Photographer: Christopher Furlong/Getty Images

Many For-Profit College Graduates Earn Less Than Minimum Wage

Taxpayers may not be getting good value for investing in for-profit colleges, the feds say.

About a third of recent for-profit college graduates attended career-training programs whose typical graduate annually earns less than the federal minimum wage, new federal data show.

Vocational programs, common at community colleges and for-profit schools, are meant to help graduates land well-paying jobs.

But of Americans who graduated from such programs at for-profits from 2008 to 2012, some 32 percent attended programs in which a typical graduate made less than $14,500—what a full-time worker making the federal minimum wage would earn—in 2014, even as they incurred student debt, federal officials said. Just 14 percent of those from public schools' vocational programs, by contrast, graduated from programs whose typical graduates made so little.

That data led officials to declare Thursday that public schools provide far better value for students and the taxpayers who subsidize their studies.

"Public institutions pay off," Education Undersecretary Ted Mitchell told reporters during a breakfast briefing. The new federal data, he said in a prepared statement, "will ensure students don’t make decisions based on too-good-to-be-true promises."

In a prepared statement, Steve Gunderson, who leads Career Education Colleges & Universities, the for-profit college trade group, called it "absolutely absurd to compare totally different fields of study and suggest that programs traditionally taught in public institutions have higher incomes than programs taught in proprietary colleges."

But the new federal data threaten to intensify pressure on for-profit colleges, whose enrollment and share prices dropped sharply during the Obama administration amid government investigations and lawsuits alleging fraud. Recent research has found that Americans who attended for-profit colleges were, on average, worse off for having enrolled—a finding the industry rejects.

The federal government has doled out more than $115 billion in loans and grants to students at for-profit schools over the past five academic years, U.S. Department of Education data show. Students at for-profit colleges default on their federal loans at higher rates than borrowers from nonprofit and public schools.

The average graduate of a career-training program at a public school makes nearly $9,000 more each year than the average graduate of a for-profit certificate program, according to Education Department data. And graduates of vocational programs at public schools make, on average, about $2,700 more each year than their counterparts at for-profit programs.

Federal officials have repeatedly stressed that more Americans need to earn college degrees and other post-secondary credentials if the U.S. is to  compete better in the global economy. But while for-profit programs have long been thought to play a critical role, new data on their graduates' loan-repayment rates and earnings are raising questions about the value taxpayers get for investing in such colleges.

The Obama administration has been trying to shed light on how college students fare in the workforce after taxpayers subsidize their studies.

Until last year, verifiable information on how much colleges' graduates earn wasn't available to prospective students, leaving them in the dark on which schools provided good value. But in September 2015, the administration launched its College Scorecard, an online database that shows how a typical graduate of each of the nation's roughly 7,000 colleges manages after using federal student aid to complete her studies.

The administration hopes that tool and the new earnings data released Thursday, covering roughly 1.3 million recent graduates of vocational programs at about 3,700 schools, will help prospective students more carefully decide where to spend their money.

"The message for students is: Go to programs that have good outcomes," said Education Secretary John B. King Jr. said Thursday.

The program-level earnings information is part of the Obama administration's 2015 gainful-employment regulation. That rule, which the White House spent years trying to finalize, threatens career schools' access to federal student aid if they saddle their graduates with too much debt relative to their earnings.

To do so, the Education Department matches income data from the Social Security Administration with its own records on federal student loans and school-provided data to determine whether taxpayers are receiving good value for subsidizing vocational programs.

The for-profit college industry has sued to overturn the gainful-employment rule. It's now hoping the incoming Donald Trump administration will join Republicans in Congress to roll it back.

Gunderson, the head of the for-profit trade group, said in his statement Thursday that without further details from the administration on what he called "faulty" data, his group could not answer questions about the value for-profit colleges deliver to students and taxpayers.

"This reflects the continuing ideological bias of this department against our sector and is yet another example of why Americans are tired of out-of-touch bureaucrats in Washington," he said.

(Corrects number of recent vocational graduates in 13th paragraph.)
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