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The Effect of the Gainful Employment Regulatory Uncertainty on Student Enrollment at For-Profit Institutions of Higher Education

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Abstract

In 2010, the Obama Administration proposed new regulations designed to hold institutions of higher education (IHEs) accountable for student outcomes. I examine the effects of the regulatory uncertainty surrounding these “Gainful Employment” (GE) regulations on enrollment at for-profit IHEs. I utilize informational debt rates of GE institutions along with enrollment data from the integrated postsecondary education data system to employ a difference in difference design that compares enrollment before and after the GE regulatory proposal at for-profit IHEs to enrollment at public and nonprofit IHEs. My results suggest that for-profit IHEs experienced slower enrollment growth relative to public and nonprofit IHEs in the post-GE period. Additionally, enrollment of low-income students appeared to be disproportionately affected by the GE regulatory uncertainty.

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Notes

  1. Throughout the paper, I also refer to for-profit institutions of higher education as “for-profit colleges” and “for-profit institutions”.

  2. See Protecting Students from Worthless Degrees Act at https://www.congress.gov/bill/114th-congress/senate-bill/1165S.2098; Students Before Profits Act of 2015 at https://www.congress.gov/bill/114th-congress/senate-bill/2098/text; Defense to repayment at https://federalregister.gov/a/2016-14052.

  3. See https://federalregister.gov/a/2010-17845.

  4. According to the GE Manual, “Debt-to-Earnings Ratios are measures of the average share of the GE Program’s former students’ income that must be used to repay student loan debt incurred by the students for attendance in the GE Program”.

  5. Author’s calculations using GE data merged with data from the Integrated Postsecondary Education Data System. Refer to Table 1.

  6. See https://www.sec.gov/Archives/edgar/data/1013934/000095012311016592/w80904e10vk.htm.

  7. See https://studentaid.ed.gov/sa/about/announcements/itt/faq and https://studentaid.ed.gov/sa/about/announcements/corinthian.

  8. See https://www.ed.gov/news/press-releases/us-department-education-proposes-overhaul-gainful-employment-regulations.

  9. See https://www.congress.gov/bill/102nd-congress/senate-bill/1150

  10. http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html.

  11. Programs pass, fail, or are placed in a “zone” based on the metrics. Programs that pass the metrics have a debt to earnings ratio that is less than or equal to 8% of total earnings or less than or equal to 20% of discretionary earnings. Programs are placed in a “zone” if they have a debt to earning ratio that is greater than 8% but less than 12% of annual earnings or greater than 20% but less than 30% of discretionary earnings. Programs with a debt to earnings ratio that exceeds 12% of annual earnings or 30% of discretionary earnings fail the metrics. A program loses eligibility for financial aid if it “fails” for 2 out of 3 consecutive years or if it is placed in the zone for 4 years.

  12. Critics of the 90/10 rule suggests that the rule incentivizes for-profit institutions to raise tuition when federal student aid funding increases. See http://www.finaid.org/loans/90-10-rule.phtml.

  13. Institutional expenditures are explored further in forthcoming paper by author.

  14. Institutions with traditional academic calendars report the enrollment by Oct 15 or the official fall reporting date of the institutions; institutions with 12-month academic calendars report it for students that enrolled anytime between August and October 31.

  15. The number of nonprofit and public institutions decreased in the post GE period, so I am less concerned about my estimated calculation of GE public and nonprofit institutions.

  16. The Department of Education first mentioned “Gainful Employment” in 2009 and anecdotal information from the securities exchange commission suggests that institutions began paying attention to the GE talks in 2010. Therefore, I expect any enrollment response to begin in the fall of 2011.

  17. My full sample excludes institutions missing one or more years of data. Therefore, schools that closed since GE are not included in the sample.

  18. For simplicity, my references to “two-year” include both 2 year and less than 2-year institutions.

  19. Small schools are those schools classified as having fewer than 1000 students in the first Carnegie classification completed in 2005.

  20. Prior to 2008, Pell grant recipients were lumped in with other federal grant aid recipients in the IPEDS. Based on the author’s calculations, grant recipients comprise between 96 to 99% of federal grant aid recipients from 2008 through 2014. Thus, in order to ensure consistency, I use the federal grant aid measure for all my years.

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Authors and Affiliations

  1. Congressional Research Service, Washington, DC, 20540, USA

    Joselynn Hawkins Fountain Ph.D.

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  1. Joselynn Hawkins Fountain Ph.D.
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Correspondence to Joselynn Hawkins Fountain Ph.D..

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The views expressed herein are those of the author and are not presented as those of the Congressional Research Service or the Library of Congress.

Appendices

Appendix A

See Table 9.

Appendix B

See Table 10.

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Fountain, J.H. The Effect of the Gainful Employment Regulatory Uncertainty on Student Enrollment at For-Profit Institutions of Higher Education. Res High Educ 60, 1065–1089 (2019). https://doi.org/10.1007/s11162-018-9533-z

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