This column contains corrections.
More than 2,000 career training programs will need to improve their graduates’ earnings or cut their students’ debt levels if they want to maintain access to federal financial aid, according to the U.S. Department of Education’s Monday data release. The new release focuses on students who received federal financial aid and graduated in the 2014-15 academic year. In particular, it examines the first round of results under the so-called gainful employment regulation for nearly 8,700 career training programs across the country.
The gainful employment rule, which went into effect in 2015, is a landmark attempt to hold career training programs accountable for the amount of debt their graduates take on compared to their earnings. To do so, the rule judges individual programs on whether their graduates who received federal financial aid have loan payments that represent too high a share of their income. When that happens, programs risk losing access to federal financial aid. The rule applies to all programs at private for-profit colleges and certificate programs at public and private nonprofit institutions.
Under the rule, programs can end up in one of three categories based upon their debt-to-earnings ratios:
- Pass: Programs have acceptably low debt levels compared to earnings and face no other consequences.
- Fail: Debt levels are way too high compared to earnings. Programs that fail twice in a three-year period lose access to federal financial aid.
- Zone: Their debt levels are not good enough to pass but they are not so bad they fail. Programs in the zone have to pass once in a four-year period or they too lose access to federal financial aid.
While the dataset provides an important snapshot of the national results for gainful employment, a closer review reveals other important findings. Below are five other interesting findings from the new data.
EDMC has a lot to worry about*
Arguably no major for-profit college operator fares worse in the data than the Education Management Corporation, or EDMC. The company, which owns a variety of for-profit college chains, such as The Art Institutes, had more than 100 programs fail or end up in the zone. Those programs represent 72 percent of EDMC’s programs, in which 67 percent of its graduates received federal financial aid.
That’s among the worst performance of the largest operators of private for-profit colleges identified in the data. Of the 36 largest private for-profit college companies, only the much smaller TA Associates performs worse, with 83 percent of its programs and 86 percent of its graduates in failing or zone programs
The University of Phoenix enrolls thousands of students in troubled programs
While EDMC had the highest number of programs that failed the gainful employment rule, the University of Phoenix, owned by the Apollo Group, had the highest number of students in failing or zone programs. These high rates of troubled programs are mostly a function of the fact that Phoenix is the largest college affected by the rule, but the numbers still are not pretty. Twenty-four percent of Phoenix students who received federal aid graduated from a gainful employment program that failed or zoned; that rate represents 30,870 Phoenix graduates who walked away with too much debt relative to their earnings.
Phoenix is so large that its results have a big effect on national gainful employment results. For example, the school had a bachelor’s degree in behavioral sciences—a program with 6,720 graduates—fail. Because of that result alone, behavioral sciences produced the third-most graduates from failing programs of any type of program in the data.
Picking a program because of popular police procedurals is a bad idea
Of the 15 most common types of programs, criminal justice programs had by far the highest rates of being placed in the failing or zone categories: 57 percent of these programs ended up in trouble. This should not be a shock. In Florida, for example, ITT Technical Institute used references to popular police procedurals, such as the CBS television show “CSI: Miami,” to recruit students, rather than present actual employment options for graduates. ITT’s criminal justice programs —all of which failed—often led to little more than low-paying security officer jobs.
Ugly results at beauty schools
Cosmetology programs are the second most common type of program in the data, and no program type had more students failing or in the zone. In fact, 61 percent of the 104,693 students who received federal aid and graduated from cosmetology programs enrolled in a program at risk of losing access to federal aid. These results suggest the need for serious reconsideration of licensing rules that may be forcing students to attend and borrow money at programs that are tied to occupations that will never pay enough to justify the price.
Transition status helps some
In response to concerns from schools about wanting more time to improve, the final gainful employment rule includes a transition period during which programs are allowed to replace existing student loan amounts in the debt-to-earnings ratios with the corresponding figures for more recent graduates. The idea is that programs in which debt fell sharply would be able to pass using those lower numbers.
As it turns out, 178 programs with more than 33,000 graduates managed to pass because of this provision. The Career Education Corporation and the University of Phoenix were the biggest beneficiaries of this change among the publicly traded companies. Career Education Corporation had 11 programs saved through this change, while Phoenix had more than 3,700 graduates in its saved programs.
Similarly, the transition process allows another 73 programs to move from failing to zone status. These programs enrolled nearly 31,000 students, though more than 11,000 of them were at the now shuttered ITT Technical Institute.
Conclusion
Monday’s release highlights just how important it is to have strong accountability in place for career training programs. As the data show, far too many programs ask students to take on debt levels that are not sustainable given the economic returns received. When that happens, these programs can end up costing taxpayers by having over-indebted students defaulting or getting their loans forgiven.
Sara Garcia is a Research Associate on the Postsecondary Education team at American Progress. CJ Libassi is a Policy Analyst on the Postsecondary Education team at American Progress. Ben Miller is the Senior Director for Postsecondary Education at American Progress.
*Correction: June 23, 2017: This section of the column has been corrected to include accurate percentages for the programs run by Education Management Corporation and TA Associates that are failing or zone programs.