud of myself. I was looking forward to the wonderful future my 3 kids and I were going to have. I was going to finish college and finally have a career which I loved which was helping people. I was assured by all the admissions people at Sanford Brown College that I had made the right choice to attend that college. They all were so friendly and seemed to want this as much as I did.
But it was not to be. After attending from August 2006 to September 2008, the woman believed she had graduated but ended up not being able to do so after a dispute with the institution over whether she still had an outstanding balance on her account. She never ended up finding a job in the criminal justice field and owes $25,000 in student loans and cannot transfer her credits. Now the campus she attended, which had a 27.5 percent student loan default rate in the last year and charged the lowest income students a net price of nearly $18,000, is shutting down. 
Those who went from the highs of success to the disappointing workforce reality pulled no punches on their sentiments. For example, one student in the Milwaukee area who graduated from a dental assisting program at Everest College in 2011 wrote: "My intentions were to give my children a better future by bettering myself through education. Everest ripped that dream away from me and is the reason I am struggling today with a $12,000 loan." A student who finished at Everest with a 4.0 grade point average in the same program had the same reaction, calling her experience the "beginning of a long unfinished nightmare."
[UPDATE: On Twitter, Robert Kelchen notes that the Milwaukee branch of Everest College closed after placing only 95 out of its 1,585 students in jobs since opening in October 2010. An Inside Higher Ed article from February also notes that Milwaukee is increasing scrutiny of for-profit colleges.]

Confusion rules the day

Given all the work that's been done to raise questions about some gainful employment programs, it's fair to ask why students are still choosing to enroll in certain ones that already have bad outcomes (see 27 percent default rate at Sanford Brown). The answer, at least partially, appears to be confusion. Lack of clarity around costs, expected return, likelihood of finishing, transfer opportunities, and ability to pass licensing tests whether credits would transfer, and whether they will even be able to sit for the necessary licensing tests pop up again and again in a host of comments. (See for example, this comment about trying to get an animation degree or page 4 of the document labeled "student complaints.")

Confusion can be one way to shift personal responsibility away from the individual and to the program, but it also seems to be a symptom of our opaque higher education system and false quality assurance provided by accreditation. In a working transparent market, concerns about cost, transfer, etc. should not be happening. The fact that they are again reiterates the importance of efforts like the College Scorecard and Financial Aid Shopping Sheet, which try to standardize information to help with comparisons may be some assistance, but are struggling to get widespread adoption.

But better information is not enough unless either: 1) consumers change their behavior and take a more skeptical and less trusting approach to choosing colleges or 2) they have a better quality assurance that the institutions where they can take their aid have been sufficiently vetted to merit a more trusting relationship. Right now, students face the worst of both worlds thanks to accreditation. With the imprimatur of accrediting agencies (and thus by implication the Department of Education), accreditation provides a false sense of security for students that breeds an implicit level of trust toward the institution that may not be warranted. Unlike a mechanic you've never used before, a student trusts her accredited college will charge her a reasonable price and give her a service that works. And she does that because some other group of people have reviewed the college to check its quality. Experts in higher education have signed off on it, so why shouldn't she trust that seal? And so students trust that their accredited institution will offer accredited law degrees in their state--but that's not always true, as a student from Iowa found out when he tried to get a law degree from a program whose lack of recognition from the American Bar Association meant California was the only state in which he could become a lawyer. Or they might assume that their credits could be used at colleges beyond the one they are currently attending., which was not the case for many students who tried to take their coursework from proprietary institutions to Milwaukee Area Technical College.

Solving this issue of trust can be done one of two ways. First, Congress could change the requirements around accreditation to compel these agencies to actually set clear standards for outcomes and results--including things like having necessary programmatic accreditation--which would likely result in closing some institutions and accreditors for poor performance. Or, we could go the opposite way and acknowledge that accreditation is not a meaningful indicator of anything and students should not assume that just because a college gets federal student aid that means they should assume it's any good. The former is extremely difficult politically. The latter is not only hard to accomplish but would make the path into college even more confusing for low-income students that currently have to trust and rely on their financial aid office for help navigating Federal grants and loans. Either way this issue indicates more must be done to think about not just what information consumers use for their decisions, but also how they interact with the colleges they are considering attending.

Does this really require a college credential?

Also implicit in the trusting attitude of students is the assurance that program will be what it says it is--training that will provide them access to a job. Now in any system, some programs will be better than others and there will always be a few duds.  And commenters did identify some that appeared to be not very good--students discussed outdated or insufficient equipment (imagine learning how to work with braces on half a mouth) or instructors without sufficient content knowledge. But assumed in all of those comments is the idea that the program would have been better had those deficiencies just been corrected. Never would a student assume that the degree itself is fundamentally not reflective of how the fields they are preparing for actually operate. Yes one student who attended  Sanford Brown in the Milwaukee area found out that misalignment problem was exactly what her program suffered from:
The majority of companies hiring for Billing have on the job training for people who have been hired by the company including Aurora Healthcare. ... The HIPPAA, JCAHO and Medical Terminology courses are being given as on the job training as free computer based learning courses. Positions in Coding for hospitals are impossible to get into without years of experience. The Certificate I received has not been useful to me and is not worth the $17,000 I now owe. 
The commenter raises a point that goes beyond the idea of whether a program merits the price charged and debt incurred to instead ask is it even aligned with fields or occupations where postsecondary education really provides an advantage for entry and advancement? In the case of the coding program, she suggests that even an extremely good program would not have been worth it because that is not how the coding industry works. This isn't a derivative of the "bachelor's degree holders working in restaurants" argument, but rather the idea  that even someone who gets employment in the relevant field may not actually need that credential. It's a challenge to the idea that if a college or university offers a program it is by definition "postsecondary." 

Signs some schools are taking steps to improve--is it enough?

To be sure, there's a lot of comments that do no paint a flattering light of the programs and the institutions that offer them. But there are some rays of light suggested in the comments. Some institutions have shut down poor-performing programs, while others have closed entire branches that did not appear to be succeeding. Outside the comments, the University of Phoenix and Kaplan University have been among the large institutions to get noticed for offering trial periods and experimenting with new curricula to boost quality. In these cases, schools do appear to be responding to market forces in positive ways. The task ahead then is to figure out how to keep driving those kinds of changes so that stories of future students can focus only on the hope and not the disappointment and regret that followed. 

What Reading 900+ Comments Tells Us About the Coming Gainful Employment Re-Regulation

June 13, 2013

Circle September 9 on your calendars. That's the date according to a Federal Register notice published yesterday that the Department of Education will bring together a committee to develop new regulations defining gainful employment. While it had been clear since a notice published in mid-May that the Department was going to be considering gainful employment in its next round of rulemaking, yesterday's announcement provides exact timing for negotiations, as well as the types of negotiators to be considered. 

With the first negotiating session still not for several months, it is going to be some time before the Department puts forth any public proposal, but with more than 900 public comments already submitted in response to initial thoughts on the regulatory agenda, there's already some clear indications of what we can expect to see from a policy standpoint. In a separate post I'll put up some of the more interesting comments received from students. (New America also submitted its own comments on the regulations, which can be found here.)

Arguments in favor--stronger, more comprehensive

By far the largest number of comments came similar short submissions calling for a stronger rule and protections for students and taxpayers (see here for an example). On the more substantive side, a few themes emerged:

The gainful employment rule should be stronger: Multiple comments cited the 2011 rule's "nine strikes and you're out" policy whereby a program had to fail each of three measures for three years straight as being overly generous. Several comments called for initiating penalties for programs that failed two out of the three measures. Others, such as those from The Institute for College Access and Success argued for a higher threshold on the repayment rate based upon prior studies of delinquency and default as well as how Congress set thresholds for cohort default rates. Not surprisingly, among the most thoughtful and creative comments were those from Robert Shireman, the former Department official who helped craft the initial set of regulation. Shireman's comments suggested a new structure that would draw distinctions between institutional and program eligibility depending on repayment rates, with debt to earnings tests used if repayment rates fell below a certain level.

Accountability in this space is about more than just gainful employment: Many comments touched on the idea that gainful employment is only one piece of an accountability framework that also includes cohort default rates and the 90/10 rule. Given that, many commenters stressed the need for the Department to address the use of deferments and forbearances by some institutions to keep their default rates low by limiting the number of students that could default during the measurement window. Similarly, commenters also stressed the need to consider tactics like delaying the disbursement of student aid funds so some dollars would not count as part of the 90/10 calculation for a given year.

Relief for borrowers at failing programs: The final gainful employment regulation never included any relief for borrowers that had debt from a program that eventually lost eligibility on the grounds that discharge requirements were statutory and could not be changed. This time, several comments, such as those from the National Consumer Law Center, stressed that borrowers in programs that lose eligibility should be given relief much the same way that those who attend institutions that shut down receive assistance.

Job placement matters: The comments also included several submissions from attorneys general from states such as Colorado, Illinois, and Kentucky. One issue these focused on is the importance of greater clarity in definitions of successful job placement. Inaccurate, misleading, and outright fraudulent have been an ongoing problem at some proprietary institutions for many years, but the lack of a clear definition can make enforcement of the issue more complicated (the Department's National Center for Education Statistics did hold a technical review panel on creating a definition a few years ago, but did not end up putting together a definition).

Arguments against--wait for reauthorization 

Not surprisingly, there was a pretty clear divide on whether the Department should approach the gainful employment rule again, and what to do so if it does. In general, proprietary colleges and their lobby groups argued that the Department should delay action on the grounds that Congress would be scheduled to reauthorize the Higher Education Act in short order (see page 2 of the comments from the industry's main lobby group, the Association of Private Sector Colleges and Universities for a typical form of this argument). Since reauthorizations these days have a cicada-like periodicity  that's effectively calling for a delay of many years.

In a similar vein, several institutions also brought forward the idea that the gainful employment rule should be applied to all types of institutions, not just a subset of programs at public and private nonprofit institutions and essentially all programs at proprietary colleges. DeVry and LIM College had the clearest forms of this argument, while Strayer University took a slightly different approach, arguing why it resembles other institutions that are not subject to the gainful employment requirement and should thus be excluded. (Whether including more programs is legally allowable, a good policy idea, or just something that would be designed to get other sectors of higher education opposed is debatable.) 

By far the two most thoughtful and interesting comments from those opposed to gainful employment came from Strayer University and Champion College Services, which provides default management and would have provided gainful employment support if the rule were still in effect. Strayer's comments suggests relying on the cohort default rate to set thresholds and penalties, while Champion put forth an argument for creating a repayment rate that is based on the number of borrowers, not dollars, and define "repayment" as not being in default or more than 120 days delinquent. Other ideas more commonly raised included allowing institutions to limit the amount of debt a student can take on and risk-adjusting the measures based upon the characteristics of students enrolled. 

Not surprisingly then, we're already clearly headed for a pretty significant divide on the policy questions in gainful employment. In a subsequent post I'll pull out some of the more interesting submissions from former students and faculty at proprietary institutions. 

Syndicate content