Student loan borrowers spent billions on career training programs that failed to deliver.
Roughly 350,000 students attended and graduated from either two or four-year career-education programs in 2012 that were failing or close to failing certain government metrics, according to an analysis of government data released Wednesday by the Institute for College Access and Success, an organization that advocates for equity in higher education.
That means that these programs, which are supposed to prepare students for specific careers, like cosmetology or culinary arts, saddled borrowers with levels of student loan debt that ate up a huge chunk of their pay.
Graduates of these programs were left with about $7.5 billion in debt, according to the analysis. “There are a lot of programs leaving a lot of students with unreasonable debt,” said Debbie Cochrane, the vice president of TICAS. “What’s astonishing is just seeing how many students are affected and how much debt those affected students are left with.”
The findings come just a few weeks after Betsy DeVos’s Department of Education announced a plan to rescind the gainful employment regulation. The set of rules, developed by the Obama-era Department of Education, were aimed at ensuring that career-training programs prepared students for jobs and didn’t saddle them with unsustainable debt.
That decision to rescind the rules is part of a broader set of policies under DeVos that critics say opens the door to unscrupulous companies. Over the past few years, major for-profit college companies have collapsed amid the weight of scrutiny over their recruitment practices and outcomes. Thousands of former for-profit college students, who say they were victims of fraud by their schools, are also clamoring for relief from their federal student loans.
Advocates of the gainful employment regulation argue that the rule protects students and taxpayers by ensuring that poor-performing programs face consequences before luring too many students and their loan dollars. To be in compliance with the gainful employment rule, career training programs had to prove that in most years their graduates’ loan payments weren’t exceeding 20 percent of their discretionary income or 8 percent of their total earnings. The TICAS analysis is based on data associated with graduates who attended a failing or near-failing program, as measured by the gainful employment definition.
The rule has faced multiple court challenges since the Obama administration began developing it in 2009. Critics say the rule unfairly targets for-profit colleges — the vast majority of career-education programs are housed at those schools — and that the debt-to-earnings ratio isn’t necessarily reflective of a program’s performance.
The Department has proposed replacing the rule by making more robust program-level information available about schools of all types, including public and non-profit universities. Borrower advocates counter that without some accountability measure, more disclosure will do little to incentivize better behavior on the part of poor-performing schools.
“The analysis shows the stakes for students and taxpayers both,” Cochrane said.