Gainful Employment Take Two: Concerns for Rural Community Colleges

Federal Reserve Bank of Richmond

Stephanie Norris and Laura Dawson Ullrich
March 28, 2024
Last week, we wrote about the new gainful employment (GE) rules that go into effect this summer, along with the history and motivation of the GE policy. Beginning in July, higher education institutions across the country must begin submitting detailed data to the U.S. Department of Education (DOE) on all programs that are eligible for federal financial aid, namely the Pell Grant and federal student loans. All programs at for-profit institutions and non-degree programs at nonprofit institutions (including all community colleges) are subject to GE scrutiny, which includes an earnings premium (EP) test. Programs that do not pass this test could lose financial aid eligibility as early as 2026.
The motivations behind the policy are noble. The primary goal is to protect students and their families from enrolling in programs that do not result in expected wages after completing a postsecondary education. In addition, the federal government aims to protect taxpayer dollars that are used to fund these programs via federal financial aid. However, we believe that community colleges, especially those in rural areas, are likely to be disproportionately harmed by the EP test — likely an unintended consequence of the policy.