Feds rule in favor of college students in fight against the new ‘diploma mills’
EDITOR’S NOTE: In the June 8 edition of the Community Journal, we reported the grand-opening of Everest College Milwaukee, which attracted a number of notable community individuals. This week, MCJ contributor Harriet Callier reveals a little known side of for-profit schools that seem to create more problems financially for its graduates than it solves in their efforts to gain the type of education needed to meet the demands of today’s job market.
by Harriet Callier
On June 3, the Obama Administration released the final version of its clarification of the law of “gainful employment” as it relates to for-profit career/trade/vocational school program.
The law has always required schools that received federal financial aid under Title IV of the Higher Education Act to “prepare students for gainful employment in a recognized occupation.”
The law has always addressed vocational/trade programs and not schools. Compliance, however was defined by the respective states and/or accrediting agencies.
On June 8, Pres. Obama returned to the Virginia Community College Campus where he had signed the Health Care and Education Reconciliation Act of 2010.
He continues to stress the importance of an educated workforce, as well as, the alignment between businesses seeking skilled workers and educational institutions.
Millions of dollars of stimulus funds were directed to educational initiatives that challenged educators to find ways of improving specific programs with completions in six months or less. Each grant, however, appeared to steer clear of the for-profit businesses.
The draft version of this ruling was released last July 2010 for public comment.
The final version actually gives the schools more time to prepare for a federal valuation of their public worth—program by program.
Thankfully, the tools to measure gainful employment have been standardized.
Prior to this ruling, Wisconsin programs identified their compliance through self-reported figures as submitted by the respective school.
For instance, a Wisconsin program identifying 80% employment as a measure of success could potentially forget or mislabel a few names to reach the required score.
Would a school steal in this manner? Absolutely!–which is exactly what happened when we noticed several students haphazardly omitted from each quarterly self-reporting for just one program at its Milwaukee Campus.
With the new ruling, the federal Education Department (ED) does not have to wait for a report from the school. It now has authority to use information that is an extension of the student’s original FAFSA application.
The ED will compare the student’s social security number on the loan/grant to the same social on the reported earned income of that student for the year.
The ED will compare loan/grants received under a school’s Federal Code (FAFSA) against what has been returned as loan payments—even down to the penny by program.
With this approach, the ED avoids the ambiguous fights of which trades/vocations are acceptable to finance with taxpayer dollars; there is still potential for the market to identify the ‘recognized’ trades/programs.
The ED is scheduled to begin collecting student and school data this October.
A program can become ineligible to receive federal aid if it fails to meet either of the following in three out of four years:
• At least a third of its students are repaying the school loans;
• Loan payment should be no more than 30% of discretionary income (what the student has left after taxes, food, clothing, shelter, child care, child support and transportation);
• Loan payment should not exceed 12% of gross/total income.
How does this translate into Milwaukee dollars?
Nearly a year and a half after Everest College opened in Spring 2010, it continues to “celebrate its opening.” This past week Everest College ran ahead of the pack and submitted a ‘business opening’ photo and/or ad to every newspaper that it could attract—specifically in the African American and Hispanic communities.
Metropolitan Milwaukee Association of Commerce, again, joined the school for the re-celebration of its opening; MMAC was instrumental in the first opening last spring.
Tim Sheehy and MMAC also helped to celebrate the $11 million tax-free bond that the city devoted to Everest in November of 2009.
In 2010, Everest College opened with promises of nine-month programs –this was nearly 15 months ago.
The school boasts of $5 million in tuition on hand as of May (376 students multiplied by $15,000).
Oddly enough, the school continues to solicit more students and can only celebrate opening at the time of year when every other school is celebrating the successes of graduation.
For the 376 students, the typical Milwaukee pay-grade for the programs that Everest (Milwaukee) offers is $9 to $12 per hour.
With a normal income of $2,000 monthly, 30% of discretionary or 12% of gross is roughly $100 to $250.
To make matters worse, four of the five programs are entry-level jobs where certification warrants roughly the same pay-rate as no education, at all.
And many in Milwaukee have obtained the certification after on-the-job exposure at Walgreens or a medical clinic because a vocational program is not required for the highly sought after national certifications.
Why pick on just these schools? Not everyone attends college to get a job—some attend just to expand their knowledge! A trade/vocational/career school was never designed to serve as a liberal arts college.
I cannot stress enough that all schools—including state-supported colleges and universities that accept federal aid for its trade/vocational/career programs are required to adhere to this guideline.
The scrutiny of the new ruling is applied by program—not by school. Typically, the tuition/fees for the non-profit schools are reasonable and easily fall within the acceptable range—which brings us back around to the problematic for-profit career/trade schools.
What can we do?
While the data collection begins this October, schools/programs have through 2013 to become compliant. Nothing prevents us from personally applying the same financial principles now.
An educational endeavor is indeed a worthy investment. If, however, your motivation is to advance your efforts toward employment, then the overall cost to your family has to be weighed, as well.
While the conversations are confusing, the math is straightforward and will not mislead you to apply for a program that will do more financial damage than good to your family.
If the loan repayment exceeds the reasonable income after training, it would be more worthwhile to invest in other programs in the community that will yield the same end result.
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