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Study: Gainful Employment Associated With Closures

November 12, 2019
 
 

For-profit college programs that passed gainful-employment metrics were associated with a lower likelihood of closing, according to a working paper from Robert Kelchen, an associate professor at Seton Hall University, and Zhuoyao Liu, a Ph.D. candidate at the university.

During the Obama administration, the U.S. Department of Education released gainful-employment regulations that would tie federal aid eligibility at the program level to two sets of debt-to-earnings ratios. One year of gainful-employment data was released to the public in 2017, before the Trump administration took over and ultimately repealed the regulations.

The data grouped programs as either passing, in an oversight zone or failing based on the better of the two debt-to-earnings metrics. If the regulations were upheld or enforced, programs would have lost access to federal financial aid for three years if they remained in the oversight zone for four straight years or failed in two out of three years.

Kelchen and Liu collected information on nearly 5,000 undergraduate programs at nearly 1,500 for-profit colleges, looking at the U.S. Department of Education's closed-school database and various platforms to determine if individual programs were still in operation. They looked at whether passing gainful employment, rather than not passing, or being in the oversight zone, rather than failing, affected the likelihood of closures. While being in the oversight zone did not produce consistent, significant results, passing versus not passing gainful employment did.

"Notably, programs that passed [gainful employment] were much less likely to close than those that did not pass," Kelchen wrote in a blog post introducing the study. "This suggests that for-profit colleges, possibly encouraged by accrediting agencies and/or state authorizing agencies, closed lower-performing programs and focused their resources on their best-performing programs."

Further research could continue to tie program closures to gainful-employment requirements, Kelchen and Liu write in the report. They suggest exploring whether this metric provided market opportunities for colleges to explore, such as expansion of high-performing programs or the creation of programs in areas where most colleges failed the gainful-employment measurements. The College Scorecard will soon release program-level data on earnings, providing more opportunities to examine the relationship between earnings, repayment and debt outcomes with closures.

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