Last month, the Department of Education (ED) published a proposed regulation that would revoke federal student aid funding for certain postsecondary degree and certificate programs that leave their graduates earning too little. The Gainful Employment (GE) rule is an important step towards stronger accountability for higher education, but it has some critical drawbacks. My public comment on the rule, which is available here, brings several of these to ED's attention.

The most important shortcoming is the rule's limited scope. Only certificate programs and degree programs at for-profit institutions are subject to a loss of federal Title IV funding if they fail to produce adequate financial value for students. Degree programs at public and private nonprofit institutions are exempt, though they will still be required to warn students if their outcomes are unsatisfactory. These programs account for the vast majority of students enrolled in postsecondary education.

As I write in my comment:

[T]he exclusion of degree programs at public and private nonprofit institutions creates arbitrary distinctions between GE programs and non-GE programs. For instance, the University of Phoenix offers 13 degree programs that would fail the financial value metrics; since Phoenix is a for-profit institution, these programs are subject to a loss of Title IV aid eligibility. However, the University of Idaho recently announced plans to acquire Phoenix and reorganize it as a nonprofit institution. If the acquisition succeeds, Phoenix’s 13 failing degree programs may continue to access Title IV aid, even if student outcomes do not improve.
In addition, the rule’s limited scope creates arbitrary distinctions between programs at the same institution [in the same field of study] but at different credential levels. For instance, the public Riverside City College offers both an undergraduate certificate and an associate degree in cosmetology and related personal grooming services. The programs have similar earnings outcomes and both fail the earnings premium measure, according to ED data. However, only the certificate is subject to a loss of Title IV eligibility under the proposed rule.
These cases illustrate the danger of institutions attempting to evade accountability under the proposed rule by changing the classification of programs but doing little to improve financial value. Proprietary institutions may attempt to convert to nonprofit status, while public and private nonprofit institutions may reorganize their failing certificate programs as degrees.

ED insists that it does not have the legal authority to apply the Gainful Employment rule to degree programs at public and private nonprofit institutions, as the text of the law on which ED relies to write this regulation does not insist on a gainful employment standard for these programs.

But this is not a great excuse, as I explain:

However, ED could rely on a separate clause of the Higher Education Act, Section 454(a)(4) or the “quality assurance” authority, to revoke eligibility for Federal Direct Student Loans (though not other Title IV aid) from [GE-exempt] programs, according to legal scholars Dan Zibel and Aaron Ament. This clause requires that “an agreement with any institution of higher education for participation in the direct student loan program under this part shall … provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with institutions of higher education, to ensure that the institution is complying with program requirements and meeting program objectives.”
ED could use the quality assurance authority to condition eligibility for continued participation in the Direct Loan program on compliance with GE-like financial value metrics. In addition to protecting more students, a GE-like regulation using the quality assurance authority would drastically reduce the ability of institutions to evade accountability by reclassifying their GE programs as non-GE programs.

While ED's proposed rule is an important step towards protecting students and taxpayers, its scope should be broadened to include all federally funded postsecondary programs. Unfortunately, ED has chosen to selectively apply accountability rules to only a modest slice of higher education.