Will the Latest Gainful Employment Court Battle Impact Your School?

If you’ve been following the news in higher education, you’ve likely been bombarded by conflicting headlines on either side of the gainful employment debate. The government, in the form of the Department of Education (DOE), has been challenged on its interpretation of an amendment to the Higher Education Act of 1965 commonly known as gainful employment. In the most recent head-to-head legal battle, the DOE’s position was upheld.

In spite of a well-mounted effort by the Association of Private Sector Colleges and Universities (APSCU) to overturn some of the provisions of gainful employment that went into effect last July, the rules have withstood yet another challenge. The U.S. Court of Appeals for the District of Columbia Circuit Court sided with the DOE last month. By affirming a lower court’s decision, the Court of Appeals virtually assured that the gainful employment regulations will remain intact for years to come, having a significant impact on institutions of higher education that rely heavily on Title IV funding for student tuition.

Under the DOE’s interpretation of gainful employment, students are eligible for federal loans only if a school’s “programs provide quality education and training to their students that lead to earnings that will allow students to pay back their student loan debts.”1 APSCU challenged the DOE’s interpretation of the amendment, saying the debt-to-earnings ratios that the DOE used to determine whether students would indeed be able to pay back their loans were “arbitrary and capricious” and that the reporting requirements represented an overstepping of the DOE’s statutory authority.

The DOE’s formula set up debt-to-earnings requirements for typical program graduates.

Debt-to-Earnings Grading2

Pass: Programs with graduates whose annual loan payments are less than 8 percent of their total earnings or less than 20 percent of their discretionary income.

Warning: Programs with graduates whose annual loan payments are between 8-12 percent of their total earnings or between 20-30 percent of their discretionary income.

Failing: Programs with graduates whose annual loan payments are greater than 12 percent of their total earnings or greater than 30 percent of their discretionary income.


If your school’s programs receive failing grades two out of three consecutive years or remain in the warning zone for four consecutive years, you will lose your eligibility for federal student aid for a minimum of three years.

Since career education schools can rely on financial aid for nearly 90 percent of their revenues,3 a failing grade can easily put them out of business. The giant for-profit Corinthian Colleges heard the death knell even before the final regulations went into effect; the once billion dollar corporation is now bankrupt and gone.

However, if your school and its programs consistently attract, enroll and graduate students who are able to enter the career for which they were trained and find “gainful employment,” you have little to worry about.

How to Conform to Gainful Employment

If you want your students to experience the positive outcomes the Federal Government is trying to achieve, it starts long before you have to report your debt-earnings ratios to the DOE. At Effective Student Marketing, we acknowledge that there some bad players in the for-profit higher education sector. Using aggressive recruitment strategies, some schools make untenable promises and admit students who are clearly not qualified for their programs. Those schools opt for quantity over quality in their pursuit of leads that might turn into enrollments and then admit students who are not a good fit to their school or its programs.

What’s your philosophy? Do you choose quantity over quality or do you care passionately about the success of your graduates and try to match student to program? If it’s the later, you’re one of the good guys. You believe in the future of the American workforce and you know that the training your programs provide is an invaluable cog in the economic wheel of the United States. We agree! The HigherEd Geeks at Effective Student Marketing would be proud to work with you to help you—and your students—succeed.

Our integrated marketing approach can find your future students where they live online. We can help you engage with them long before they begin to consider schools and stay with them throughout their decision-making process. Most importantly, we can help ensure that the students who enroll are a good fit to what you have to offer. And because they are, they’ll be more likely to stay, succeed, graduate, and go out into the world as proud representatives of all you have to offer. They’ll be happily and gainfully employed.

If you’d like to find future students who will be a shining reflection of all the good that your school does, contact us today and we’ll be your partner.

~Linda Emma