Higher Education’s Gainful Employment and 90/10 Rules: Unintended “Scarlet Letters” for Minority, Low-Income, and Other At-Risk Students

Proprietary institutions of higher education, sometimes called “career colleges” since they focus on degrees that are more vocationally oriented postgraduation, provide a pathway to a postsecondary credential for approximately 3.2 million students across the country. Due to access to capital and scalable infrastructures, which allow proprietary institutions to respond quickly to market needs, their enrollments have grown significantly faster than their public and nonprofit counterparts over the past decade. Proprietary institutions serve significantly more students who are at high risk of failing to complete their education, with a substantial portion being low-income and minority students. It is also beyond debate that these students, regardless of type of institution attended, graduate at lower rates, borrow at higher rates, and are more likely to default on their student loans than more affluent students. 

The question, then, is how to provide meaningful access to atrisk students who want to pursue higher education. Because student need is the primary determinant of the amount of federal aid and debt awarded, and because such aid follows the student (and not the institution), there has been significant growth in federal aid that has gone to proprietary institutions in recent years. Ironically, in a classic example of the law of unintended consequences, existing legislative and regulatory policies directed at proprietary institutions, while pursued ostensibly in response to allegedly disproportionally higher numbers of student borrowers and defaulters at proprietary institutions, have unwittingly restricted minority and at-risk students’ access to higher education.

Two rules in particular—the US Department of Education’s (ED) new “gainful employment” (GE) rule and the “90/10” rule10— through complex regulatory metrics with contradictory implications, penalize proprietary institutions that serve high minority populations and discourage them from providing the type of access that federal student funding initiatives were intended to enable. If, as the data and analysis suggest, it is the type of student enrolled, as opposed to the quality of the program offered or the institution offering it, that is the primary cause of low graduation rates, excessive debt, and student defaults, then it is pointless to shift these students from proprietary institutions to nonprofit and public colleges. Both rules should be eliminated in favor of policies that apply to all types of institutions, that are designed to ensure student access and success, that require transparency and comparability, that consider institutional mission where appropriate, that measure student outcomes normalized against populations served, and that treat atrisk students equitably no matter what institution they choose to attend.