Five percent of vocational programs fail to meet minimum Education Department standards for student success after graduation, putting them at risk of losing federal financial aid dollars if they do not improve, according to data released to the public today.
The information is the first glimpse at how for-profit colleges, as well as some community colleges and private nonprofit institutions, will perform when judged against new standards that the department put in place last year . Those regulations, which remain controversial, evaluate colleges based on their graduates’ loan repayment rates and debt loads after graduation.
For-profit colleges fought vigorously against the regulations. And some are already protesting the results, saying the Education Department used inaccurate data in some cases.
Vocational and certificate programs that fail to make any of the minimum standards -- a 35 percent loan repayment rate, a 12 percent debt-to-income ratio for a typical graduate, or a 30 percent ratio of debt to discretionary income for a typical graduate -- in three out of four years will lose eligibility for federal financial aid programs.
According to Education Department data, 193 programs at 93 institutions, or 5 percent of all such programs, failed to meet any of the benchmarks. When the final rule was published last year, the Education Department predicted that 8 percent of programs would fail at least once, but that only 5 percent would lose eligibility for financial aid by failing for three years.
The earliest a program’s students would be barred from receiving federal financial aid -- the primary source of support for most vocational programs -- is 2015. This year's rates are informational: Sanctions, including increased disclosure requirements, could begin for some programs as early as next year, when final rates are released.
To qualify for their students to receive federal financial aid through programs under Title IV of the Higher Education Act, vocational programs must prepare students for “gainful employment in a recognized occupation.” Many of those programs are at for-profit colleges, which have come under criticism from the Education Department and Congress  in recent years for high default rates and poor outcomes for graduates. The federal regulation, finalized last year after a contentious rule-making process, was the first attempt to define what “gainful employment” actually is.
The Association of Private Sector Colleges and Universities, which fought the regulation from the beginning, criticized it harshly Monday. “The Department of Education’s so-called ‘gainful employment’ regulation has always been and remains today a faulty metric that does not accurately measure the services provided by career colleges and universities,” said Steve Gunderson, the association’s president, in a statement.
Gunderson said the association’s members had “severe concerns” about the accuracy of the data, saying that some institutions submitted data on programs but didn’t receive information from the department in return. In some cases, the Education Department did not have correct debt levels, he said.
Some areas of study did worse than others on the metrics. More than half of all programs in criminal justice, as well as those that prepare secretaries, medical assistants, and pharmacy and medical records technicians, failed to meet any of the department’s standards. Other programs -- including photography, interior design and certificate programs for licensed professional nurses -- fared relatively better, with more than 70 percent meeting at least minimum standards.
A few programs that failed to meet any of the department’s minimum standards, including one program at the University of Phoenix, one program at the Kaplan Career Institute and two at Kaplan College, represent some of the largest publicly traded for-profit colleges. About one in 10 programs at the for-profit Art Institutes, owned by the Education Management Corporation, also fell short.
But other colleges on the list at risk for losing federal aid are small operations, some with only one program eligible for gainful employment.
In a required disclosure to investors, Education Management challenged the accuracy of the department’s data, saying “conclusions drawn from the informational data may be misleading," in part because some of the statistics on student debt appeared incomplete, the company said in a disclosure filed Monday with the Securities and Exchange Commission.
At Corinthian Colleges, Inc., which owns the Everest chain of for-profit colleges and universities, 43 programs at Everest Colleges, Universities and Institutes failed to meet any of the department’s standards. (The company also owns WyoTech and Heald Colleges, which performed much better.) (Note: This paragraph has been updated to correct an error.)
Of the company's 45 total programs not in compliance, 13 programs are on campuses that are being closed or have already been shuttered due to “performance issues,” said Kent Jenkins, the company’s spokesman. A company analysis of the data found that 93 percent of programs are in compliance, representing 95 percent of all Corinthian graduates.
Although the Education Department's news release went out of its way to note that all of programs that failed all three of the gainful employment tests were at for-profit colleges, some public and private nonprofit institutions showed vulnerability in the new data, too.
A total of 34 programs at community colleges and four-year private institutions failed two of the tests. More than a third of them -- 13 -- were at campuses of Remington College, which was a for-profit institution until shifting to nonprofit status in 2011. Baker College, in Michigan, had three programs that failed two of the department's tests; McLennan Community College and Trinity Valley Community College, in Texas, and New York's Touro College and Michigan's Davenport University were among nonprofit institutions that had one such program each.
Thirty-nine programs at public colleges and universities and 19 programs at private nonprofit institutions failed at least one test under the department's metrics.
Beginning with next year's final rates, programs that fail to meet any of the minimum standards will be required to disclose that fact to students enrolling for the upcoming academic year. Programs that fail again in the next year will also have to inform students of transfer opportunities. (Note: This paragraph has been updated to correct the year when programs could be sanctioned. The required disclosures will be based on next year's rates, not this year's.)
Programs failing 'gainful employment':
Paul Fain and Doug Lederman contributed to this article.