Obama Administration Punts on Job Placement Rates

[Over the last two months, Higher Ed Watch has examined how many for-profit colleges cook the books on the job placement rates they disclose to prospective students and regulators. In prior posts, we have looked at how the manipulation of these rates is a widespread problem throughout the industry; revealed some of the most common tricks of the trade for-profit schools have used to inflate these numbers; and showed how accreditors and regulators have been asleep at the switch as these abuses have been occurring. Today, we continue our series by reporting on the Obama administration’s unsuccessful effort (so far) to curb these practices.]

As part of the Obama administration’s Gainful Employment regulations, for-profit colleges and other vocational schools are required to disclose to prospective students more-detailed consumer information about the programs they offer. The aim of this effort is help students make better-informed decisions about the postsecondary educational programs they are considering.

But at least in one area, the information that prospective students are getting is fundamentally flawed. That’s because the job placement rates that for-profit higher education companies are required to disclose under the new rules are the same ones they report to accreditors and state regulatory agencies. As we wrote last week, the methodologies that career colleges use to calculate these rates vary state by state and accreditor by accreditor, making them impossible to compare. And because neither accreditors nor state regulators put much of an effort into verifying these rates, the schools don’t seem to have any qualms about gaming them.

It wasn’t supposed to be this way. Obama administration officials had an opportunity to establish a standard methodology for career colleges to use when calculating these rates, but they appear to have bungled it. And it isn’t clear whether they will get another shot at it anytime soon.

Proposing a Stricter Standard

Currently, the federal government leaves it up to accrediting agencies and states to set the standards that for-profit schools must use to calculate the rates, and to monitor them. The only exception is for extremely short-term job training programs, which must have employment rates of at least 70 percent to remain eligible to participate in the federal student loan program.

In June 2010, as part of a package of draft regulations aimed at improving the integrity of the federal student aid programs, the administration proposed extending the standards that short-term programs are required to use to all for-profit college and vocational programs that are subject to the Gainful Employment rules. The proposal was met with a firestorm of protest from career college officials, as the federal methodology is much more strict than that used by accreditors and state agencies.

For example, under the Education Department’s requirements, students are only considered to be successfully placed if they have been employed in their field or a related one for at least 13 weeks within the first six months after graduating. In comparison, some accreditors and state agencies apparently allow schools to consider a graduate to be successfully placed if they work in their field for as little as a day.

Meanwhile, the Education Department has established a strict regulatory regime to make sure the rates are not rigged (the extent to which the agency actually holds short-term programs to these standards is unclear). Institutions are required to provide documentation proving that each of the graduates included in their rates is employed in the field in which he or she trained. According to the Department’s rules, acceptable documents “include, but are not limited to, (i) a written statement from the student’s employer; (ii) signed copies of State or Federal income tax forms; and (iii) written evidence of payments of Social Security taxes.”

For-profit college officials railed against the proposal, arguing that was it was redundant because their schools already have to report this data to accreditors and states. Requiring career colleges to disclose an additional rate, they said, would not only be unnecessarily burdensome for the institutions but would also be confusing to students, who wouldn’t know which rate to trust.

To be fair, for-profit colleges were not the only institutions that objected to the proposal. Community colleges and state universities that have training programs that fall under the Gainful Employment requirements also complained that the plan was too stringent. These institutions may have found these requirements to be especially daunting since they generally have not had to track job placements before.

The Department’s Blunder

How did the Education Department’s political leaders respond to this criticism? They punted. Instead of devising an alternative proposal, they kicked the issue to the National Center for Education Statistics (NCES). Under the final program integrity regulations, which were released in October 2010, the Department directed the NCES to convene a Technical Review Panel “to develop a placement rate methodology and the processes necessary for determining and documenting student placement” that schools would be required to use to fulfill this mandate. Until then, however, the regulations required schools to disclose the rates they already report to states and accreditors, as the institutions had wished.

But putting NCES in charge of developing a federal standard for calculating these rates turned out to be a major blunder. First, this was not an assignment that the NCES had sought out or has typically been asked to do. After all, the Department was not just asking the center to provide technical assistance in devising a new methodology, but to take the reins in setting a new federal policy in this highly contentious and controversial area. Second, the Technical Review Panel that the Department chose to carry out this assignment included a number of representatives from schools that were opposed to this effort.

All of this was a recipe for failure. So it was hardly a surprise that, after two days of discussions on this topic in March, the review committee was not able to reach an agreement. The panel suggested in a final report on its deliberations that "the topic be explored in greater detail by the Department of Education.” Translation: This is a job for the Department, and not NCES.

It's unclear, however, whether the Department’s leaders can do much about it now. That’s because the regulations they wrote explicitly require schools to use “a methodology developed by the National Center for Education Statistics, when that rate is available.”

Perhaps Department officials will revisit this issue in the next round of rulemaking, which is expected to start later this fall. But even if they do, they probably won't be able to put a new standard into effect until at least the year after next.

In the meantime, prospective students will have to continue relying on faulty information when choosing which career college program to attend.