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

It has become clear that many of the colleges and universities that the federal government funds do not provide their students with a strong enough return on investment to repay their loans. Without stronger accountability for taxpayer-funded higher education, there is no hope of solving the student loan crisis for the long term. Fortunately, policymakers on both sides of the aisle are actively considering how to ensure that federal funding only flows to higher education programs with decent earnings outcomes.

The Biden administration proposes reviving “Gainful Employment”

Earlier this year, the Department of Education released a proposed framework for a “Gainful Employment” (GE) regulation that aims to terminate low-value programs’ access to federal grant and loan funding. Programs subject to GE—which include postsecondary certificate programs and degree programs at proprietary colleges—would have to prove two things in order to maintain access to funding. First, their graduates’ ratio of typical loan payments to median earnings must be below a certain threshold. Second, their graduates must earn more the median early-career high school diploma holder in the same state.

It’s encouraging that the Biden administration is thinking about ways to hold taxpayer-funded programs accountable for their outcomes. But higher education accountability policy has high stakes. Programs which fail the Gainful Employment rule are extremely likely to shut down without federal funding. Even small changes to GE’s design have the capacity to reshape American higher education.

Most criticism of GE rightly focuses on its limited scope. Only degree programs at proprietary colleges, along with certificate programs at any school, are held accountable under the rule. This leaves students who are seeking degrees at public and private nonprofit colleges unprotected, despite the fact that these students represent the vast majority of college enrollment. This double standard is the most fundamental problem with GE as proposed.

Problems with the GE framework

But aside from GE’s well-documented double standard problem, there are other issues with the framework that have received less attention, as I explore in a new research paper. Foremost among these is the rule’s treatment of postsecondary certificate programs enrolling mostly women.

GE aims to measure whether a higher education program leaves its students financially better off. Thus, the rule compares the earnings of people who complete a given postsecondary education program to those of early-career high school graduates. On its face, this test seems appropriate. Why should a program receive federal funding if it cannot raise its graduates’ earnings above those of the typical high school diploma holder?

But the comparison is not quite apples-to-apples. As Kristin Blagg points out, most people with only a high school diploma are male. But graduates of key certificate programs such as medical assisting are up to 90% female. A gender earnings gap exists within all educational strata: men typically 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 proper counterfactual for a predominantly female certificate program is not the median high 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 return on investment for postsecondary certificate programs. The analysis compares students’ earnings to demographically similar high school graduates rather than all high school graduates. It finds that many predominantly female programs provide their graduates with a real, albeit modest, increase in lifetime earnings. But because the women who complete these programs tend to earn less than (mostly male) early-career high school graduates, the programs are likely to fail GE and have their federal funding revoked should the rule go into effect.

By my calculations, almost 70% of postsecondary certificate programs in medical assisting will fail GE as written, along with 60% of certificate programs in dental support services. But the majority of failed programs in both of these fields still increase their students’ lifetime earnings by a substantial margin.

Fixing the GE rule

GE could thus inadvertently deprive tens of thousands of lower-income women of promising pathways to upward mobility. At a time when students are increasingly skeptical of the four-year-college model, policymakers should encourage vocational programs, not shut them down. Medical assisting in particular can be a career stepping-stone to high-paying jobs such as registered nursing. Moreover, defunding 70% of medical assisting programs could have a catastrophic impact on the health care system.

Fortunately, there’s an easy fix: lower the earnings threshold in GE to 85% of its current level. Programs would fail GE if their graduates’ earnings are below 85% of the median early-career high school diploma holder in their state. This modification would allow most certificate programs that provide real financial value for their students to continue receiving federal support. However, the threshold is still high enough to terminate truly low-value or scam programs.

The Biden administration’s enthusiasm for higher education accountability is welcome. But with such high stakes, it’s important to get the details right. A simple modification 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 a more comprehensive accountability system and apply it to all programs.