Obama Administration Drops Ball on For-Profit College Job Placement Rates

Prospective students, beware: the job placement rates that for-profit colleges are required to disclose remain as unreliable as ever. The Obama administration had a chance to ensure schools release more accurate data, but fumbled it. And judging from a notice that the U.S. Department of Education issued shortly before Christmas, the administration doesn’t plan to make another play on it anytime soon.

Currently, the federal government leaves it up to accrediting agencies and states to set the standards that for-profit colleges must use to calculate job placement rates, and to monitor them. The only exception is for short-term job training programs, which must have employment rates of at least 70 percent to remain eligible to participate in the federal student loan program.

As I wrote for the New America Foundation’s Higher Ed Watch blog in September, the job placement rate data that for-profit colleges report to accreditors and state regulatory agencies for the majority of their programs are fundamentally flawed.  The methodologies that schools use to calculate these rates vary state by state and accreditor by accreditor, making them impossible to compare. And because neither accreditors nor state regulators put much of an effort into verifying these rates, the schools don’t seem to have any qualms about inflating them.

The Obama administration took aim at these problems in June 2010 when it proposed, as part of a package of draft regulations designed to improve the integrity of the federal student aid programs, requiring for-profit colleges to use a single standardized methodology when calculating these rates. Under the plan, the administration would have extended the standards the government requires short-term programs to follow in calculating their rates to all for-profit college and vocational programs that are subject to the Gainful Employment rules.

This proposal was met with a firestorm of protest from career college officials, as the federal methodology used for these job training programs is much stricter than those mandated by accreditors and state agencies.

For example, under the Education Department’s requirements, students are only considered to be successfully placed if they have been employed in their field or a related one for at least 13 weeks within the first six months after graduating. In comparison, some accreditors and state agencies allow schools to consider a graduate to be successfully placed if they work in their field for as little as a day.

Meanwhile, the Education Department requires these short-term programs to provide documentation proving that each of the graduates included in their rates is employed in the field in which he or she trained. According to Department’s regulations, acceptable documents “include, but are not limited to, (i) a written statement from the student’s employer; (ii) signed copies of State or Federal income tax forms; and (iii) written evidence of Social Security taxes.”  In contrast, the standards of proof that accreditors and states typically require of career colleges are much more lax. According to a report in The Chronicle of Higher Education, accreditors “often allow colleges to use student and employer surveys, business-directory listings, Web sites, and business cards as evidence of employment.”

How did the Education Department’s political leaders respond to the for-profit colleges’ objections to the proposal? They punted. Instead of devising an alternative proposal, they kicked the issue to the Department’s National Center for Education Statistics (NCES). Under the final program integrity regulations, which were released in October 2010, the Department directed NCES to convene a Technical Review Panel “to develop a placement rate methodology and the processes necessary for determining and documenting student placement” that schools would be required to use to fulfill this mandate. Until then, however, the regulations require schools to continue disclosing the rates they already report to states and accreditors.

But putting NCES in charge of developing a federal standard for calculating these rates turned out to be a major blunder. First, this was not an assignment that NCES had sought out or has typically been asked to do. After all, the Department was not just asking the center to provide technical assistance in devising a new methodology, but to take the reins in setting a new federal policy in this highly contentious and controversial area. Second, the Technical Review Panel that the Department chose to carry out this assignment included a number of representatives from schools that were opposed to this effort.

So it was hardly a surprise when, after two days of discussions on this topic in March, the review committee failed to reach an agreement. In its final report on its deliberations, the panel suggested that “the topic be explored in greater detail by the Department of Education.” Translation: This is a job for the Department, and not NCES.

But, as the Education Department acknowledged in the notice it issued before the Christmas break, there’s not much that the Obama administration officials can do about it in the near term. That’s because the regulations direct schools to continue disclosing the rates they report to accreditors and states until “a methodology developed by the National Center for Education Statistics” becomes available. [Emphasis added]

Administration officials could, of course, rewrite the rules to propose a new methodology. However, given that the Department’s notice doesn’t make any mention of that possibility and that the topic has not been included on the agenda of the negotiated rulemaking panel that began meeting this week, they do not appear to be inclined to do so.

In the meantime, unscrupulous schools will continue misleading prospective students about their job placement rates, with little fear of discovery or punishment.