Another Pitfall for Student Loans

In a recent article for Career College Central, I discuss the negative implications of the Department of Education’s (ED) proposal to alter the gainful employment rule to restrict the amount of money that a student could borrow by program of study and expected entry level occupational earnings. I identified three major flaws with the proposal. First, it would severely limit the ability of for-profit colleges to offer bachelor’s degree programs, and other non career-specific fields of study. Next, it fails to account for total compensation, regional variations in compensation, and the possibility that workers will receive a promotion or pay increase over time. Finally, the rule could result in a reduction of educational options and access for those most in need, and a shortage of qualified employees to meet the demands of the labor force.
I also analyzed the effect that the rule would have on 10 occupations that are expected to produce more than 2.6 million additional jobs by 2018, finding that for most of the occupations, students would have been able to borrow less (after adjusting for inflation) to pursue training in them in 2008 than in 2003. ED’s arbitrary gainful employment metric would hamper the ability of colleges to offer occupational training in fields that the market demands by exerting what amounts to government price controls. A better solution to protect the interests of both students and taxpayers would be to ensure that colleges provide prospective students with sufficient information (such as job and income data, and debt and default levels) to make wise education decisions, prior to their enrolling and paying a dime of tuition.


  • Daniel Bennett

    Daniel L. Bennett is a Research Professor at the Baugh Center for Entrepreneurship and Free Enterprise at Baylor University.

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