Proprietary Schools: Millions Spent to Train Students for Oversupplied
Occupations (Letter Report, 06/10/97, GAO/HEHS-97-104).
Pursuant to a congressional request, GAO determined the extent to which
Higher Education Act title IV funds finance proprietary school training
in fields with insufficient job demand, focusing on: (1) title IV money
spent to train proprietary school students for occupations with a
surplus of trained individuals; (2) ways government-sponsored training
programs use labor market information to target training funds toward
fields with promising employment outcomes; and (3) the merits of using
labor market information to target training funds.
GAO noted that: (1) the federal government spends millions of student
financial aid dollars to train students for occupations that already
have a surplus of workers; (2) for fiscal year 1995, $273 million in
title IV funds subsidized over 112,000 proprietary school students to
train in fields with projected labor supply surpluses in the 12 states
GAO reviewed; (3) in some cases, proprietary school students received
training in occupations with projected labor supply surpluses in several
states; (4) for example, 28,000 proprietary school students were trained
in electrical/electronic technology in seven states that each had a
labor supply surplus; (5) several major federal job training programs
restrict training to fields with favorable job demand projections; (6)
the Job Training Partnership Act Program, the largest federal employment
training program, specifies that participants may train only for
occupations of which sufficient job demand exists; (7) in addition, the
federal Carl D. Perkins Vocational Education Act requires that state
plans describe how training funds will be used for occupations with
available or projected job openings; (8) also, until recent welfare
legislation passed on responsibility to states under block grants, the
federal Job Opportunities and Basic Skills program had similar
requirements that compelled welfare agencies to work with private
industry councils to ensure that programs provided training for jobs
likely to become available in an area; (9) although government officials
did not support using labor market data to regulate title IV
participation, they and experts GAO interviewed advocated providing
prospective students of occupation-specific training programs access to
labor supply and demand projections; (10) in agreeing that such
information would help these students make more informed training
decisions, these interviewees also noted the need to supplement the data
with other labor market information, such as training-related placement
and wage rates of recent program graduates; (11) using labor market
projections provides a rational basis for making training investment
decisions, which was a noted advantage; and (12) as a disadvantage, the
interviewees cautioned that such data are inherently imprecise.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-97-104
TITLE: Proprietary Schools: Millions Spent to Train Students for
Oversupplied Occupations
DATE: 06/10/97
SUBJECT: Vocational education
Higher education
Proprietary schools
Student financial aid
Student loans
Direct loans
Educational grants
Noncompliance
Program abuses
IDENTIFIER: Federal Family Education Loan Program
William D. Ford Federal Direct Loan Program
Dept. of Education Stafford Student Loan Program
Dept. of Education Unsubsidized Stafford Loan Program
Dept. of Education Parent Loans for Undergraduate Students
Program
Pell Grant
Dept. of Education Perkins Student Loan Program
JTPA
Job Training Partnership Act Program
**************************************************************************
* This file contains an ASCII representation of the text of a GAO *
* report. Delineations within the text indicating chapter titles, *
* headings, and bullets are preserved. Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are *
* identified by double and single lines. The numbers on the right end *
* of these lines indicate the position of each of the subsections in the *
* document outline. These numbers do NOT correspond with the page *
* numbers of the printed product. *
* *
* No attempt has been made to display graphic images, although figure *
* captions are reproduced. Tables are included, but may not resemble *
* those in the printed version. *
* *
* A printed copy of this report may be obtained from the GAO Document *
* Distribution Facility by calling (202) 512-6000, by faxing your *
* request to (301) 258-4066, or by writing to P.O. Box 6015, *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time. *
**************************************************************************
Cover
================================================================ COVER
Report to the Chairman, Subcommittee on Human Resources, Committee on
Government Reform and Oversight, House of Representatives
June 1997
PROPRIETARY SCHOOLS - MILLIONS
SPENT TO TRAIN STUDENTS FOR
OVERSUPPLIED OCCUPATIONS
GAO/HEHS-97-104
Student Aid for Oversupplied Occupations
(104853)
Abbreviations
=============================================================== ABBREV
BLS - Bureau of Labor Statistics
HEA - Higher Education Act
IG - Inspector General
IPEDS - Integrated Postsecondary Education Data System
JOBS - Job Opportunities and Basic Skills
JTPA - Job Training Partnership Act
Letter
=============================================================== LETTER
B-272442
June 10, 1997
The Honorable Christopher Shays
Chairman, Subcommittee on Human Resources
Committee on Government Reform and Oversight
House of Representatives
Dear Mr. Chairman:
Under the Higher Education Act's (HEA) title IV programs,\1 the
federal government annually invests billions of student financial aid
dollars to help fund occupation-specific training at proprietary
schools. Administered by the Department of Education, title IV
programs help provide access for thousands of proprietary school
students to train for a diverse range of occupations, such as
automobile mechanics, electronic technicians, and nurses. About $3
billion in student aid, primarily subsidized loans, financed
occupational training for fiscal year 1995 at proprietary
schools--the principal vendors of occupational training under title
IV.
Proprietary school graduates face some unique challenges in the labor
market. Because most proprietary school skill training lacks a
general education component, it is not readily transferable to other
occupations. This produces proprietary school graduates who are less
versatile workers than graduates of degree-granting programs. In
addition, wages for positions suitable for proprietary school
graduates are usually too low to motivate these graduates to relocate
long distances to find work, making them more dependent on local
labor market conditions. These circumstances make proprietary school
graduates more susceptible to unemployment and less likely to meet
their student loan obligations than other postsecondary graduates.
A recent report by Education's Inspector General (IG) raised concern
about proprietary school students being trained for occupations with
a surplus of job seekers but a scarcity of jobs. The IG estimated
that taxpayers and students spent over a billion dollars for fiscal
year 1990 for cosmetology training, even though the national supply
of cosmetologists exceeded demand by over one million.\2 Some members
of the Congress believe that student loan default rates for
proprietary school students, more than twice that of students
attending other postsecondary schools, may stem in large part from a
mismatch between their training and the skills employers demand.
Because of concerns about a mismatch between title IV-funded
occupational training and skills demanded in the labor market, you
asked us to determine the extent to which title IV funds finance
proprietary school training in fields with insufficient job demand.
More specifically, we agreed with your office to provide information
on (1) title IV money spent to train proprietary school students for
occupations with a surplus of trained individuals, (2) ways
government-sponsored training programs use labor market information
to target training funds toward fields with promising employment
outcomes, and (3) the merits of using labor market information to
target training funds.
To address these issues, we analyzed labor supply and demand data for
12 states (see fig. 1). We selected these states mainly because
they accounted for about 63 percent of the title IV funds received by
proprietary schools in fiscal year 1995. We compared labor demand
projections for selected occupational categories, or clusters, with
the number of graduates from occupation-specific training programs.
On the basis of state labor department practices, we considered a
labor supply surplus to exist when at least two students completed
training for each projected job vacancy, a ratio of 2 to 1 or an
oversupply of 100 percent.
Our analysis is based on state-level labor market data. Although
local labor market conditions--which can cross city, county, and
state boundaries--
best indicate an individual's employment opportunities, these data
are not consistently maintained for all locales. Because the job
market for graduates of occupation-specific programs rarely extends
beyond state boundaries, national-level data are not appropriate for
this type of study. According to Bureau of Labor Statistics (BLS)
officials, state-level data provide a good approximation of
employment opportunities at local levels.
Although we have tried to be conservative in our analysis, our labor
market projections have some limitations. The labor demand data we
used are based on estimates of job openings prepared by states using
industry growth projections and staffing patterns. Unforeseen
changes in economic conditions at the local or national level can
cause actual and projected demand to differ. Our labor supply data
are entirely based on students who graduated from postsecondary
education school programs in fiscal year 1995. As such, we
understated the available labor supply by, among other things,
excluding avocational and adult basic education program graduates.
Figure 1: States Included in
Supply and Demand Analysis
(See figure in printed
edition.)
We also examined the role that labor market information plays to help
target program funds in three major government-sponsored job training
programs: the Job Training Partnership Act (JTPA) and the federal
vocational education and welfare-to-work job training programs. We
reviewed their program documentation such as laws, regulations, and
policies. In addition, we spoke with officials of these job training
programs in the 12 selected states on their use of labor market
information and reviewed related program policies and legislation.
Furthermore, we discussed the merits of using labor market
information to target training funds with federal and state job
training program administrators, recognized experts,\3 and officials
at the Departments of Education and Labor. Appendix I describes in
more detail our information sources and methodology.
--------------------
\1 Title IV established financial aid programs for students attending
institutions of higher education and vocational schools and includes
the Federal Family Educational Loan Program and the William D. Ford
Direct Loan Program. Both offer subsidized and unsubsidized Stafford
loans and Parent Loans for Undergraduate Students. Title IV also
established the Federal Pell Grant Program and the Federal Perkins
Loan Program.
\2 Management Improvement Report No. 93-03, U.S. Department of
Education IG, (Washington, D.C.: Mar. 12, 1993).
\3 Experts included specialists from labor market research centers at
three universities as well as knowledgeable staff from BLS and the
National Occupational Information Coordinating Council.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The federal government spends millions of student financial aid
dollars to train students for occupations that already have a surplus
of workers. For fiscal year 1995, $273 million in title IV funds
subsidized over 112,000 proprietary school students to train in
fields with projected labor supply surpluses in the 12 states we
reviewed. In some cases, proprietary school students received
training in occupations with projected labor supply surpluses in
several states. For example, 28,000 proprietary school students were
trained in electrical/electronic technology in seven states that each
had a labor supply surplus.
Several major federal job training programs restrict training to
fields with favorable job demand projections. JTPA, the largest
federal employment training program, specifies that participants may
train only for occupations for which sufficient job demand exists.
In addition, the federal Carl D. Perkins Vocational Education Act
requires that state plans describe how training funds will be used
for occupations with available or projected job openings. Also,
until recent welfare legislation passed on responsibility to states
under block grants, the federal Job Opportunities and Basic Skills
(JOBS) program had similar requirements that compelled welfare
agencies to work with private industry councils to ensure that
programs provided training for jobs likely to become available in an
area.
Although government officials did not support using labor market data
to regulate title IV participation, they and experts we interviewed
advocated providing prospective students of occupation-specific
training programs access to labor supply and demand projections. In
agreeing that such information would help these students make more
informed training decisions, these interviewees also noted the need
to supplement the data with other labor market information, such as
training-related placement and wage rates of recent program
graduates. Using labor market projections provides a rational basis
for making training investment decisions, which was a noted
advantage. As a disadvantage, the interviewees cautioned that such
data are inherently imprecise.
BACKGROUND
------------------------------------------------------------ Letter :2
Under title IV, the federal government provides grants and loans to
help students finance the cost of attending postsecondary schools.
The kind of schools eligible for title IV programs has changed over
time. Initially, only public and nonprofit schools were eligible
under the HEA of 1965. To expand access to students, the Congress
amended the HEA and made proprietary schools eligible for the
complete range of student aid by 1972.
Proprietary schools contribute to the nation's competitiveness by
providing occupational training to traditionally noncollege-bound
individuals. Most proprietary schools are small, enrolling fewer
than 100 students, and offer occupational training lasting 2 years or
less. They enroll a higher percentage of women, minorities, and
low-income students, serving a rather heterogeneous student
population compared with nonprofit institutions. About 67 percent of
proprietary school students receive title IV federal student aid.
Under title IV, the law treats proprietary schools differently from
other institutions. For example, a proprietary school's eligibility
is contingent on its training programs preparing students for gainful
employment in a recognized occupation. As early as 1971, members of
the Congress explicitly recognized a need for proprietary school
training to relate to labor market needs. Because employment
directly affects the ability to repay student loans, default rates
are an important gauge of the quality and usefulness of postsecondary
education training programs. Default rates of proprietary school
students have consistently exceeded rates for other postsecondary
school students. For fiscal year 1994, the default rate for
proprietary school students was 21.1 percent as compared with 13.7
and 6.5 percent for students of 2-year and 4-year nonprofit colleges,
respectively. For fiscal year 1992 (the most recent data available),
the federal government paid about $140 million to cover defaulted
student loans to proprietary school students.
The Congress added an additional requirement for proprietary schools'
eligibility to participate in title IV programs when it reauthorized
HEA in 1992. Known as the 85-15 rule, this rule requires proprietary
schools to obtain at least 15 percent of their revenues from sources
other than federal student aid programs. The rationale for this
provision is that schools providing a quality education should be
able to attract a reasonable percentage of their revenues from
sources other than title IV. Another requirement that affects
proprietary schools dictates that short-term programs--those less
than 600 hours long--must maintain completion and placement rates of
at least 70 percent for eligibility.
In addition to the Congress' recognizing the need to treat
proprietary schools differently from other postsecondary schools, the
administration proposed combining title IV grants for nondegree
programs with newly proposed skill grants in the 1996 budget. The
skill-grant proposal was intended to ensure that vocational students
get information about labor market outcomes relevant to their
proposed training field before actually enrolling. The
administration, though no longer recommending that title IV nondegree
training funds be combined with skill grants, recognizes that labor
market information is an integral part of a job training system and
supports creating a stronger labor market information system.
The philosophy underlying title IV contrasts starkly with that
underlying government-sponsored job training. Title IV programs are
based on individual choice and implicitly assume that students use
some information source to make good judgments. As a result,
financial aid recipients may choose any area of study--whether a
liberal arts degree or a certificate in air-conditioning repair--as
long as the institution meets Education's title IV eligibility
requirements such as licensure and accreditation. The extent to
which students make informed decisions largely depends on their
initiative and self-reliance. In contrast, in federal job training
programs, the law limits individuals' choices to occupations with
labor demand. For example, some job training programs limit training
to occupations for which local employers have guaranteed placement of
program graduates.
In recognizing the critical importance of information, the Congress
has acted to expand the information available to title IV students
making education and training decisions. The Student Right-to-Know
and Campus Security Act\4
requires that schools with certificate or undergraduate
degree-granting programs participating in title IV annually disclose
students' completion rates. Under implementing regulations, the
first results are due by January 1, 1998. The act does not require
schools to disclose information on graduates' employment outcomes,
however, such as training-related job placement rates or wages, or on
local labor market conditions.
--------------------
\4 P.L. 101-542, enacted Nov. 1990.
FINANCIAL AID RECIPIENTS TRAIN
FOR OCCUPATIONS OVERSUPPLIED IN
MULTIPLE STATES
------------------------------------------------------------ Letter :3
Millions of title IV program dollars went to proprietary schools for
students who trained in fields with a surplus labor supply. For 12
states, $273 million in title IV funds was spent to subsidize over
112,000 proprietary school students who trained for jobs with a
projected surplus labor supply in fiscal year 1995, according to our
estimate. Occupations that were oversupplied and for which
proprietary school students received student aid were diverse,
including legal assisting, respiratory therapy, appliance/equipment
repair, and drafting.
Although proprietary schools in all 12 states trained students for
oversupplied occupations, the amount of federal student aid spent and
the number of students trained in oversupplied fields varied (see
table 1). Title IV funds spent to finance training in oversupplied
fields ranged from a low of $3 million in South Carolina (about 22
percent of the title IV funds received by its proprietary school
students) to a high of $47 million in Arizona (about 21 percent of
the title IV funds received by its proprietary school students). The
number of students receiving such funds ranged from 1,000 in
Washington (about 6 percent of its proprietary school students) to
17,900 in California (about 12 percent of its proprietary school
students).
Table 1
Estimated Financial Aid Spent by
Students Training for Oversupplied
Occupations in 12 States, Fiscal Year
1995
Percentage Percentage
of of
proprietar proprietar
y school y school
aid students
directed training
to for
Federal oversuppli Number oversuppli
financial ed of ed
aid dollars occupation studen occupation
State (millions) s ts s
------------ ------------ ---------- ------ ----------
Arizona $47.2 2 1 13,900 27
California 36.1 9 17,900 12
Florida 31.7 2 3 10,700 23
Illinois 13.6 1 3 7,700 25
Indiana 33.2 3 8 16,400 50
New Jersey 16.8 1 8 5,000 17
New York 29.4 1 8 13,500 19
Oregon 6.9 3 1 2,400 37
Pennsylvania 26.7 1 5 11,700 20
South 3.0 2 2 1,800 28
Carolina
Texas 20.3 1 1 10,300 16
Washington 8.6 1 1 1,000 6
==========================================================
Total $273.3\a 1 6 112,30 20
0
----------------------------------------------------------
\a Numbers do not add to total due to rounding.
The surplus of qualified job candidates, including proprietary school
graduates, for some occupations occasionally reached dramatic
proportions in some states, exceeding demand by ratios of 10 to 1 or
more. Overall, 51 percent of the jobs we identified as oversupplied
had ratios of graduates to projected job openings at least as high as
4 to 1; the high was 42 to 1 for appliance/equipment repair in
California. States where the majority of oversupplied occupations
had ratios of graduates to projected job openings equaling or
exceeding 4 to 1 included
Arizona, with 11 of 15 occupations, whose high was a ratio of 34 to
1;
Indiana, with 5 of 6 occupations, whose high was a ratio of 12 to
1; and
New York, with 5 of 7 occupations, whose high was a ratio of 9 to
1.
In the 12 states, proprietary school students received training in
jobs classified under 23 occupational categories with a labor
surplus. Jobs classified in two occupational categories,
however--barbering/
cosmetology and electrical/electronic technology--accounted for about
two-thirds of the title IV funds ($172 million) and proprietary
school students (75,900) associated with oversupplied occupations.
Some occupations were oversupplied in several states. The barbering/
cosmetology category had a surplus labor supply in 10 of the 12
states--the highest of any category--involving about $86 million in
title IV funds and 48,100 proprietary school students.
Appliance/equipment repair ($6.8 million and 2,100 students) and
legal assisting ($18.7 million and 6,400 students) had a surplus
labor supply in eight states. In total, about $260 million--95
percent of the title IV dollars spent training students for
oversupplied occupations--went to occupations oversupplied in many
states.
Table 2
Financial Aid for Occupations
Oversupplied in Many States, Fiscal Year
1995
Estimated
Estimated students
financial aid receiving
Occupation States (millions) aid
---------------------- ------ -------------- ----------
Barbering/cosmetology 10 $85.8 48,100
Appliance/equipment 8 6.8 2,100
repair
Legal assisting 8 18.7 6,400
Electrical/electronic 7 86.6 27,800
technology
All other engineering 5 12.8 4,600
technology
Respiratory therapy 5 4.2 1,600
Miscellaneous health 5 16.7 6,200
services
Air-conditioning/ 3 9.9 3,400
heating installation/
repair
Optical technology 3 6.6 4,000
Electromechanical 2 1.4 300
equipment/
instrument/
production repair
Airplane piloting 2 2.5 300
Pharmacy support 2 5.4 2,000
Medical secretarial 2 2.9 1,500
==========================================================
Total $260.2\a 108,200\a
----------------------------------------------------------
\a Numbers do not add to total due to rounding.
Many of the proprietary school students who trained for oversupplied
occupations benefited in one way or another. First, because each of
the oversupplied fields has vacant positions, some proprietary school
graduates will get jobs in their chosen fields. In New York, for
example, jobs in the electrical/electronic technology field had five
qualified workers for each job vacancy--1,367 trained workers vying
for 280 openings. In this case, one of every five proprietary school
graduates who received training could conceivably get a job in the
field. Second, the education of proprietary school students may have
benefits that extend beyond the occupational field. Some employers
use credentials--a degree or certificate showing completion of a
field of study--to screen out less qualified job candidates. Such
credentials show these employers that prospective workers have
demonstrated critical skills that will make them effective members of
the labor force, such as coming to work on time, completing
assignments, and following a project from beginning to end. These
employers may well assume that people who complete training programs
are more talented than those who either failed to enroll in or
complete a postsecondary training program.
SOME GOVERNMENT-SPONSORED
TRAINING LIMITED TO OCCUPATIONS
WITH HIGH DEMAND
------------------------------------------------------------ Letter :4
Some major federal and state programs that support short-term
occupational training limit training to areas with a documented labor
demand. Each program requires training opportunities to be based on
an analysis of local labor markets and training plans based on
projected job demand. Furthermore, these programs interact with
local business community representatives to continually assess local
labor market conditions. Although each program serves different
populations, such as disadvantaged youth or dislocated adult workers,
the programs share a goal of helping clients develop training skills
to improve their employment prospects.
JTPA
---------------------------------------------------------- Letter :4.1
Enacted in 1982, title II of JTPA has been the cornerstone of federal
employment training programs. JTPA supports job training for
individuals facing barriers to employment and needing special
training to obtain productive employment. JTPA programs annually
provide employment training for specific occupations and services to
roughly one million economically disadvantaged individuals. Service
providers, such as vocational-technical high schools, community
colleges, proprietary schools, and community-based organizations
provide training in local service delivery areas. The program
objectives are to increase earnings and employment and to reduce
welfare dependence for participants of all ages. In fiscal year
1997, the Congress appropriated almost $2 billion to JTPA title II
programs.
JTPA funding is restricted to training participants for occupations
with demonstrated labor demand in areas where participants currently
reside or are willing to relocate. Although the program has various
implementation strategies, generally, labor market specialists from a
state's labor or workforce agency develop and provide labor demand
projections, usually at both local and statewide levels. Local
boards use this information in their annual plans to identify
occupations to target. Recognizing that local conditions change,
states often have provisions to allow local boards flexibility to
respond to unforeseen changes in job demands. Generally, training in
fields not identified in plans requires additional documentation of
specific local conditions such as results of local industry surveys.
VOCATIONAL EDUCATION
---------------------------------------------------------- Letter :4.2
Funding provided under the Carl D. Perkins Vocational Education Act
(P.L. 98-524) supports vocational education at both the secondary
and postsecondary levels. Vocational education prepares students for
employment through an organized sequence of courses directly related
to jobs that do not require a baccalaureate degree. The Department
of Education provides funding to states for distributing to school
districts and community and technical colleges. Although the act
requires schools to ensure that students who are disadvantaged or
have disabilities or limited-English proficiency have access to
vocational education programs, school districts receive the funds to
be used on vocational education in general. In fiscal year 1997, the
federal government provided about $1.1 billion to support Perkins Act
programs.
The federal vocational education law requires that state plans
describe how funds spent on occupation-specific training will be used
for occupations that labor market analysis shows have actual or
projected job vacancies.\5 Schools that receive federal vocational
education funds must spend them according to the state priorities
identified in the state plans. The legislative requirement is
helpful because the labor market analysis encourages states to
reflect changing labor market conditions in their plans, commented
one Education program official.
--------------------
\5 State plans, updated as often as annually, address several areas
concerning implementation of vocational education, such as how
program spending will reflect the state's training needs.
WELFARE-TO-WORK JOB TRAINING
PROGRAMS
---------------------------------------------------------- Letter :4.3
The federal welfare job training program--JOBS--was the primary
federal training program for welfare recipients until it was passed
on to the states.\6 The Family Support Act of 1988 created JOBS to
help parents receiving welfare obtain the education, job skills
training, work experience, and support services needed to increase
their employability and avoid long-term welfare dependency.
Administered by state welfare agencies, JOBS training appropriations
totaled $1 billion in fiscal year 1996.
The JOBS program required welfare agencies to work with private
industry councils and ensure that programs provided training for jobs
likely to become available in an area. It also required state
agencies to use private industry council services to identify and get
advice on the types of jobs available or likely to become available
in a service delivery area. State plans were to describe state
coordination efforts with private industry councils, and their
consultations with the councils were to ensure that JOBS training and
educational activities were directed toward jobs that were currently
or likely to become available.
--------------------
\6 Under the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, the JOBS program is generally repealed as
of July 1, 1997, with certain transition rules in effect.
EXPERTS ADVOCATE STUDENTS' USE
OF LABOR MARKET INFORMATION
------------------------------------------------------------ Letter :5
In discussing ways to better target occupation-specific training
under title IV, the experts we spoke with generally identified two
approaches: (1) restricting eligibility to programs with suitable
future labor demand and (2) ensuring that students consult sufficient
information sources on likely labor market needs before choosing
training programs. Regulating program eligibility on the basis of
labor market projections was rejected by our interviewees. Schools
that, despite low labor demand projections, manage to place high
proportions of their graduates in training-related fields should not
be penalized, they said. They also expressed a reluctance to
interfere with the free-market principles--such as allowing
individuals to specialize in the field of their choice--underlying
the title IV program. In contrast, with some stipulations, the
notion of providing prospective students better information on labor
market conditions was unanimously supported.
Better resource targeting could result from informing prospective
students of occupation-specific training of labor market conditions,
according to labor market experts. Enabling these students to review
labor demand projections provides them with a sound basis for
deciding on vocational training, these experts said. For example,
labor demand projections would allow such students to distinguish
between growing and declining occupations. Anecdotal information is
more likely to result in poor training decisions. Students could
also better determine the merit of investing their time and money by
having data on the employment experiences of recent program
graduates, according to these experts. For example, even though a
field may have good employment prospects, prevailing wages must also
appeal to job candidates. Training-related placement rates would
also inform prospective students about a training program's success
in competing for market share, the experts said.
Labor demand conditions, however, should not be the sole determinant
of which training field a student should pursue, according to these
experts. First, the prospective student's personal characteristics
play an important role. An individual's basic skills, aptitude, and
interests are prime considerations. Second, labor supply and demand
data are generally imprecise. For example, labor supply projections
typically exclude some categories of skilled workers and potential
out-of-state workers who may relocate. On the demand side, labor
projections, particularly for local areas, can be highly sensitive to
single economic incidents and therefore misleading when unforeseen
events in the economy curtail labor demand.
CONCLUSIONS
------------------------------------------------------------ Letter :6
The discretion afforded proprietary school students under title IV
makes consumer information critically important. In passing the
Student Right-to-Know Act, the Congress recognized the need to
improve the quality of student-consumer information. The act stops
short, however, of requiring schools to report employment outcomes of
recent graduates such as training-related job placements. In
addition, no mechanism currently exists to ensure that students get
important information on local labor market conditions. The result
is a system that embraces individual choice without ensuring that
students have the information needed to make sound training
investment decisions. Not surprisingly, this has possibly
contributed to student financial aid being directed to skill training
not demanded by the workplace--more than a quarter of a billion
dollars for 12 states in fiscal year 1995 alone. Having information
on recent graduates' success in the job market and the likely future
demand for skill training should help prospective students make more
informed training investment choices.
RECOMMENDATION TO THE CONGRESS
------------------------------------------------------------ Letter :7
We recommend that the Congress expand the Student Right-to-Know Act
to require proprietary schools to report recent graduates'
training-related job placement rates. The act currently requires all
title IV-eligible schools to report student completion rates but not
graduates' employment experiences. Such information would help
prospective students understand the usefulness of recent graduates'
occupational training programs.
RECOMMENDATION TO THE SECRETARY
OF EDUCATION
------------------------------------------------------------ Letter :8
We recommend that the Secretary identify and take appropriate action
to ensure that prospective proprietary school students have access to
employment and earnings projections relevant to their chosen training
field and local area.
AGENCY COMMENTS
------------------------------------------------------------ Letter :9
In commenting on a draft of this report, Education stated that our
recommendation to require proprietary schools to report placement
rate data is consistent with the administration's stated desire to
ensure that schools provide students useful information about
educational programs for making informed training decisions. The
Department concurred with our suggestion that information on student
outcomes will help ensure that market forces work better to eliminate
inadequate schools and programs from title IV participation.
Education promised to seriously consider our recommendation on
enhancing the reporting requirements of the Student Right-to-Know Act
to include placement rates as part of its HEA reauthorization
proposal.
Education questioned one specific result, noting that the 1996-97
Occupational Outlook Handbook lists occupational therapy assistants
and aides as the fourth fastest-growing occupation in the nation,
though we found it to be the most oversupplied occupation in Arizona.
The Occupational Outlook Handbook provides national demand
projections which, as stated earlier, may not reflect conditions of
individual labor markets. In this case, the supply of qualified
Arizona graduates far exceeds the projected job openings. Given that
proprietary school graduates are less likely to relocate for work,
such results underscore the importance of information on local labor
market conditions. (A copy of Education's comments appears in app.
III.)
Education did not comment on our recommendation that it identify ways
to ensure that students have access to employment and earnings data.
---------------------------------------------------------- Letter :9.1
As arranged with your office, unless you announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter. At that time, we will send copies to
the Secretary of Education. We will make copies available to others
on request.
If you have any questions about this report, please call Cornelia M.
Blanchette, Associate Director, Education and Employment Issues, at
(202) 512-7014. This report was prepared under the direction of
Wayne B. Upshaw, Assistant Director. Other major contributors to
this report are listed in appendix IV.
Sincerely yours,
Richard L. Hembra
Assistant Comptroller General
DATA SOURCES AND METHODOLOGY
=========================================================== Appendix I
We used a variety of data sources to estimate the extent to which
title IV funds support students training for occupations with
insufficient job demand. We used 12 states' job opening projections
as our measure of job demand.\7 On the supply side, we estimated the
supply of proprietary school and other postsecondary graduates from
those states using the Integrated Postsecondary Education Data System
(IPEDS) of the National Center for Education Statistics. The
corresponding financial aid information came directly from the
Department of Education's student loan and Pell grant records. The
state and federal data were self-reported and unverified. We
compared the number of postsecondary graduates preparing for an
occupation with the projected job openings to estimate which
occupations would have surplus labor supply, a method that experts
confirmed as the most suitable approach to predict labor market
conditions, given the data available. We performed our work between
April 1996 and March 1997 in accordance with generally accepted
government auditing standards.
--------------------
\7 Together, these states represented 63 percent of the title IV
funds provided to proprietary schools in fiscal year 1995.
DATA SOURCES
--------------------------------------------------------- Appendix I:1
STATE JOB OPENINGS
PROJECTIONS
------------------------------------------------------- Appendix I:1.1
For labor demand estimates, we used job openings projections provided
by the 12 states for 1995. Job openings result when industrial
expansion creates new positions (growth) and when current employees
vacate positions because of death, retirement, or separation
(replacement). States forecast industry growth using current and
past BLS industry survey results. Then, using knowledge of
industries' staffing patterns, states convert industry growth
projections into growth in occupations. BLS estimates occupational
replacement needs from the Current Population Survey for its
Occupational Projections and Training Data report and provides this
information to states. States calculate total job openings by adding
those created by industry growth and those due to replacement needs.
As projections, the job openings data we used are sensitive to
unforeseeable fluctuations in the local and national economy and
within industries.
IPEDS GRADUATES DATA
------------------------------------------------------- Appendix I:1.2
We based our estimates for labor supply on IPEDS 1994-95 data on
postsecondary school graduates. IPEDS identifies schools by type of
degree (baccalaureate or higher degree-granting institutions, 2-year
award institutions, and less-than-2-year institutions) and by control
(public, private nonprofit, and proprietary). Institution-level
data--on academic, vocational, and continuing professional education
programs--are collected on almost all postsecondary institutions
eligible for federal student financial aid funding. IPEDS, however,
provides only a partial accounting of trained entrants to the
workforce.
IPEDS understates the available supply of students trained for
occupations. It excludes information on avocational and adult basic
education program graduates. IPEDS also excludes some who complete
occupational training, including graduates of high school vocational
education programs, vocational rehabilitation programs, JTPA
training, Job Corps programs, and recently discharged military
personnel. In using IPEDS to estimate the supply of qualified
individuals in an occupation, we underestimate the labor supply and
thus the supply and demand ratios we report.
LINKING FINANCIAL AID TO
OVERSUPPLIED OCCUPATIONS
--------------------------------------------------------- Appendix I:2
SPECIFYING THE LABOR MARKET
FOR PROPRIETARY SCHOOL
GRADUATES
------------------------------------------------------- Appendix I:2.1
We chose the state level as the unit of analysis for assessing supply
and demand outlooks. Proprietary school students generally are not
as likely as students at 4-year colleges and universities to relocate
for employment, labor market experts told us. In reality, the
relevant labor market could be either larger or smaller than a state
depending on the area and the occupation. Analyzing the labor supply
and demand outlook for particular occupations at the national level
has many drawbacks. One problem occurs when national averages are
assumed to apply at the state level. For example, an auto mechanics
shortage in California combined with an auto mechanics surplus in New
Jersey could appear to be a balanced supply and demand. Such a
conclusion would only be correct if auto mechanics from New Jersey
would be willing and able to relocate to California. This is
unlikely to occur for most occupations taught at proprietary schools,
according to current research. Therefore, examining too large an
area would lead to identifying neither the labor shortage in
California nor the labor surplus in New Jersey. Although experts
believe an area smaller than a state may be more relevant in some
locations, we used the state as the analytical unit in all cases.
IDENTIFYING OVERSUPPLIED
OCCUPATIONS
------------------------------------------------------- Appendix I:2.2
We compared the supply of new graduates with the projected demand for
new employees in an occupation to identify oversupplied occupations.
We used the Units of Analysis matrix, developed by the National
Occupational Information Coordinating Committee, to determine which
instructional programs were linked to occupations for which we had
obtained job opening projections. The matrix identifies over 200
occupational clusters, or groups, of one or more occupations with
similar duties and training requirements. The matrix also links the
roughly 1,000 instructional programs identified in the IPEDS
graduates data to an occupational cluster. We used IPEDS information
on program graduates to identify the clusters taught at proprietary
schools. We excluded 10 occupational clusters ranging from
psychology to legal services because more than half their graduates
received baccalaureate or advanced degrees. By comparing projected
job openings with new graduates trained for jobs in clusters, we
identified occupations with surplus labor supply. For this report,
we defined surplus labor supply as two or more graduates for each
projected job opening in an occupation.
After discussions with an expert on the Units of Analysis matrix, we
limited our analysis to those occupations with the strongest
relationship between training and the occupation. The matrix
classifies occupational clusters into three categories, depending on
the directness of the link between training and occupational
employment. "A" cluster occupations--which we analyzed--have
specific training programs that lead directly to employment in an
occupation. For these occupations, an individual would be unlikely
to enter the occupation without having received the "A" cluster
training. Such training would also be unlikely to prepare someone
for employment in a different occupation. For "B" and "C" clusters,
the link between training and employment is less direct. Either the
skills mastered are more transferable or the occupation draws new
employees from a wide variety of sources--or both in the case of "C"
cluster occupations.
LINKING FINANCIAL AID
INFORMATION TO OCCUPATIONS
------------------------------------------------------- Appendix I:2.3
We used IPEDS information on institutional characteristics to
associate students with training programs. For schools offering more
than one occupational program, we assumed that the amount of aid
being used for each occupation was proportional to the percentage of
its graduates in that program. For example, if 20 percent of the
graduates of a proprietary school studied air-conditioning repair and
100 students spent $100,000 in student aid at the school, we assumed
that $20,000 in aid came from the 20 air-conditioning repair
students. Our estimates of federal financial aid dollars and student
financial aid recipients associated with oversupplied occupations are
sensitive to this assumption because more than 78 percent of the
financial aid going to train students in oversupplied occupations
went to schools with multiple occupational training programs.
DETAILED STATE-LEVEL RESULTS:
ANALYSIS OF FINANCIAL AID TO
OVERSUPPLIED OCCUPATIONS
========================================================== Appendix II
This appendix presents detailed results of our analysis of fiscal
year 1995 financial aid\8 to oversupplied occupations in 12 states.
(See tables II.1 to II.12.) We calculated the supply and demand ratio
using data from the Integrated Postsecondary Education Data System on
program graduates from the Department of Education and job opening
projections provided by each state. We estimated title IV aid and
the number of student aid recipients by associating Education's
student aid data with proprietary schools by program (numbers may not
add to totals due to rounding).
Table II.1
Supply and Demand Analysis for Arizona
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Occupational 34:1 $0.6 420
therapy
assisting
Musical 29:1 0.1 40
instrument
repair
Optical 11:1 0.6 295
technology
Respiratory 7:1 1.1 664
therapy
Miscellaneous 6:1 1.0 442
health services
Air- 6:1 5.8 1,925
conditioning/
heating
installation/
repair
All other 5:1 0.5 88
engineering
technology
Barbering/ 5:1 2.7 1,308
cosmetology
Electromechanica 5:1 0.7 192
l equipment/
instrument
production/
repair
Drafting 4:1 6.9 1,855
Surgical 4:1 0.6 224
technology
Legal assisting 3:1 2.1 610
Radiologic 3:1 0.8 348
technology
Electrical/ 3:1 22.1 4,518
electronic
technology
Medical 3:1 1.6 936
secretarial
==========================================================
Total 4:1 $47.2 13,864
----------------------------------------------------------
Table II.2
Supply and Demand Analysis for
California
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Appliance/ 42:1 $1.1 310
equipment
repair
Barbering/ 7:1 11.6 7,662
cosmetology
Optical 5:1 5.1 3,158
technology
Legal assisting 4:1 4.7 1,477
Miscellaneous 3:1 8.9 3,615
health services
Pharmacy support 2:1 4.7 1,682
==========================================================
Total 5:1 $36.1 17,904
----------------------------------------------------------
Table II.3
Supply and Demand Analysis for Florida
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Airplane 8:1 $2.3 222
piloting
Legal assisting 4:1 4.6 1,535
Respiratory 3:1 2.3 686
therapy
Electrical/ 3:1 15.9 3,829
electronic
technology
Barbering/ 2:1 6.6 4,464
cosmetology
==========================================================
Total 3:1 $31.7 10,736
----------------------------------------------------------
Table II.4
Supply and Demand Analysis for Illinois
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Appliance/ 11:1 $0.4 205
equipment
repair
Barbering/ 3:1 11.7 6,942
cosmetology
Air- 3:1 1.5 584
conditioning/
heating
installation/
repair
==========================================================
Total 3:1 $13.6 7,731
----------------------------------------------------------
Table II.5
Supply and Demand Analysis for Indiana
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Electrical/ 12:1 $18.1 10,016
electronic
technology
All other 11:1 9.5 3,870
engineering
technology
Appliance/ 6:1 1.4 401
equipment
repair
Legal assisting 5:1 0.4 130
Barbering/ 4:1 3.6 1,944
cosmetology
Miscellaneous 3:1 0.1 33
health services
==========================================================
Total 6:1 $33.2 16,395
----------------------------------------------------------
Table II.6
Supply and Demand Analysis for New
Jersey
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Appliance/ 6:1 $1.1 375
equipment
repair
Electrical/ 4:1 15.0 4,274
electronic
technology
Legal assisting 2:1 0.6 317
==========================================================
Total 4:1 $16.8 4,966
----------------------------------------------------------
Table II.7
Supply and Demand Analysis for New York
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Appliance/ 9:1 $1.0 349
equipment
repair
Miscellaneous 5:1 4.9 1,400
health services
Optical 5:1 0.9 535
technology
All other 5:1 0.1 94
engineering
technology
Electrical/ 5:1 7.5 4,235
electronic
technology
Barbering/ 3:1 14.7 6,784
cosmetology
Respiratory 2:1 0.3 106
therapy
==========================================================
Total 4:1 $29.4 13,502
----------------------------------------------------------
Table II.8
Supply and Demand Analysis for Oregon
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Barbering/ 7:1 $3.7 1,337
cosmetology
Legal assisting 4:1 0.4 116
Medical 4:1 1.3 530
secretarial
Pharmacy support 3:1 0.7 277
Electromechanica 2:1 0.7 133
l equipment/
instrument
production/
repair
Respiratory 2:1 0.1 44
therapy
==========================================================
Total 4:1 $6.9 2,437
----------------------------------------------------------
Table II.9
Supply and Demand Analysis for
Pennsylvania
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Appliance/ 31:1 $0.4 142
equipment
repair
Carpentry 11:1 0.3 56
All other 10:1 0.2 50
engineering
technology
Legal assisting 6:1 3.1 1,167
Barbering/ 6:1 14.1 7,383
cosmetology
Miscellaneous 5:1 1.9 667
health services
Air- 3:1 2.7 917
conditioning/
heating
installation/
repair
Computer/ 3:1 2.2 684
business
machine
production/
repair
Legal 3:1 1.0 350
secretarial
Stenography 2:1 0.4 132
Respiratory 2:1 0.3 115
therapy
==========================================================
Total 4:1 $26.7 11,663
----------------------------------------------------------
Table II.10
Supply and Demand Analysis for South
Carolina
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Barbering/ 7:1 $2.3 1,591
cosmetology
Aircraft 6:1 0.1 27
mechanics
Airplane 4:1 0.1 28
piloting
Electrical/ 3:1 0.4 137
electronic
technology
==========================================================
Total 5:1 $3.0 1,783
----------------------------------------------------------
Table II.11
Supply and Demand Analysis for Texas
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Barbering/ 4:1 $14.8 8,695
cosmetology
Legal assisting 3:1 2.7 1,067
Appliance/ 3:1 0.3 106
equipment
repair
All other 2:1 2.5 471
engineering
technology
==========================================================
Total 3:1 $20.3 10,339
----------------------------------------------------------
Table II.12
Supply and Demand Analysis for
Washington
Title IV aid
to Number of
Supply/ occupation student aid
Occupation demand ratio (millions) recipients
---------------- ------------ ------------ ------------
Appliance/ 14:1 $1.0 259
equipment
repair
Electrical/ 2:1 7.6 742
electronic
technology
==========================================================
Total 3:1 $8.6 1,001
----------------------------------------------------------
(See figure in printed edition.)Appendix III
--------------------
\8 Financial aid includes grants and loans disbursed through the
Federal Pell Grant Program, the Federal Family Educational Loan
Program, and the William D. Ford Direct Loan Program.
COMMENTS FROM THE DEPARTMENT OF
EDUCATION
========================================================== Appendix II
GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================== Appendix IV
GAO CONTACTS
Wayne B. Upshaw, Assistant Director, (202) 512-7006
Carol L. Patey, Evaluator-in-Charge, (617) 565-7575
ACKNOWLEDGMENTS
In addition to those named above, the following individuals made
important contributions to this report: Gene G. Kuehneman, Jr., and
Arthur T. Merriam, Jr., assisted in collecting and analyzing the
data and writing the report; Edward H. Tuchman performed analysis of
financial aid data; and Linda W. Choy and Wayne M. Dow assisted
with and reviewed database analysis.
*** End of document. ***