Thursday, January 12, 2017

The Department of Education's "Heightened Cash Monitoring" list and its list of programs that failed DOE's Gainful Employment Rule: Big Trouble Ahead for American Higher Education

As the Obama administration limps to a close, the U.S. Department of Education issued two lists that should scare the heck out of anyone working in the field of higher education.

First, a few days ago, DOE issued its most recent list of colleges that it flagged for "Heightened Cash Monitoring." More than 500 colleges are on that list.

At about the same time, DOE also released its list  of post-secondary programs that failed DOE's "gainful employment" rule.  More than 800 programs are on that list.

DOE's Heightened Cash Monitoring List: 539 institutions

Let's look first a DOE's Heightened Cash Monitoring List. Most of the schools on this list are for-profit institutions, which shouldn't surprise anyone. Is anyone shocked to discover that Lubbock Hair Academy in Lubbock, Texas and the Institute for Therapeutic Massage in Haskell, New Jersey are on that list?

A lot of the colleges on DOE's Heightened Cash Monitoring List are nonprofit liberal arts schools, and that isn't surprising either. The small liberal arts colleges are finding it more and more difficult to attract students, and a number are on shaky financial ground.  Colleges on the list include secular institutions like Pine Manor College and Mount Ida College in Massachusetts and religious institutions like St. Gregory's University in Shawnee, Oklahoma and St. Mary of the Woods College in Indiana.

But I was surprised that DOE put 38 foreign colleges on its Heightened Cash Monitoring List. Who would have thought the federal government would issue student loans to Americans studying abroad? But it does, and some of those foreign schools have financial concerns that got them on DOE's Heightened Cash Monitoring List.

Here are just a few of the foreign schools that made the list: Medical University of Gdnask in Poland; Tyndale University College and Seminary in Toronto, Canada; and the University of Gloucestershire in Cheltenham, England.

But what surprised me most was the number of public institutions that were flagged by DOE for Heightened Cash Monitoring--84! In Minnesota, more than 30 public colleges and universities made the list, including regional universities like Bemidji State University and Minnesota State University in Mankato. Nine public institutions in Alabama are also on the list, including the University of North Alabama and the University of West Alabama.

In short, DOE's latest Heightened Cash Monitoring list shows us that a lot of for-profit colleges, non-flagship public colleges, and small liberal arts colleges are under financial strain. Not all of the 539 schools on that list will fail in coming years; but certainly some of them will.

More Than 800 Programs Failed DOE's Gainful -Employment Rule

The Department of Education adopted a Gainful-Employment Rule in 2014, which was designed to protect students from enrolling in expensive for-profit colleges that did not prepare them for good jobs. Under this rule, programs risk losing federal student aid money if their graduates do not make enough money on average to justify the expense of getting their education. Specifically, programs fail the Gainful-Employment Rule if their graduates have student-loan payments that exceed 12 percent of their total earnings or 30 percent of their discretionary income.

Over 800 higher-education programs failed DOE's gainful-employment test, which it released this week. As reported by the Chronicle of Higher Education, 98 percent of the failing programs were offered by for-profit institutions. But even the mighty Harvard University made the list for one of its programs--a certificate program in theater arts.

Here is what surprised me about the list of programs that failed the gainful-employment test: Only two law schools were on it. Florida Coastal School of Law and Charleston School of Law, both for-profit law schools failed to meet the debt-to-earning ratio that the Gainful Employment rules requires.

Given the damning evidence compiled by Law School Transparency, I was puzzled by the small number of law schools that failed DOE's gainful employment rules.  After all, LSAT scores for students at 7 law schools are so low that Law School Transparency estimates that 50 percent of their graduates are at "extreme risk" of failing their bar exams. And LSAT scores at 26 schools are so low that a quarter of their graduates run an extreme risk of failing their licensing exams.

Conclusion: Big Trouble Ahead For Higher Education

DOE's Heightened Cash Monitoring List and its list of programs that failed the Gainful-Employment Rule are warning signs that a number of higher education institutions are in trouble. For-profit institutions, non-prestigious public college, and small liberal arts schools are all surviving on federal student-aid money. If DOE turns off the spigot to any of the schools on these two lists, those schools will certainly close within a few months.

If higher education leaders are not concerned about the financial health of their industry, they certainly should be.

Gee, I'm scared!



References

Andrew Kreighbaum. Latest Heightened Cash Monitoring List. Inside Higher Ed, January 12, 2017.

Law School Transparency. 2015 State of Legal Education.

Karen Sloan. Two Law Schools Get an 'F' for High Debt From Education Dept. Law.com, January 11, 2017.

U.S. Department of Education press release. Obama Administration Announces Final Rules to Protect Students from Poor-Performing Career College Programs, October 30, 2014.

U.S. Department of Education press release. Education Department Releases Final Debt-to-Earnings Rates for Gainful Employment Programs. January 9, 2017.

Fernanda Zamudio-Suarez. Over 800 Programs Fail Education Dept.'s Gainful-Employment Rule. Chronicle of Higher Education, January 9, 2017.

Fernanda Fernanda Zamudio-Suarez. Here Are the Programs That Failed the Gainful-Employment RuleChronicle of Higher Education, January 9, 2017.





3 comments:

  1. Let's be clear that the reason that all 37 Minnesota State Colleges and Universities are on the list for heightened cash monitoring is not specifically financial strain but rather due to the fact that the Minnesota Department of Administration and the Budget Bureau did not submit Certified Financial Annual Audit Reports on time IN 2015 to the Department of Education. This leads to being added to the list for three years. Calling out Bemidji State and Minnesota State Mankato is a little unfair if only to do with the nefariousness of bureaucracy.

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    1. Thanks for sharing that information. That is very helpful and useful information.

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