Trade Schools Sue Over Gainful Employment Rule

A trade organization for cosmetology schools is suing the Biden administration to block a new gainful employment rule from taking effect.

On Dec. 22, 2023, the American Association of Cosmetology Schools filed a lawsuit in the U.S. District Court for the Northern District of Texas, claiming the U.S. Department of Education’s (DOE) rule would jeopardize the existence of cosmetology schools.

The rule is designed to stop for-profit trade schools and postsecondary programs from saddling students with unaffordable amounts of student loan debt when those students show no gain in earnings compared to people with no education beyond high school. The rule is scheduled to take effect on July 1.

We’ve gathered a group of articles on the news from SHRM Online and other trusted sources.

Schools Could Lose Federal Aid

The lawsuit argued that the DOE’s rule uses flawed measures to determine whether graduates of career education programs are gainfully employed. The rule measures whether graduates earn more than the average high school graduate in their state, as well as enough money to repay their student loans. Students in programs that fail either of those tests twice in a three-year period could lose access to federal financial aid. Most cosmetology schools would fail under the new rule.

(Inside Higher Ed)

Federal Agency Authority

The American Association of Cosmetology Schools argued that the DOE rule is arbitrary and that the department overstepped its authority in adopting it. The organization also said the rule violates institutions’ and students’ First Amendment right to free speech, since it will selectively restrict colleges’ ability to operate.

(Higher Ed Dive)

Do Students Benefit from Training?

The DOE wants more accountability from higher education programs that participate in Title IV of the Higher Education Act of 1965. Under Title IV, federal programs provide financial assistance through aid such as Pell grants and direct loans to students.

The DOE noted that the regulation changes are a result of listening to a number of researchers over the last several years who have recommended an added layer of accountability through a high school earnings metric to ensure that students financially benefit from their training.

(SHRM Online)

Cost and Earning Estimates Will Be Public

The DOE’s rule will require institutions to provide comprehensive cost estimates for each program they offer, which will be made available in a public database alongside income estimates for graduates. Institutions reporting costs that outweigh earnings won’t immediately lose funding but may be at risk for discretionary funding loss if they are facing other challenges, as determined by the DOE.

Educational institutions should consider doing the following:

• Understand how the DOE will calculate graduates’ expected income for all programs and use this metric to identify those programs that will be met with the most skepticism.
• Understand where their alumni are working and these graduates’ earning potential relative to high school graduates.
• Identify ways to cut costs for students by exploring new models for delivery and instruction.
• Ensure that each educational program has learning outcomes that prepare graduates for gainful employment. If needed, improve their curriculum to help meet the needs for licensure or certification.
• Conduct a rigorous accounting of the value of the college experience at their institution beyond earned income.
• Articulate the value of the degree or certificate they offer to prospective students.

(Forvis)