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Fri, 07/08/2011 - 12:15

When the U.S. Department of Education drafted their “gainful employment” policy they aspired to combat the high levels of unemployment and disproportionate number of loan defaults experienced by alumnus of the nation’s for-profit institutions who educate an usually high number of low income, minority and military students. However, some stakeholders felt that the initiative was overly broad and targeted for-profit institutions. Subsequently, policymakers scaled back, and despite criticism from advocates on both sides of the issue, other recognize this as potential for fundamental change in America’s colleges and Universities.

The current iteration of the regulation mandates that 35 percent of a school's alumnus be in repayment (with loans in deferment counting toward this minimum). For-profits must also demonstrate that annual loan payments did not exceed 30 percent of an average graduate’s discretionary income or 12 percent of a graduates’ total income. Schools are given until 2015 to comply with these regulations. Institutions that fail to meet these basic requirements are subject to a "three strikes" policy before they lose federal funding. While noted commentators on both sides of the issue have expressed concern with the current iteration of the regulation, others recognize a potential for fundamental change in higher ed that could result from this regulation.

By defining “gainful employment”, the regulation shifts accountability for program outcomes to universities accountable for the debt incurred and employability of their programs. Some say this regulation is a benefit to the for-profit Universities who can discard less effective degree programs and invest solely in the most effective and lucrative ones; however, some worry about the potential danger this will have on liberal arts programs whose value oftentimes does not translate well to the workforce. While this directive is not currently applicable to public and private universities, there is already speculation about the ramifications of this kind of regulation on all of Higher Education.

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