WASHINGTON -- Earnings data the U.S. Department of Education released Thursday show that graduates of certificate programs at public institutions earned nearly $9,000 more than graduates of those programs at for-profit colleges.
The department will use the new numbers to enforce its gainful employment rule, which was finalized in 2014 and seeks to measure whether a sufficient number of graduates of vocational programs can repay their federal loans.
The data also showed a wide range of variation in earning outcomes depending on a graduate’s field of study. That variation partly explains the difference in earnings between certificate holders who attended public and for-profit colleges. Those who attended higher-earning certificate programs were more likely to have attended a public institution, such as a community college.
For instance, 52 percent of gainfully employed graduates of public undergraduate certificate programs work in relatively high-earning fields like nursing, while only 17 percent of those graduates of for-profit undergraduate certificate programs were in high-earning fields. But the data also show that many undergraduate certificate fields produce low earnings.
“For most of the programs subject to gainful employment, their graduates don’t end up doing tremendously well to start with,” said Robert Kelchen, an assistant professor of education at Seton Hall University, who focuses on higher education finance and student aid.
The department is planning to release debt-to-earnings metrics, which also will underpin the regulations, in early January. Programs that fail the metrics and don’t improve risk losing eligibility for federal student aid.
The gainful employment regulation only applies to nondegree programs at public institutions but includes degree programs at for-profit colleges. The rules were heavily contested by the for-profit sector even as consumer advocates warned they did not go far enough.
Secretary of Education John B. King Jr. told reporters Thursday that the core message students should take from the data is to go to programs that have good outcomes.
“What you see in both the for-profit sector and the public sector is variation across the programs,” he said. “On the whole, it is clear public-sector programs are outperforming the for-profit sector.”
For many community college leaders, this is information they’ve known for years.
“The earnings data is beneficial, but not surprising considering the breadth of job and technical training options offered at the nation’s community colleges,” Walter G. Bumphus, president and chief executive officer of the American Association of Community Colleges, said in an email. “Community colleges will continue to provide relevant and low-cost career training for thousands of Americans.”
Different Pay, Different Fields
The gainful employment data reflect 2014 earnings information for graduates who attended programs between 2008 and 2012. They include 28,817 programs at 3,693 institutions and 1.34 million graduates.
The figures show that graduates of cosmetology programs -- second in number of graduates produced, after medical assistant tracks -- had mean annual earnings of $14,130. And 91 percent of those graduates attended for-profit institutions.
Graduates of culinary arts programs had median salaries of $18,829. For-profits accounted for 89 percent of those students. The highest-earning field -- licensed practical nursing -- had a median salary of $33,835. Public institutions accounted for 65 percent of those graduates.
Steve Gunderson, president and CEO of Career Education Colleges and Universities, said the department had released faulty data without context.
“It is absolutely absurd to compare totally different fields of study and suggest that programs traditionally taught in public institutions have higher incomes than programs taught in proprietary colleges,” he said. “This reflects the continuing ideological bias of this department against our sector and is yet another example of why Americans are tired of out-of-touch bureaucrats in Washington.”
Gunderson said a fundamental lesson from reviews of gainful employment data is that where a person lives has a significant impact on earnings.
“Without seeing the department's underlying data sets, it is impossible to fully answer any of these questions,” he said. “But geography, age, race and gender are all factors here.”
Some for-profit programs, particularly those that award graduate or professional degrees, showed high median earnings for graduates, Kelchen said, pointing to both Walden and Capella Universities, for instance. Walden’s doctoral medical degree and Capella’s doctoral business program both showed median earnings above $90,000.
“Those are the types of programs where we can make a strong argument that they should be covered by gainful employment, because they’re preparing people for a particular field and some of these graduate programs' earnings are really good,” Kelchen said, adding that without the debt-to-earnings information and without a true comparison to gainful employment at public universities' graduate-level programs, what can be deciphered from the data is limited.
The average salary for many covered programs is $20,000, although some fields connected to cosmetology, massage or culinary arts would involve tips or other unreported wages and wouldn’t be captured in federal Social Security data, said Kelchen.
“But the fields that seemed to grow in the last decade, for example medical transcription, looking across the colleges with records here, the average salary is about $18,000 a year,” he said. “These students are unlikely to pay much of their loans back because of income-based repayment plans, and in terms of gainful employment accountability, a portion of these programs will look terrible in debt to earnings because the earnings are so low.”
The gainful employment rules were among a number of regulations introduced by the Obama administration to crack down on the for-profit college sector. Although the department scrapped original plans to include student loan default rates in the standards for gainful employment, they will hold programs accountable based on debt-to-earnings ratios -- to meet the standards, a program’s graduates must not pay more than 8 percent of wages annually on student loans or more than 20 percent of discretionary earnings.
Debbie Cochrane, vice president of the Institute for College Access and Success, said the earnings numbers for some programs could be even more concerning when data on debt-to-earnings ratios are released.
“I certainly don’t think there’s any way for these numbers to look better once you add debt to them,” she said. “The absence of debt doesn't make the earnings higher. But the presence of debt makes the earnings more concerning.”
Some of the data call into question the stories of students doing yearlong programs and making $60,000 or $70,000 in entry-level positions, Kelchen said. "That's clearly not shown in the data," he said, adding that "some of these programs where earnings are basically under the poverty line are at risk of being cut."
In 2010 the for-profit sector challenged the department’s original gainful employment rules in court. After the first round of rules was blocked by a federal judge in 2012, the department issued a new draft of regulations. A federal appeals court rejected for-profits’ challenge of the latest version of the regulations earlier this year.
Under Secretary Ted Mitchell said Thursday that even the prospect of gainful employment regulations had sent signals to the marketplace that institutions need to be serious about outcomes. A few for-profit companies have indicated to their shareholders that a number of their programs are likely to fail.
After Republican Donald Trump’s election victory last week, for-profits said they would now have a fair chance to make a case for their sector. Trump and congressional Republicans have promised to roll back many of the Obama administration’s regulations, like gainful employment, so the fate of the rule remains in doubt. But King said the regulation already is having an effect.
“Our sense is that students are benefiting, families are benefiting and I think that will make a strong case for continuing to build on this rule,” he said.
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