Gainful employment no longer just means preparing students to find work after graduation. The U.S. Department of Education has redefined gainful employment to include adequate preparation for graduate employment and ensure sufficient earnings so that students can repay their debt. Colleges that do not meet these minimum standards for graduate employment and earnings may become ineligible for Title IV funds, also known as Federal student financial aid. Gainful employment regulations are aimed at for-profit institutions, including online colleges, because they are more expensive and students accrue more debt and more loan defaults overall. Although the gainful employment regulations are intended to help students find higher-paying jobs and lessen their debt, it has also been criticized for ignoring certain student demographics and many worry that it will hurt the job market more than help. Here are 5 ways gainful employment impacts online colleges:

• Loss of Federal Student Aid for Programs

  Most online colleges are for-profit institutions that depend almost entirely on Federal student aid funds. If federally-funded college programs don’t meet the Department’s minimum standards of preparing students for employment and making sure they earn sufficient salaries to repay their student loan debt. The loss of Federal student aid is bad for schools that want to maintain their programs, Federal funding and not have their reputations tarnished. However, students will still be eligible for aid and they can enroll in better, high-performing programs. In addition, taxpayers will no longer pay for programs that are not performing well. The new gainful employment regulations hold colleges accountable for their academic programs, while motivating institutions to better prepare students and help them lower their student loan debt.

• Loss of Programs

  Institutions that do not meet the Department’s gainful employment regulations may lose their eligibility for Federal student aid for certain programs. Colleges will have no other choice than to cancel the programs that aren’t performing well and students will have to switch majors or transfer to another institution. Considering the wide variety of degree programs offered at for-profit online colleges, there are certain programs that continually fall short of the rest. Culinary, cosmetology and other nonconventional training programs that aren’t preparing students for what Congress stated as “gainful employment in a recognized occupation.” The Department predicts that approximately 16 percent of programs will lose eligibility when the rules take effect.

• Strengthen the Online College System

  The proposed rules will help weed out college programs that aren�t preparing students for gainful employment and worsening student debt loads. The new gainful employment standards will help improve America’s higher education system, as well as strengthen distance education. Since most online colleges are for-profit institutions, they too will be monitored by graduation rate, employment rate, individual earnings, default rates and other factors that determine gainful employment. Gainful employment will help clean up online schools, by cutting the funding of programs that aren’t performing well, and holding schools accountable for their academics and employment preparation. The good news is that schools still have time to improve their programs, prepare students for higher-paying jobs, increase scholarships, reduce dropout rates and help students manage student loan debt before the proposed rules take effect.

• Make Online Colleges More Accountable

  When schools are held accountable for their actions, they are more likely to be mindful of their academic programs and how well they prepare graduates for work. In order to retain their Federal student aid and credibility, online and traditional colleges will have to follow the Department’s new rules for gainful employment. Like a checks and balances system, the Department will require institutions to publically disclose their information to determine if their programs fit the gainful employment rules, and require poorly performing programs to issue warnings, like debt-to-earnings measures, to current and prospective students. If a school ignores the importance of gainful employment, their programs will be in jeopardy and their enrollment may see a significant drop. By taking accountability for their programs and preparing students for recognized work within their field, online colleges can continue to grow as a reputable and affordable academic experience.

• Create Stricter Standards

  Higher education institutions will be measured by stricter standards because of the new gainful employment definition. The repayment rate and debt-to-earnings measurements determine whether a program is eligible for Federal financial aid. In order to for a program to be fully eligible, the repayment rate of Federal loans has to be at least 45 percent, or graduates have a debt-to-earnings ratio of less than 20 percent of discretionary income or less than 8 percent of total income. A program is ineligible when the repayment rate is less than 35 percent and graduates have a debt-to-earnings ratio above 30 percent of discretionary income and 12 percent of total income. Students who are currently enrolled in an ineligible program can receive financial aid for the current award year and one other award year, but new students are not eligible for Federal student aid. Programs that are on restricted status are not fully eligible or ineligible, but they are subject to limited enrollment growth, and the curriculum must be recognized by employers who have prospective job vacancies within that particular academic field. Programs can regain eligibility by working with former students to raise repayment rates or increase their average salary earnings, as well as lower the debt and increase the earning potential of current students. In other words, graduates’ salaries must be sufficient enough to repay their student loan debt.