Gainful Employment, Jesse Jackson, and For-Profit Institutions

Posted: October 4, 2010 in Commentary
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The Obama administration has taken steps to stop federal funding of for-profit institutions that are preparing too few of their students for “gainful employment” and that boast high student-loan default rates. Jesse Jackson and several members of the Black and Hispanic Congressional Caucuses have spoke out against these steps. In a letter to Secretary of Education Arne Duncan (September 15, 2010), Jackson stated, “I am concerned that the proposed rule casts too broad and too general a brush on many institutions, some of whom are doing an excellent job at serving economically disadvantaged and minority students.”

Herein lies the problem with Jackson’s claim: The institutions that are doing an “excellent job” won’t lose funding as their students are much more likely to secure employment by earning useful degrees. In addition, these same students will be more likely to pay back their students loans because they are employed. Jackson and others are worried that low-income, first-generation African-American and Latino college students will lose out on opportunities for a college education if the Obama administration holds for-profits more accountable. In truth, holding these institutions more accountable will help racial and ethnic minorities. It does not serve anyone well—African-Americans, Latinos, Whites, the nation overall—to have a degree that doesn’t lead to gainful employment or, worse, is not respected by employers. And in fact, granting degrees that are of low quality sets up a two-tiered system in which racial and ethnic minorities as well as low-income Whites pay the price.

Instead of critiquing the Obama administration’s attempt to raise the quality of education for all students—but especially low-income students who frequent for-profit institutions—Jackson, members of the Black and Hispanic caucuses, and all of us for that matter, need to be pushing for more access and greater degree attainment at colleges and universities that care deeply about the future prospects of their students. We need to pay particular attention to racial and ethnic minorities—not only because it is the right thing to do—but because they are quickly becoming the majority of the population.

If you take a closer look at the outcomes of attendance at for profit institutions, the Obama administration’s actions make sense. For example, according to the National Center for Educational Statistics, default rates measured 4 years after students begin repaying their loans show that students who attended for-profit schools have a higher default rate than those who attended non-profit public and private institutions. Specifically, public institutions have a rate of 7.1 percent, private institutions 6.2 percent and for-profits 19.2 percent. In fairness, although the for-profit sector’s rate is higher than that of other sectors, according to Government Accountability Office data, it is still beneath the threshold cut-off rates that disqualify schools from Title IV eligibility.

If we turn our attention to graduation rates, for-profits have lower six-year graduation rates than their non-profit counterparts. For example, according to a recent Chronicle article, 44 percent of students who seek a four-year degree at a for-profit institution graduate. That compares with 54 percent of students attending public four-year colleges and 64 percent enrolled at private, non-profit, four-year colleges. If we look more closely, African-Americans graduate at a rate of 40 percent at for-profit institutions, compared to 45 percent at non-profit colleges and universities (NCES, 2005).  Likewise, Latinos graduate at a rate of 50 percent at non-profits, but only at 46 percent at for-profit institutions (NCES, 2005).

Of course, higher loan-default rates and lower graduation rates can be explained, in part, by the student population served by for-profit institutions. Research tells us that low-income and first-generation students are more likely to default on their loans and less likely to graduate. Other colleges and universities that serve those populations also struggle with the same issues that for-profits do, but they do not operate with a goal of making a profit.

Although there are for-profit institutions that are graduating racial and ethnic minorities at a commendable rate, anytime you mix making money with education—especially the education of low-income, first-generation, or racial and ethnic minorities—it is vital to have the highest level of accountability measures in place. The Obama administration is doing the right thing by holding institutions that make a profit off of education, as well as those that don’t, accountable for providing a quality experience to students and making sure these students graduate with valuable degrees.


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