What Do “Gainful Employment” Regulations Accomplish? Funding-eligibility tests can do real good if used universally, not selectively.

James G. Martin Center for Academic Renewal ^ | August 18, 2023 | Andrew Gillen

[karpov]

The Biden administration will soon implement a set of regulations that are commonly known as “Gainful Employment.” These regulations would restrict some college programs’ eligibility to participate in federal financial-aid programs like Pell grants and student loans.

The Higher Education Act, originally passed in 1965 and amended many times over the years, includes a provision that requires “vocational” programs to prepare students for “gainful employment.” The law defines vocational programs as any program at a for-profit college, as well as any non-degree program (e.g., certificate programs) at public and private non-profit colleges.

As a matter of logic, this definition fails miserably. Under it, a master’s in business administration from the Wharton School is not considered vocational, but a master’s degree in social work from a for-profit college is. Unfortunately, when you pit logic against the law, the law wins. Thus, we are stuck with this definition of vocational education until Congress remedies the flaw.

But the law is silent on the definition of “gainful employment,” and, until 2010, no presidential administration had bothered to try to define it. That year, the Obama administration tried to do so in large part by utilizing student-loan repayment rates, the logic being that if a program succeeds in preparing its students for vocational success, then those students should be able to repay their loans. Programs where the repayment rate was too low would lose eligibility for federal financial aid.

However, the courts threw out the Obama regulations, and one of the reasons was that the repayment-rate threshold was chosen to ensure that an (arbitrarily) predetermined share of for-profit programs would fail.

In 2014, the Obama administration tried to define gainful employment again. This time, it passed muster with the courts.

[Brian Griffin]

Colleges should be required to co-sign federal student loans and secure them by real estate/investment grade securities.