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Will the New Gainful Employment Rules Discriminate Against Minority Students?

Oct 12, 2010

A new analysis by Mark Kantrowitz, publisher of Fastweb.com and Finaid.org, suggests that the affordable debt restrictions in the Department of Education's proposed gainful employment rules may unfairly impact minority and disadvantaged students.

College Costs

Loan Repayment Rates Linked to Student Demographics

This summer, in a move to clamp down on questionable practices at for-profit colleges, the Department of Education released a series of proposed new rules governing federal student aid. The most controversial of these rules attempts to set minimum levels of 'gainful employment' among an institution's graduates in order for its students to continue to be eligible for aid.

The goal of the gainful employment rule is to shut down schools with unacceptable levels of unaffordable debt among their graduates. The DOE has proposed to measure this via loan repayment rates. Schools with a rate over 45% will continue to be eligible, schools with a rate between 35% and 45% will be 'restricted' and schools below 35% will be cut off. Since most students at low-performing institutions depend on federal financial aid, the new rules would effectively shut down these colleges.

Proponents of the rule say that this is a good thing. If we shut down under performing schools, students will be shuttled into better schools. In theory, this means that they will have a higher chance of graduating and be less likely to end up buried under unmanageable debt.

But a new analysis by Mark Kantrowitz suggests that this theory is based on a false assumption. Namely, that the problem lies with schools, not students.

Kantrowitz's research indicates that loan repayment rates are correlated to student demographics. Specifically, colleges with more minority students have lower loan repayment rates: The average repayment rate at colleges with more than two-thirds minority enrollment is 30%, compared with 62% at colleges where less than one-tenth of students are minorities.

Diverse Students

Serving At-Risk Populations

Of course, the differences aren't entirely due to race. His research indicates that other demographic factors such as family income, independent student status, first-generation student status, household size, student status as a single parent, gender and age all factor in.

But the correlation is most closely linked to race - and as a result, the proposed rules may end up discriminating against minority students by closing the schools that serve them without providing services to fix the underlying problems.

Kantrowitz acknowledges that it's in the public's best interest to try to weed out schools that aren't effectively serving their students. But he cautions that if the government goes through with the new rules as proposed, the problem won't disappear. It will just follow students to their new institutions.

Instead, they should assess the impact of the new rule on minority, low-income and other at-risk students. If the DOE excludes these groups from their measurements of affordable debt levels, they can avoid penalizing institutions for accepting the very students who stand to benefit the most from a college education.

Furthermore, Kantrowitz proposes that the DOE should take a closer look at what it means to provide a high quality education. He suggests that the agency undertake a large, in-depth study of American colleges and universities, evaluating students' mastery of subject matter and tracking them longitudinally to test loan repayment rates, job placement rates, cohort default rates and income. This, Kantrowitz asserts, would be a real assessment of educational quality.


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