‘Employment for all’ is not enough to hold higher education to account – Forbes | Team Cansler

The Biden administration is likely to reintroduce the gainful employment (GE) rule, a federal regulation aimed at removing low-quality college programs from state student aid. GE critics rightly point out that the regulation is unfair because it excludes courses at public and private non-profit universities. Some argue that Congress should apply GE to all higher education. While this would be a step in the right direction, GE for all would still not be able to protect students from poor higher education, especially at the graduate level.

How paid work tries to hold programs accountable

As currently proposed, GE would subject higher education programs to a two-part test; Programs must pass both “strands” to continue receiving federal funding. One portion compares the earnings of program graduates to the median of early career high school graduates in the same state. This provision applies more to short-term certificate programs. As I explained in a previous post, the test penalizes some post-secondary certificate programs that offer their students a moderately positive ROI.

But for the programs that would be newly subject to GE if Congress applied it to all programs, the second part of the test is more relevant. To conduct the second part, the Department of Education estimates annual graduate loan payments assuming bachelor’s and master’s degree borrowers repay over 15 years. For a program to continue receiving federal funding, students’ estimated loan payments must be less than 8% of their median annual income.

However, the Biden administration’s version of GE includes an “exit hatch” for heavily indebted programs such as master’s degrees. The Department of Education also divides the estimated annual loan payments by the student median discretion Income equal to median annual income minus $18,735. If this ratio is less than 20%, the program passes the test even if the “standard” pay-to-income ratio exceeds 8%.

Most inferior master’s degrees would survive GE for All

Consider the master’s degree in journalism from Columbia University. My estimates of ROI in higher education assume that students who complete this program will be over $90,000 worse off because the increase in lifetime income that results from this degree will not be enough to sustain the students for the Compensate the cost of tuition and time spent outside of study workers. This is a perfect example of a program that taxpayers should no longer fund.

Students in the journalism program in Colombia have a median debt of $72,000 upon graduation, which translates to an annual loan payment of $6,771. With an average annual income of $56,000, the standard pay-to-income ratio is 12%, which is above the 8% threshold for failing. But the loan payment on-discretion The win ratio is 18%, which is below the 20% threshold for this metric. This program meets GE regulation despite the fact that the Department of Education estimates that loan payments will eat up 12% of students’ annual income.

Master’s degrees are among the worst investments in higher education. In my estimation, two out of five master’s degrees put their students in a worse position financially. But thanks in part to GE’s volunteer income “escape hatch,” just 6% of master’s degrees would lose their federal funding if GE were applied to all programs.

These facts suggest that accountability for federally funded higher education programs must be more than GE for all.

Politics should address the master bubble

Master’s degrees are one of the main contributors to the problems in our student loan system. Graduate degrees account for an increasing proportion of federal student loans. (43% in 2020 vs. 33% in 2010) and graduate borrowers are expected to repay a smaller proportion of their loan obligations than students. Additionally, master’s degree enrollments are increasing as universities take advantage of lax federal student loan subsidies to make easy money. Tackling the student loan crisis must also include tackling graduate lending.

As I argue in a new report, policymakers could make two incremental changes to the GE framework to improve its power to target low-level college degrees. First, annual loan payments for master’s programs should be calculated with a payback period of 10 years instead of the current 15 years. Given the short duration of master’s courses, this is more justified; it would also increase estimated annual loan payments and cause more GE master’s degrees to fail. Second, policymakers should drop the discretionary revenue “escape hatch” and require programs to demonstrate their worth based solely on the standard payment-to-income ratio. Both changes would revoke federal funding for more master’s programs with no financial value.

A bolder agenda, however, would end the federal role in lending to graduate students entirely. The argument for government control of student loans rests on the notion that 18-year-old students with no credit history would not be able to obtain proliferating educational loans in the private market. But that argument doesn’t apply to graduate students in their 20s. A fully private graduate loan market would provide greater accountability for low-quality masters degrees, as private lenders would refuse to fund programs where students have little chance of repaying their loans.

More accountability for federally funded colleges and universities is welcome, but the Biden administration’s proposed employment rule is flawed. As it stands now, GE would unfairly punish trade schools while letting substandard master’s degrees off the hook. Policymakers should want the opposite: we should enable students to pursue quality professional programs, but limit subsidies for expensive master’s degrees that fuel credential inflation and confer few useful skills. “Gained work for all” is rooted in laudable instincts. But the details need to be worked out.

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