Why ‘Gainful Employment’ Matters

The much-anticipated gainful employment regulations, which include important changes to how for-profit colleges are held accountable, were finally released today (for more on gainful employment see this ES report from 2010).

There’s grumbling on both sides about the final regulations. Proponents are upset over added leeway given to the colleges. And the for-profit sector, despite winning some significant concessions from the Department of Education, is still claiming that the rules will hurt the low-income and minority students that for-profit colleges tend to enroll. Underlying this claim is the argument that the poor performance of many for-profits has to do with who they enroll, and not the quality of the education they provide for their students.

To address this argument, which came up frequently in the comment period for the new regulations, the Department ran a lot of regression analyses to see whether race and income predicted one of the key measures in the regulations – the rate at which students repay their loan debt (see p. 323 of the regs).

Overall, the Department found that Pell grants predicted 23 percent of the variation in repayment rates among institutions and race predicted 1 percent. That leaves a lot of variation unexplained – variation that might, just maybe, have to do with the quality of the education and the value of the degree students receive. See this ES report for our very similar findings on default rates.

Once the new regulations take effect, maybe we’ll finally be able to differentiate between colleges that use that remaining variation to put students on the path to success and those that add little value in exchange for a lot of debt.