Latino Students in For-Profit Schools, What the New Rules Do and Fail to Do

By Brenda Calderon, Policy Analyst, Education Policy Project, NCLR

GraduationNCLR and seven other civil rights organizations have released a brief urging the Obama administration to enforce regulations in order to protect Black and Latino students from poorly performing for-profit schools. The brief comes on the heels of the administration’s release of final rules to a section in the Higher Education Act to address “gainful employment in a recognized occupation.” We are pleased the administration has released new rules to provide greater accountability for career education programs, such as schools that prepare students to become dental assistants, auto mechanics, etc. However, given the disproportionate enrollment of Latino students at for-profit schools, high loan default rates, and low graduation rates, NCLR hoped for a stronger ruling that accounted for students who do not complete their programs.

What do the regulations do?

The new regulations, set to take effect July 2015, create a more substantial accountability system for career education programs. The regulations create three different performance categories for the programs: passing, failing, and zone (schools in between the passing and failing thresholds). A school is considered passing if its annual and discretionary debt-to-earnings ratios (the average income of graduates after leaving school compared to their annual loan payments) is less than or equal to 20 percent for discretionary income or if its annual earnings rate is less than or equal to 8 percent. Schools would lose eligibility to participate in federal financial aid programs if they failed to meet the passing thresholds within a three- or four-year period for schools in the zone category. Furthermore, the regulations require schools to notify students if the school is at risk of losing eligibility. This will help potential new students from being misled to enroll in poorly performing schools and it will also signal to current students that they may need to continue their education elsewhere.

What was missing?

In a letter released to the administration earlier this year, more than 40 national civil rights, education, and other organizations, including NCLR, called for stronger accountability to include students who did not complete their programs. As our brief shows, students who attend for-profit institutions incur more debt than those enrolled in public and private nonprofit schools. Students who enroll but do not finish their programs face even worse consequences, as they incur the debt, but lack the certificate and skills to be gainfully employed and make sufficient income to repay their debt. These new regulations did not include a metric that would have captured noncompleters and held schools accountable for nongraduates. Additionally, there is nothing in the new regulations for students in programs who lose eligibility to receive financial relief from schools that welcomed them, but which failed to deliver on promises of new careers and upward mobility.

How does this impact Latino students?

An analysis from the Department of Education showed about 1,400 schools would be affected by the ruling, with the majority of schools in the zone category. Together, these schools serve 840,000 students. Those against a strong rule argued that schools where Latinos constitute a larger share of enrollment would lose eligibility, thus displacing minority students in higher education. However, analysis of the new regulations shows that the number of passing, zone, and failing program rates are similar for Hispanic students. The table below shows that accountability measures are equal across the spectrum, from programs that enroll very few to those with a very high Hispanic student population. These findings show that the potential impact on Latino students is not dictated by Hispanic student enrollment, thus challenging the notion that only schools that disproportionately enroll high numbers of Latino students would be affected. GainfulEmployment_blogpost_table

Source: U.S. Department of Education

These new regulations provide much-needed accountability that was missing in post-secondary education. NCLR encourages students seeking to enroll in career education programs to research the school or program to make sure they will gain a return on their investment. Students should also consider low-cost alternatives where they are least likely to incur massive student debt and more likely to achieve positive outcomes.

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