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What Does “Gainful Employment” Mean?

what does in default on a student loan mean

Comments on the Department of Education’s proposed “gainful employment” regulation are due next Tuesday May 27.   This is the Department’s second attempt to define what it means for career education programs at public, nonprofit and for-profit colleges to prepare students for gainful employment in a recognized occupation.  According to the Department of Education, a shocking 72% of the for-profit college programs subject to the proposed regulation had graduates who on average earned less than high school dropouts.

The gainful employment requirement has been part of the Higher Education Act for years, but there has never been a rule defining it.  Creating a standard definition is essential to enforce the law and protect students and taxpayers.

The Department of Education’s efforts to crack down on worthless programs are critical, but the proposed regulations should be stronger.  Among other changes, the Department must require schools to immediately improve weak programs AND provide real relief to borrowers harmed by attending programs that fail to meet the gainful employment standards.  Borrowers, students, and taxpayers have an opportunity to tell the Department about why the rule is so important and how it can be stronger.  You must send your comments on or before Tues. May 27.

The Institute for College Access and Success (TICAS)’s analysis of the

Department’s data found that of the 4,420 programs in the Department’s dataset with complete data, there were 114 programs that had more defaulters than graduates.  As TICAS higlights, this means that “students receiving federal aid to attend these programs are more likely to find themselves unable to repay their debt than they are to complete the credential they sought.”    And this is an understatement of the problem given the limits of the default data.  All of these 114 programs were at for-profit schools and most were associate degree programs.  There are seven programs where the number of defaulters exceeded the number of completers by more than 1,000.  All seven of these programs were at the University of Phoenix.

TICAS accurately calls these “parasitic programs.”  The stakes for both student borrowers and taxpayers are huge, especially given the draconian government collection powers faced by borrowers in default.

The proposed rule is the government’s effort to address this waste of borrowers’ lives and taxpayer dollars, but it must be stronger.  Now is the time for you to weigh in and share your comments with the Department of Education.

Share your story, and let the Department know it needs to improve the rule to protect students and taxpayers from wasteful career education programs

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