Ensuring that education is worth the cost

For many Americans, higher education promises increased social mobility. However, growing concerns about student loans have cast doubt on this theory. Students who want to invest in their education to advance their careers and increase their income often struggle to pay off their debt.

According to the U.S. Department of Education, college graduates’ incomes have not increased proportionately to their tuition costs and borrowing levels. Additionally, some institutions use deceptive tactics to recruit students to programs with poor employment performance.

To address this growing problem, the Department of Education this week released a final rule aimed at ensuring that higher education programs, such as college and vocational training, are cost-effective for students. Through this rule, the Department of Education will increase transparency and introduce more robust competitive employment requirements to shift student enrollment to programs with more economic value, increasing the potential for higher earnings at lower debt costs. The aim is to provide sex to students.

The regulations include a financial value transparency framework that evaluates programs based on student debt-to-income ratios and income premium measures. The debt-to-income ratio compares a student’s annual loan payments to their annual income. The earnings premium measure compares the earnings of program graduates to the earnings of students with only a high school diploma or general education development certificate. A program does not meet the financial value benchmark if the median loan repayments for graduates of the program are too high relative to their incomes, or if they earn less than students without higher education.

Starting in 2026, the Department of Education will maintain a website that will publish financial value measurements and other information for the program. Programs that receive federal funding (including nearly all undergraduate, graduate, and vocational programs) are required to distribute this information to prospective students. Students wishing to enroll in a particular failed program should be aware that the program’s monetary value measure is below an acceptable level. However, undergraduate degree programs are exempt from approval requirements.

For-profit and non-degree programs that “prepare students for gainful employment in recognized professions,” such as cosmetology and massage therapy programs, generally qualify for federal student aid initiatives. However, under the rule’s gainful employment eligibility framework, a program that fails any financial value indicator in two consecutive years out of three years will no longer qualify as a gainful employment program. As a result, they would be ineligible for federal funding such as subsidized loans and Pell grants.

Through these funding restrictions, the Department of Education intends to protect not only students but also taxpayers. Because low-income student borrowers are not required to repay their federal loans in full, programs that lead to poor student performance impose a disproportionate burden on taxpayers. The Department of Education estimates that by weeding out low-performing programs and directing students to higher-value programs, student loan repayment rates will increase, resulting in overall budget cuts and taxpayers saving thousands of dollars. Potential savings of billions of dollars.

Helping students find worthwhile educational opportunities may seem uncontroversial, but education professionals and other stakeholders need to know how best to achieve this goal. We have been debating for a long time how to do this. More than 7,500 parties commented on the Department of Education’s proposed rule during the notice and comment period, and the Department devoted nearly 90 pages of the final rule’s preamble to addressing these comments. Supporters praise the rule for protecting students from investing in low-value educational programs, while critics accuse it of ignoring the non-financial benefits of education.

At this Saturday seminar, experts will discuss the merits of the Department of Education’s final rule and propose solutions to improve higher education outcomes.

• Madison Weiss explains that favorable employment rules have languished in regulatory uncertainty for nearly 15 years due to legal issues and changes in administrations. in Recent Center of American Progress article. Weiss, the center’s policy analyst, writes from Congress’ first mention of “gainful employment” in the Higher Education Act of 1965, to the Obama administration’s first gainful employment provisions in 2011, and the numerous lawsuits that followed. Follow the trajectory of this rule until now. Weiss argues that implementation delays are allowing predatory programs to continue earning federal funds while graduates struggle to earn a living wage. She argues that enforcing this rule will protect students and taxpayers from wasting resources on low-quality programs.
• Amber Villalobos and several co-authors from the Century Foundation commented in support of the Department of Education’s Notice of Proposed Rulemaking on Paid Employment and Related Initiatives. Villalobos and her co-authors argue that strengthening gainful employment requirements can prevent students from investing in programs that have low value. Additionally, Villalobos’ team argues that the proposed rule’s debt-to-income test will ensure that students in career development programs graduate with manageable debt levels. The Villalobos team also provides recommendations to strengthen the rules. For example, they suggest that useful employment disclosures should include information about a school’s spending on student instruction, since a higher percentage of education spending is correlated with student success.
• In a paper published by the IZA Institute for Labor Economics, Michael Loebenheim of Cornell University and Jonathan Smith of Georgia State University discuss the different courses of study and types of educational institutions such as four-year colleges and trade schools. We are investigating the return on investment for students across the globe. Loebenheim and Smith found that economically disadvantaged students were more likely than other students to attend institutions with lower returns. Loebenheim and Smith cite for-profit schools as an example of low-profit institutions that enroll a disproportionate number of low-income students. Because enrollment disparities are partly due to a lack of information, Loebenheim and Smith suggest simplifying the application process and providing additional application fees and financial aid guidance to low-income students.
• In their comments on the proposed gainful employment rule, Adam Kissel and Lindsey Burke of the Heritage Foundation wrote that regulating for-profit and nonprofit higher education institutions would meet different standards of reasonableness in administrative law. Alleges that it is in violation. Kissel and Burke argue that the rule ignores important dynamics in student earnings and puts for-profit higher education institutions at an unfair disadvantage. They also argue that the rule replaces the risk tolerance of regulators with that of students, depriving historically disadvantaged students of higher education opportunities. Kissel and Burke anticipate costly lawsuits challenging the reasonableness of the rules, and point out that the Department of Education ignored litigation costs in its cost-benefit analysis.
• In a paper published by the Brookings Institution, Dominic Baker of Southern Methodist University and several co-authors argue that information alone is not enough to deter students from choosing low-performing schools. are doing. Baker and his co-authors say that because college is a “positive experience,” students may not know how well an institution will meet their needs until after they enroll. I’m observing. Baker and his co-authors cite research showing that government-mandated disclosure alone does not induce behavioral changes in students or institutions. Baker’s team says the government doesn’t have to tell students which universities to attend, but it should “identify, sanction, and potentially close” low-performing universities that lead to financial hardship for students. concludes that it is necessary.
• In comments on the Department of Education’s proposed rule, the National Association of Student Financial Aid Administrators (NASFAA) argues that the value of higher education cannot be expressed solely in graduates’ earnings. NASFAA argues that beneficial employment rules penalize higher education programs that emphasize intellectual growth over workforce training. NASFAA warns that this rule could force the closure of high-quality programs that do not meet the metrics but have real value to students. NASFAA is calling on the Department of Education to allow for a broader range of factors that influence its value metrics so that students understand the full value of their higher education programs.