Before any discussion of the Obama Administration’s Gainful Employment rules, I must reiterate a point I make so often that it is almost a mantra: The Association of Proprietary Colleges welcomes greater regulation of schools with questionable graduation outcomes.  But we feel strongly that standards and regulations should be universally applied to all colleges and universities, regardless of their tax status.

The APC also firmly believes that universities and colleges who serve primarily minority and economically disadvantaged students shouldn’t be penalized for providing much needed educational services to this considerably riskier demographic when it comes to graduation and loan repayment outcomes. The Department of Education steadfastly claims that’s not the case with its proposed Gainful Employment rules, arguing there is no real relationship between students’ demographic and economic characteristics and the performance under the Department’s Gainful Employment metrics of the programs in which those students are enrolled.

As our experience made us highly doubtful of this claim, we commissioned the Parthenon Group, a highly respected consulting firm, to do a detailed analysis of the DOE’s analysis, using proprietary student data collected from Gainful Employment programs and publicly available statistics. Sure enough, Parthenon confirmed our suspicions about the DOE’s claims.

Here is the study’s key finding:

Student characteristics actually account for the majority of variation in program performance under the GE Rule, so the GE Rule as proposed by the DOE is effective at measuring the type of students enrolled in a program but it does not (emphasis mine) and cannot (emphasis mine) measure the success of the program in preparing its students for Gainful Employment.

Put more simply: The proposed Gainful Employment Rule is based on metrics that target minorities and economically disadvantaged students, but has no statistical relevance measuring gainful employment outcomes.  As the Parthenon Group found, “the proposed rule is tantamount to educational red-lining:  under the GE Rule, low-income students, minority students, and females will be denied access to the federal grants and loans that they need to pursue their education.”  ED reached a contrary result by inexplicably omitting various student characteristics from its analysis – characteristics that the Department’s own previous studies had firmly established were important factors in measuring students’ success.

Chris Ross, Partner at Parthenon Group and co-lead on this study had this to say about what they learned:

“We were surprised by the Department’s claims about Gainful Employment outcomes not being materially affected by student demographics. Their own research has shown strong correlations in the past with cohort default rates and other student outcomes like graduation. It would have been unusual for those same relationships between student risk factors and outcomes not to be present in the case of employment outcomes.  When we looked deeper into the data and methodology, it became clear that the Department was not using the best data nor a valid statistical approach to back up their claims.”

For-profit institutions enroll a dramatically higher percentage of non-traditional students. Accordingly, their graduation outcomes are adversely affected.  But public and not-for-profit colleges experience equal or worse outcomes when it comes to graduating students with the same socio-economic backgrounds.

That’s why applying questionable metrics only to for-profit colleges is inherently unfair and very poor public policy.   The rules should be grounded in factual and sound analysis and universally applied to all institutions.