4. Outcome Performance Measures
Another quality assurance approach is to require that qualifying programs achieve certain direct measures of performance. Each of the two House bills incorporate this outcomes approach. The Senate’s JOBS Act does not include direct performance indicators.
- Graduation and Placement Rates—Both House bills require 70% completion and 70% job placement rates.
- Earnings Requirements—Both House bills also require that programs demonstrate that their graduates earn more money after the program, though each establishes different measures of increased earnings.
- The Forthcoming Gainful Employment Rule—A new regulation established by the Department of Education called the Gainful Employment rule will likely be in effect by the time any Workforce Pell legislation is passed and implemented. Under that new rule, post high school nondegree programs and all for-profit institutions eligible for federal financial aid (including Pell Grants and student loans) would be required to meet two earnings requirements. First, programs must show that graduates’ payments on loans taken out for the program are no more than 8% of annual earnings or 20% of their earnings that are above 150% of federal poverty level. Second, at least half of a program’s graduates must have higher earnings than the median earnings of 25 – 34-year-old high school students in their state. The earnings requirements described below in both the PELL and the Jobs to Compete Act would be in addition to this new Gainful Employment rule.
- Increasing Earnings by More than the Program Costs—The PELL Act establishes a requirement designed to be sure that graduates’ earnings increase enough to justify what they paid to enroll in the program. Three years after finishing, students’ median earnings adjusted by region must exceed the 150% of federal poverty level for individuals and must do so by more than the program’s total published tuition and fees. The current 150% poverty threshold for individuals is $21,870. To illustrate, a program whose students earned a median income of over $31,870 per year three years after completing a program that cost $10,000 would be Pell eligible.
- Earning More than They Made Before—Instead of comparing increases in earnings to the cost of the program, the Jobs to Compete Act compares graduates’ earnings to what they made before the program. Within six months of finishing, a program’s students must show a median earnings increase of 20% compared to the median of what they were earning before. Additionally, within 18 months of finishing, completers’ median earnings must be more than the median earnings for 25–34-year-olds with only a high school diploma or the equivalent in the state in which the program is offered. Currently, the national median earnings for 25–34-year-olds with only a high school diploma working full time and year round is $39,700. To illustrate, a program would qualify whose students had a median income of $30,000 before entering, more than $36,000 six months after finishing, and more than $39,700 18 months after finishing (in a state whose 25-34-year old high school graduates mean income was equal to the national median).
Supporters of performance measures argue that they are the most direct and effective way to ensure the quality of eligible programs. They suggest that if the main aim of career development programs is to get students into higher paying jobs, then successfully achieving those outcomes should be the main factor determining eligibility for Pell Grants.
Some advocates argue that if a high percentage of students successfully complete a program and get placed in a job earning substantially more, it shouldn’t matter if the program was offered by a for-profit institution, exclusively online, or if it was able to meet extensive administrative criteria for quality. Conversely, they suggest, it matters little if the program was not offered by a for-profit, was offered in-person, or was able to check all the administrative boxes if it still isn’t effective at placing people in higher paying jobs.
While acknowledging that programs will have an increased burden to provide the relevant data with this requirement, some supporters argue that the outcome requirement approach is less burdensome than the administrative criteria approach. It will be easier, they suggest, to demonstrate compliance with a few outcome measures than to jump through many administrative hoops.
Supporters of the PELL Act’s specific outcome approach argue that the most relevant earnings requirement is that the increased pay is enough to justify what students pay for the program. They observe that this standard is especially important because skills education program costs can vary widely, from less than $5,000 to more than $15,000. Those who must pay more should be able to expect more in earnings, they suggest. These supporters also argue that this earnings requirement is especially effective at excluding for-profit programs that are not only considerably more expensive than community colleges but also don’t increase earnings by as much.
PELL Act supporters also argue that the 150% of federal poverty threshold is important because of federal policy regarding repayment of federally supported student loans. Below that level, students are not expected to repay their loans. The more students’ incomes exceed that level, the more they’re required to pay. PELL Act supporters argue that its appropriate to expect that programs supported by Pell Grants can increase their graduates’ earnings by enough that they can be appropriately expected to start paying back their student loans.
Supporters of the Jobs to Compete Act’s particular outcome approach argue that the most relevant earnings requirement is that there is a meaningful increase over what that person was making before. They suggest that this approach is especially warranted because students’ prior earnings can vary from less than $10,000 per year to more than $50,000 per year. They argue that if a student was only earning $10,000 per year before, and is earning $12,000 per year just six months after completing the program, that’s still a success even if they remain below the 150% of federal poverty threshold of $21,870.
Opponents generally fall into one of two opposite camps—that the proposed outcome requirements are (1) too high or (2) that they are too low. Those arguing that they are too high first observe that the new Gainful Employment Rule will provide sufficient assurance of success in placing students in higher paying jobs. Adding further outcome requirements is overkill, they argue, that will limit accessibility too much. In fact, some suggest the additional earnings requirements are counter-productive because they will create an incentive to discriminate. They suggest that programs are likely to conclude that the most disadvantaged students—including lower income, women, and people of color—will have the hardest time meeting the earnings requirements. The result may be that programs will admit few of those students because they believe these students will have difficulty meeting the earnings requirements.
Opponents who argue that the outcome requirements are too high also observe that program graduates will get the benefits of higher earnings over the remainder of their entire career, not to mention the benefits to their employers and society. For example, some suggest that three years is too short a period to expect a full return on the tuition and fees investment in the case of the PELL Act. In the case of the Jobs to Compete Act, they suggest that six months is too short a time to expect a 20% increase over what they were earning before entering the program. These opponents suggest that the Gainful Employment rule is more than sufficient. If additional earnings increases beyond that are required, they suggest, the amount by which earnings must increase should be lower, or that the time for achieving those gains should be longer, or both.
Opponents who believe that the earnings requirements are too high frequently point to recent research conducted by the Urban Institute which found that only 21% of workforce programs overall would meet the PELL Act’s outcome requirements. For-profit career development courses faired even more poorly than the overall figures, with only 8% meeting the earnings requirements. Workforce development programs offered by public institutions, mostly community colleges, fared better with 81% meeting the PELL Act’s earnings requirement.
Although the study did not examine the more recently introduced Jobs to Compete Act, many argue that even fewer would qualify under its earnings requirements. With the short six-month window by which graduates would need to show a 20% increase in their earnings, along with the requirement that within 18 months they earn more than median earnings for 25–34-year-old high school graduates, they contend that even fewer than 21% of programs would qualify.
Finally, those who argue that the proposed outcome requirements are too stringent also note that similar requirements are not made of college degrees eligible for Pell Grants. It’s unfair, they suggest, to require job placement and earnings increases of career development programs that many majors at many four-year colleges couldn’t meet though they are Pell eligible.
Other opponents argue that the proposed performance requirements are too low. If the educational program is geared specifically toward quickly placing people in higher paying jobs, they reason, then they should be able to demonstrate the ability to do that to be Pell eligible. They reason that the biggest earnings boost should come right after gaining the new skills and qualification. For example, some argue that programs should be able to demonstrate more than just barely meeting the PELL Act requirement that within three years earnings be more than 150% of the federal poverty level by the amount that the program costs in less than three years. Similarly, some argue that the Jobs to Compete Act’s requirement of a 20% increase in earnings six months after completing a program isn’t enough to justify paying $15,000 or $20,000 for a program. They argue that this is especially true if the graduates are only earning, for example, $4,000 more per year (if they were making $20,000 before the program and $24,000 within six months of completion, they would still meet the 20% increase requirement). Opponents to this earnings requirement also note that examples like the one above make it clear that the requirement is too low when one considers that the student may in fact be worse off financially because many would now be carrying close to $15,000 or $20,000 of student loan debt.
There are also those who support performance measures generally but oppose other specifics in the two proposed approaches. Some like the increasing-earnings-more-than-it-costs approach in the PELL Act but argue that the inclusion of the 150% of the federal poverty level (currently $21,870) is an inappropriate floor given that there is such variation in how much participants were making prior to the program.
Some critics of the earning-more-than-before approach in the Jobs to Compete Act argue that establishing the same percentage increase in earnings requirement regardless of how much the program costs doesn’t make sense. A person who completes a $20,000 CCL program should see a higher percentage increase in earnings than one who completes a $5,000 program, especially since they will likely have more in student loans to repay.
An alternative approach draws on strengths of each approach by considering the wide variation both in students’ prior earnings and in the costs of those programs. For example, a program could be required to demonstrate that within two years of graduating students’ median earnings had increased over their median earnings prior to enrolling by more than the program’s costs.