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A new study from the Century Foundation released Thursday found that graduates from cosmetology schools are making near poverty-level wages. The problem is persistent across schools in the industry; under the Education Department's proposed gainful employment rule, 98 percent of cosmetology programs would fail the earnings threshold test. 

The study found that cosmetologists earn an average of $16,600 annually, $9,000 less than the average annual income of workers with only a high school diploma. Cosmetologists hold an average of $10,000 in student loan debt.

In 2016, the Education Department announced that Marinello Schools of Beauty had lost the ability the participate in federal student aid programs after a stream of predatory behavior. In April this year, the department discharged $238 million in student loans to former students of the cosmetology schools. The findings in the study suggest that the predatory practices and  poor graduate outcomes found at Marinello reflect a much larger issue across the industry.

A disproportionately large number of students at cosmetology schools are low income or come from a minority background. With more than a majority of students at cosmetology schools receiving Pell Grants, the industry received more than $1 billion in federal student loans and grants in the 2019–20 academic year alone.

Although not yet in effect, the Education Department’s proposed gainful-employment rule would impose a strong level of accountability on low-performing cosmetology schools that receive federal funding. The proposed rule would implement punishments for for-profit colleges and career training programs with poor student outcomes, measured by a debt-to-earnings ratio. It would also require all programs to yield graduate earnings above what the average worker aged 25 to 34 makes in their state with only a high school diploma, which a majority of cosmetology schools would fail, according to the study.

“While federal dollars are subsidizing cosmetology schools and programs, students are neither seeing reduced costs from the subsidies or reaping the benefits of credential or degree attainment,” said Tiara Moultrie, a fellow at the Century Foundation and an author of the study. “Imposing safeguards is crucial for protecting taxpayers and students by ensuring cosmetology programs offer those who enroll access to the mobility and economic security they seek.”

Jason Altmire, the president of Career Education Colleges and Universities, which represents for-profit colleges and is against the proposed change to gainful employment, said, “The gainful-employment proposal, as currently written, would do irrefutable harm to the cosmetology programs regardless of sector.”

Negotiations on the proposed rule have been pushed to 2024, making July 2024 the earliest the rule could go into effect. Failing colleges would not be punished until 2027.