Washington Watch: ED seeks info on determining ‘low financial value’ programs

In an action that echoes the Obama administration’s wildly unpopular college ratings system, the U.S. Education Department is formally soliciting public input on the creation of a list of higher education programs that provide “low financial value.” 

The request was issued at the same time that the Biden administration’s far-reaching, borrower-friendly and hugely costly new Income-Driven Repayment (IDR) proposed regulations were advanced. In fact, the notice states that IDR is intended to reduce the burden of debt for low- and middle-income borrowers, “not to subsidize programs that fail to help for many of their students graduate and achieve their goals.”

The department has indicated that it intends to publish annually a list of “low financial value” programs, which it stated will draw public scrutiny to designated programs. ED also said that it “is committed to sending letters to institutions with the most concerning programs to ask for their plans to improve the value of their programs.” No further detail was provided on this concept.

The document states that there are “many low-financial-value postsecondary programs — those for which total costs exceed the financial benefits provided to students. Some higher education programs promote goals other than financial returns for students. However, a misalignment of prices charged to financial benefits received may cause particularly acute harm for student loan borrowers who may struggle to repay their debts after discovering too late that their postsecondary programs did not adequately prepare them for the workforce.” 

Similarities to gainful employment, without the same consequences

The document states that “too many postsecondary programs saddle students with levels of debt far out of proportion to the income they earn after leaving their program.” This, of course, is the basic metric that has been employed in previous gainful employment regulations and was proposed in a somewhat modified form last year by ED in negotiated-rulemaking sessions. 

The vast majority of community college certificates that are eligible for federal aid do fall under the gainful employment dragnet. (A formal Notice of Proposed Rulemaking on gainful employment [GE] is expected this spring. Institutions that fail to meet GE standards are at risk of losing their Title IV eligibility.) ED’s notice added that the problems creating unmanageable debt loans are allegedly concentrated in undergraduate certificate programs and graduate programs.    

However, the notice indicates that “low financial value” programs may include those that provide the “lowest financial returns,” presumably earnings, for students and taxpayers. This could impact community colleges even though the non-economic value of programs will also be considered. ED is explicitly seeking input on how that might be determined. The notice also refers to generating data on whether “public investments in the program are worthwhile.”   

Although somewhat of a technical issue, ED has stated that it intends to use the six-digit Classification of Instructional Program (CIP) Code for its evaluations. The department’s College Scorecard currently employs the four-digit code to generate earnings information. The latter captures more students in each evaluation, but arguably blends programs that are somewhat dissimilar. 

The American Association of Community Colleges plans to submit comments on ED’s request for information. The association will keep members informed on developments in this area.

About the Author

David Baime
David Baime is senior vice president for government relations at the American Association of Community Colleges.
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