A diploma doesn’t guarantee a paycheck.
But institutions that collect tuition — and play a role in saddling students in debt — face increasing pressure to be clear about job prospects upon graduation.
New federal rules kicked in this month that aim to hold colleges more accountable for getting students prepared for gainful employment — work that offers an income on a scale that could reasonably settle college debt.
Meanwhile, some 200 former students of Overland Park-based Wright Career College await the outcome of a lawsuit claiming they were duped about job prospects.
That case highlights growing criticism of colleges, most of them for-profit schools, for enrolling students and cashing in their loans and grants for schooling that fails to truly prepare them for high-skilled jobs.
“Far too often, so-called career colleges leave students burdened with debt they’ll never be able to repay and stick taxpayers with the bill,” U.S. Education Secretary Arne Duncan said last month after a final effort to halt the new rules failed in court.
Colleges that don’t comply with the new regulations would become ineligible for federal dollars. That would mean a student getting federal aid to pay for school could not spend that money on an ineligible college program. The new rules apply to all degree-granting and certificate-granting programs at for-profit schools and community colleges but only certificate programs at four-year public and non-profit private schools.
The rules are intended to clamp down on poor-performing career colleges that target vulnerable, low-income and underserved students who borrow heavily to cover education costs while relying on a school’s promise that a good-paying job awaits them upon graduation.
The nation’s education leaders have said for years they want to stop programs that leave students buried in debt with few opportunities to repay it.
“Students in these low-performing programs often end up worse off than before they enrolled,” Duncan said.
According to the U.S. Department of Education, more than 80 percent of students at for-profits borrow. Less than half of students at public institutions do so. Students at for-profit colleges represent only about 11 percent of the total higher education population but 44 percent of all federal student loan defaults.
The new regulations would require career training programs to meet key requirements to establish that they sufficiently prepare students for gainful employment.
For instance, the estimated annual loan payment of typical graduates cannot exceed 20 percent of their discretionary earnings or 8 percent of their total earnings. The loan default rate for former students can’t run above 30 percent.
Also, institutions must publicly disclose information about program costs, debt and performance of their gainful employment programs so that students can make informed decisions.
Several court challenges attempted to stop the new rules, but were tossed out. The new rules measure current income-to-debt ratios. But they don’t consider whether a graduate is earning more than they were before attending a particular school, said Noah Black, a spokesman for the Association of Private Sector Colleges and Universities, a national trade group representing for-profit colleges.
Leaders of the association called the rule “unlawful, arbitrary and irrational,” and claimed it would eliminate school choice for millions of students.
The U.S. Department of Education plans to begin collecting gainful employment data from colleges immediately and release results in late 2016 or early 2017.
U.S. education officials said that in 2012, the federal department estimated that 193 programs would not have passed the previous gainful employment regulations set in 2011. And they said that using the 841-page draft version of the new regulations from earlier this year, about 1,400 programs — most of them at for-profit schools — would not pass the new accountability rules.
Independence attorneys representing the 200 plaintiffs in the Wright Career College case said they aren’t sure how the new rules might influence their clients’ case.
“The gainful employment rule is a wonderful first step,” said Andrew Smith, one of the attorneys representing the students who attended Wright’s campuses in Kansas, Nebraska and Oklahoma. “We will just have to wait and see if it has the intended effect or if the for-profit schools simply come up with a new scheme.”
Officials with Wright Career College, which primarily trains its students to be medical assistants, accountants and business people, have said the college has never guaranteed employment after graduation.
“A graduate’s success depends in large part on the decisions they make and actions they take in their professional and personal lives,” said Stacia G. Boden, general counsel for Mission Group Kansas. Mission Group is a nonprofit corporation doing business as Wright Career College.
“We don’t have a list of employers who line up at the door and hand out jobs. That is not how the real world works.”
Boden said the gainful employment rule is irrelevant to the lawsuit against the school.
“There is a large percent of the plaintiffs who never even graduated,” she said. “Gainful employment is about people who graduated.
“We are proud of our track record. … And while these regulations will provide more information about certain academic programs, even with these regulations, no college can guarantee success.”
New rules bring changes
Many institutions have already made changes related to the new regulations, including adding scholarships and offering free, weeks-long trial periods allowing prospective students a trial run before diving into the pricey venture. Some others have started shutting down or phasing out programs at risk of failing the new metrics. On that list are Career Education Corporation’s Le Cordon Bleu culinary arts program in Chicago, Sanford-Brown College, Briarcliffe College in New York, Brooks Institute in California and Missouri College in Brentwood, Mo.