It has become clear that many of the federally funded colleges and universities do not offer their students a strong enough return on investment to repay their loans. Without greater accountability for taxpayer-funded higher education, there is no hope of solving the long-term student loan crisis. Fortunately, policymakers on both sides of the corridor are actively considering how to ensure federal funding flows only to higher education programs with decent income outcomes.
The Biden administration proposes to revive “Profitable work”
Earlier this year, the Department of Education published a proposed framework for a “Profitable Employment” (GE) regulation that aims to end low-value programs’ access to federal grants and funding for loans. GE-subject programs, which include post-secondary certificate programs and graduate degree programs at proprietary colleges, should demonstrate two things to maintain access to finance. First, the ratio of their graduates’ typical loan payments to median earnings must be below a certain threshold. Second, their graduates must earn more than the median high school graduate holder at the start of their careers in the same state.
It is encouraging that the Biden administration is thinking about how to hold taxpayer-funded programs accountable for their results. But higher education accountability policy has a high stakes. Programs that do not meet the profitable employment rule are highly likely to be closed without federal funding. Even small changes to GE’s design have the ability to reshape American higher education.
Most criticism of GE rightly focuses on its limited scope. Only degree programs at proprietary colleges, along with certification programs at any school, are held accountable under the rule. This leaves students seeking nonprofit public and private college degrees unprotected, despite the fact that these students make up the vast majority of college enrollments. This double standard is the most fundamental problem with GE as proposed.
Problems with the GE framework
But aside from GE’s well-documented double standard problem, there are other issues with the framework that have received less attention, as I explore in a new research paper. Chief among these is the rule treatment of post-secondary certification programs that enroll primarily women.
GE aims to measure whether a higher education program leaves its students financially better. Therefore, the standard compares the earnings of people who complete a given post-secondary education program with those of high school graduates early in their careers. At first glance, this test seems appropriate. Why should a program receive federal funding if it cannot raise its graduates’ earnings above those of the typical high school graduate?
But the comparison isn’t really apples-to-apples. As Kristin Blagg points out, most people with only a high school diploma are male. But 90% of graduates from key certification programs such as medical care are female. There is a gender pay gap within all educational strata: men generally earn more than women with the same level of education. In fact, men with only a high school diploma earn more than women with some college experience but no four-year degree. The correct counterfactual for a predominantly female certificate program is not the high school diploma, but a predominantly female group of high school graduates.
My organization, the Equal Opportunities Research Foundation, has published a return on investment analysis for post-secondary certificate programs. The analysis compares student earnings with demographically similar high school graduates rather than all high school graduates. It turns out that many predominantly female programs provide their graduates with a real, albeit modest, increase in lifelong earnings. But because women who complete these programs tend to earn less than early career high school graduates (mostly male), programs are likely to fail GE and their federal funding will be lifted if the rule goes into effect. .
By my calculations, nearly 70% of post-secondary certification programs in medical care will fail GE as written, along with 60% of certification programs in dental support services. But most failed programs in both of these fields continue to increase students’ vital earnings by a substantial margin.
Correction of the GE rule
GE could therefore inadvertently deprive tens of thousands of low-income women of promising pathways to upward mobility. At a time when students are increasingly skeptical of the four-year college model, policymakers should encourage professional programs, not shut them down. Medical care, in particular, can be a stepping stone to high-paying jobs such as nursing. In addition, defining 70% of medical assistance programs could have a catastrophic impact on the health system.
Fortunately, there is a simple solution: lower the earnings threshold in GE to 85% of its current level. GE programs would fail if their graduate earnings were less than 85% of the average early career high school graduate holder in their state. This change would allow most certificate programs that provide real financial value to their students to continue receiving federal support. However, the threshold is still high enough to terminate really low value or scam programs.
The Biden administration’s enthusiasm for accountability for higher education is welcome. But with such a high stakes, it’s important to get the details right. A simple change to the proposed GE framework would greatly improve its effectiveness as an accountability tool. An effective GE rule would also provide a starting point from which Congress could develop a more comprehensive accountability system and apply it to all programs.