Report - April 2018

Keeping New York’s For-Profit Colleges on Track

Far too many graduates of New York State’s for-profit colleges end up stuck in low-wage jobs and saddled with debt that they can't afford. The State Legislature and Governor Cuomo have the power to change this by implementing statewide standards to ensure that crucial investments in higher education result in real economic gains for all students.

by Tom Hilliard

Tags: higher education colleges economic opportunity

  • The following are recommendations from Keeping New York’s For-Profit Colleges on Track 

Establish a statewide gainful employment standard. New York should follow California’s lead and establish a gainful employment program at the state level. Such a program would enable New York to exclude colleges which fall short of the state’s standards from TAP eligibility. The U.S. Department of Education carried out most of the spadework needed to design an effective gainful employment program, but has more recently reversed course.26 New York should step into this void with a program of its own.

Some considerations would need to be worked out for New York to implement a gainful employment standard. First, the default rate has been criticized as an outcome measure. Colleges could potentially manipulate it by encouraging graduates to push back their required payments. New York could explore the three-year loan repayment rate as an alternative, as suggested by the California Legislative Analyst’s Office and the national organization Third Way.27 Second, whichever standard New York uses is likely to require the state to collect new data. New York should require occupational programs to capture post-graduation earnings data, which the U.S. Department of Education currently maintains but may cease in the future. The state can also make use of unemployment insurance data, which provides earnings information for most workers in New York.

Apply gainful employment standards to the Enhanced Tuition Award. The New York State Legislature approved the Excelsior Scholarship program in 2017, which provides free tuition to undergraduate students from families earning less than $125,000 annually. While Excelsior applies only to students attending CUNY and SUNY, the State Legislature also created the Enhanced Tuition Award to provide a tuition benefit to students attending independent nonprofit colleges. The state legislature later approved a standalone bill to make for-profit colleges eligible for the Enhanced Tuition Award, which the Governor vetoed in December 2017. However, the award was extended to for-profit institutions as a provision of the 2019 state budget. State policymakers should revisit the Enhanced Tuition Award in the next legislative session and incorporate gainful employment protections to screen out underperforming institutions.

Strengthen consumer protection standards relevant to for-profit colleges. A common problem in New York, as in other states, is that some for-profit colleges do not provide full, complete, and honest disclosure of information to prospective and current students. In Massachusetts, the attorney general has the power to set legal standards for consumer protection. This authority has been used to establish comprehensive standards governing for-profit and occupational schools. The attorney general’s regulations ban false or misleading statements, require extensive disclosures, and prohibit unethical practices like enrolling unqualified or ineligible students or engaging in high-pressure sales tactics.28

New York should upgrade its own consumer protection regulations to meet the best-practice standard set by Massachusetts. In addition, the state should appropriately fund and empower the Office of College and University Evaluation, the Bureau of Proprietary School Supervision, and the Office of the Attorney General to enforce these standards. 

26. Michael Itzkowitz, “Death by delay: DeVos’ playbook for dismantling the gainful employment rule,” Third Way. Accessed from https://medium.com/third-way/death-by-delay-devos-playbook-for-dismantling-the-gainful-employment-rule-814fe10e2ed6.
27. Mac Taylor, An analysis of new Cal Grant eligibility rules, California Legislative Analyst’s Office, January 7, 2013. Accessed from http://www.lao.ca.gov/reports/2013/edu/new-cal-grant/new-cal-grant-010713.pdf. Michael Itzkowitz, Why the cohort default rate is insufficient, Third Way, November 2017. Accessed from http://www.thirdway.org/report/why-the-cohort-default-rate-is-insufficient.]
28. Office of the Attorney General of Massachusetts, “AG Coakley announces 
finalization of new for-profit and occupational school regulations,” June 25, 2014. Accessed from http://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-06-25-for-profit-regulations.html.

This brief is funded by the Working Poor Families Project, a national initiative supported by the Annie E. Casey and Joyce Foundations, which partners with nonprofit organizations in 23 states to investigate policies that could better prepare working families for a more secure economic future.

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