In May 2023, the U.S. Department of Education released its notice of proposed rulemaking (NPRM) (Docket ID ED-2023-OPE-0089) on rules including Financial Value Transparency and Gainful Employment (GE). During a 30-day public comment period, the Department received nearly 4,000 comments from students, postsecondary institutions, advocacy groups, business owners, public officials, and other stakeholders interested in sharing how these proposed changes may affect their schools, industries, and personal lives.
As the Department’s proposed rules on financial value transparency and GE underwent final review at the Office of Information and Regulatory Affairs, The Institute for College Access & Success (TICAS) reviewed public comments and identified common themes and concerning misconceptions. This blog summarizes and fact checks some of the most prominent concerns commenters from for-profit colleges, cosmetology programs, and associations representing public and private, nonprofit institutions raised in response to the proposed rules.
The GE rule – the final version of which should become public in the coming days – aims to ensure graduates of career education programs, including all programs at for-profit colleges and non-degree-granting career education programs at public and private, nonprofit colleges, are not left with unaffordable student loan debts and extremely low earnings.
Commenters from the for-profit college sector frequently raised concerns about the fairness of applying GE metrics to all programs at their institutions and the effectiveness of the proposed earnings premium measure in assessing program value.
Under the proposed GE rule’s earnings premium metric, programs must ensure their graduates’ median earnings exceed the earnings of early-career residents in their state who have a high school credential, but no postsecondary degree or certification. For-profit colleges consistently criticized the earnings premium metric as setting an unfair benchmark for their industry, which serves large numbers of students who may face wage discrimination in the workforce. The College of Westchester, for example, argued the earnings premium would unfairly penalize institutions for providing postsecondary access to high numbers of women, racially marginalized, and low-income students who may be subjected to workforce discrimination upon graduation.
Although the for-profit college sector enrolls disproportionately high numbers of Black and Latino students, years of evidence has shown this high enrollment too often stems not from a genuine desire to expand access to higher education to marginalized communities but from predatory targeting of students of color. For-profit postsecondary programs not only cost more than comparable programs at public colleges but also lead to poorer earnings and employment outcomes.
A TICAS analysis of career education programs that failed the proposed GE rule found that for-profit colleges had markedly worse outcomes for students of color. Other programs at public and private, nonprofit schools enrolling large shares of students of color – particularly Historically Black Colleges and Universities and minority serving institutions – produce stronger student outcomes than for-profit colleges. Thus, they generally fare better under the proposed gainful employment metrics – undermining claims that student demographics contribute to whether a program passes or fails GE.
Cosmetology programs comprised the majority of commenters from the for-profit college industry and echoed many of the broader sector’s concerns about what they contended would be the unfairness of the proposed GE metrics. They criticized both the debt-to-earnings and earnings premium metrics as inadequate measures of cosmetology graduates’ outcomes, in part because of the prevalence of cash and tipped income in the beauty industry. Michael Bianchi, co-owner of Elevate Salon Institute, wrote that, although cosmetology schools may teach their students to report their entire income, many beauty professionals will continue underreporting their taxable incomes, “putting beauty schools at an unfair disadvantage” for earnings-based standards.
Despite concerns that the widespread underreporting of income within the beauty industry may lead cosmetology programs to fail the debt-to-earnings or earnings premium metrics, research on the 2014 GE rule found that the underreporting of tips played little role in a program’s success or failure. Underreported tipped income made up an estimated 8 percent of earnings; even accounting for this income would not drastically shift program GE passage rates. Most importantly, the Department should not create incentives for programs and their graduates to unlawfully underreport their incomes, as the Department clearly states in the NPRM.
Higher Education Associations
In addition to for-profit colleges, associations representing public and private, nonprofit institutions weighed in on the Department’s proposed gainful employment rule. While most public and private, nonprofit commenters expressed support for GE’s reinstatement and accompanying focus on improving student outcomes, many also raised concerns about the administrative burden and expense of implementing financial value transparency disclosures.
With the proposed rules, the Department aims to expand student access to consistent information about postsecondary programs across all sectors by collecting data from all colleges and programs on costs, debt burdens, and outcomes. This financial value transparency measure would introduce new reporting requirements for both GE and non-GE programs. As proposed, the rule would require students to acknowledge disclosure of a program’s high-debt status before receiving loans to attend programs that fail to meet the debt-to-earnings and earnings premium benchmarks.
Some associations supported the increase in transparency as a step toward making more comprehensive data available to students. The American Association of Community Colleges, for example, called the proposed disclosures “generally positive” but cautioned the Department to minimize new institutional expenditures required for reporting because “regulatory costs are ultimately paid by students, either through higher tuition or reduced services.” Although the financial value transparency measure may increase data reporting burdens for institutions, making additional information on cost, debt, and outcomes available to students should aid students in making informed choices when enrolling in postsecondary programs.
Other associations, such as the Council for Graduate Schools, criticized the proposal as not only overly burdensome to institutions but also problematic for programs subject to “high-debt burden” or “low earning” disclosures, as these labels may fail to capture a credential’s nonpecuniary and long-term benefits. Many students, particularly those enrolled in non-GE programs, may have nonpecuniary goals in pursuing postsecondary education. But students’ ability to achieve those goals is undermined if programs leave them with debts they cannot repay – not to mention the additional costs passed on to taxpayers. Requiring students to acknowledge disclosures about a program’s outcomes should allow students to more fully consider the financial dimension of potential enrollment.
Although many of the nearly 4,000 public comments the Department of Education received on the proposed rules contained arguments about the unfairness of GE not well supported by facts or evidence, and warnings regarding administrative burden associated with financial value transparency disclosures, many others expressed support for stronger guardrails against high debt, low-quality postsecondary programs. Student and consumer advocates (including TICAS and a coalition of partner organizations), in particular, welcomed the reinstatement of gainful employment as a crucial protection against burdensome loan debt that is disproportionately saddled on students of color and low-income students. As 3,540 student loan borrowers who attended over 127 schools commented in a shared statement, “without accountability tools like the gainful employment rule, companies set sky-high tuition levels and rake in federal student loan dollars, while leaving students with little earning potential and often in financial ruin.”
The Department’s public comment period successfully engaged a wide range of industry and student groups to weigh in on the final rules on gainful employment and financial value transparency, which should be appear in the Federal Register in the coming days. Even commenters with disparate opinions on the regulatory text largely agreed that student success must remain the Department’s guiding priority. Ultimately, the final rule should strengthen protections for students by increasing transparency and guiding them toward high-quality programs with strong outcomes.
Lydia Franz is an accountability policy associate at TICAS. Eric Uriegas of the University of Texas at San Antonio and James Ward of Marquette University both reviewed hundreds of submitted comments, and each helped to inform this summary and analysis.
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Policy Associate, Accountability
Lydia serves as a Policy Associate focused on federal accountability issues. Her work supports TICAS’ federal accountability team in advocating for strong protections against low-quality and abusive colleges and developing initiatives to promote equitable outcomes for all students.