“Gainful Employment” Could Shut Down Good Programs—Here’s How To Fix It

It has become clear that many of the colleges and universities funded by the federal government are not providing their students with a rate of return strong enough to pay off their loans. Without greater accountability for taxpayer-funded higher education, there is no long-term hope of solving the student loan crisis. Fortunately, policymakers on both sides are actively considering how to ensure that federal funding goes only to higher education programs with decent income outcomes.

The Biden administration proposes the revival of “paid work”.

Earlier this year, the Department of Education released a proposed framework for “gained employment” (GE) regulation aimed at ending low-quality programs’ access to government grants and loans. Programs governed by GE — which include post-secondary certificate programs and undergraduate college degrees — would need to prove two things to maintain access to funding. First, the ratio of typical loan payments to median income of their graduates must be below a certain threshold. Second, their graduates must earn more than the median high school graduate in the same state.

It’s encouraging that the Biden administration is considering ways to hold taxpayer-funded programs accountable for their results. But the politics of accountability in higher education have a lot at stake. Programs that do not meet the employment rule are likely to be terminated without federal funding. Even small changes to GE’s design can transform American higher education.

Most criticism of GE rightly focuses on its limited range. Only degree programs at proprietary colleges and certificate programs at schools are held accountable under the rule. This leaves students pursuing degrees at public and private for-profit colleges unprotected, even though these students make up the vast majority of college enrollments. This double standard is the most fundamental problem with GE, as suggested.

Problems with the GE framework

But aside from GE’s well-documented double standard issue, there are other issues with the framework that have received less attention, I explore in a new research paper. First and foremost is the treatment of post-secondary certificate programs in which mainly women participate.

GE aims to measure whether a higher education program is financially better off for its students. Therefore, the rule compares the earnings of people who complete a given post-secondary education program with those of high school graduates in early working life. At first glance, this test seems reasonable. Why should a program receive federal funding if it can’t elevate its graduates’ earnings above that of the typical high school senior?

But the comparison is not entirely one-to-one. As Kristin Blagg points out, most people with only a high school diploma are male. But 90% of the graduates of important certificate programs such as medical assistants are female. A gender-specific income gap exists at all levels of education: 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 middle school graduate but a predominantly female group of high school graduates.

My organization, the Foundation for Research on Equal Opportunity, has published an analysis of the return on investment for post-secondary certificate programs. The analysis compares students’ incomes to demographically similar high school seniors, rather than to all high school seniors. It notes that many predominantly female programs offer their graduates a real, albeit modest, increase in lifetime income. But because the women who complete these programs tend to earn less than (mostly male) high school seniors early in their careers, programs at GE are likely to fail and have their federal funding revoked should the rule go into effect.

By my calculations, nearly 70% of post-secondary medical assistant certificate programs will fail GE as written, along with 60% of dental assistant services certificate programs. But the majority of failed programs in these two fields still add significant lifetime earnings to their students.

Establishing the GE rule

GE could inadvertently deny promising avenues of advancement to tens of thousands of low-income women. At a time when students are increasingly skeptical about the four-year college model, policymakers should encourage, not shut down, vocational programs. Medical assistance in particular can be a career springboard for high-paying jobs such as nurses. In addition, the elimination of 70% of medical assistance programs could have catastrophic effects on the healthcare system.

Luckily, there’s a simple solution: lower the breakeven point in GE to 85% of current levels. Programs would fail at GE if their graduate earnings were less than 85% of the average early graduate earnings in their state. This change would allow most certificate programs that offer real financial value to their students to continue receiving government support. However, the threshold is still high enough to terminate really low-quality or rogue programs.

The Biden administration’s enthusiasm for accountability in higher education is welcome. But with the stakes this high, it’s important to get the details right. A simple change to the proposed GE framework would dramatically improve its effectiveness as an accountability tool. An effective GE rule would also provide a starting point from which Congress could develop and apply a more comprehensive accountability system to all programs.