Top Chef All Star Gets For-Profit College Issue Wrong
Tiffany Derry, of Top Chef All-Stars, has written an opinion piece for The Hill this week publicly fighting the “gainful employment” regulation proposed by the Department of Education. Derry says this proposed rule is bad because, “The proposed regulation is going to hurt students who need help the most: students who are considered at-risk, minority and low-income or older students who may be raising a family by themselves.”
Her op-ed was accompanied by lobby visits to Rep. Edolphus Towns (D-N.Y.) and other members of the Congressional Black Caucus this week about the regulation.
The proposed regulation will look at default rates and debt-to-earnings ratios, but her conclusion that the regulation would “limit federal aid to students” is flat-out wrong. Under this regulation, it isn’t the student who won’t get funding; it is specific programs at schools that risk getting their funding pulled because too many of their students end up with overwhelming debt. Students are welcome to get financial aid for programs that provide better educational value.
Here’s what the rule actually says: Programs will be at risk if less than 35 percent of students start paying down the principle on their loans after graduation and students’ debt ratio is either greater than 8 percent of their total income or greater than 20 percent of discretionary income.
So would Derry’s alma mater be at risk if gainful employment were enacted? Well, it’s really hard to predict what would take place in the future, but let’s look some of the school’s current data and how it measures up against the proposed rule.
The Art Institute of Houston’s 2008 graduates had an average three-year default rate of 22 percent—a bit less than the average for-profit three-year default rates, which is about 25 percent. That means one in five students stop paying back their student loans within three years. To put that in perspective, public colleges have average default rates of about 10.8 percent, and private schools average about 7.6 percent. The Art Institute of Houston’s default rates are more than double non-profit public schools and three times that of non-profit private schools.
But the important number is that repayment rate. According to the Department of Education, the Art Institute of Houston’s federal loan repayment rate is 37 percent—not enough to instantly disqualify it from receiving federal student aid, but low enough to put the school in the “restricted” category if its debt-to-income ratio is also bad.
Let’s take a look at that data. The Art Institute of Houston estimates its tuition and fees rate is $46,820, and Department of Education data shows students have a median debt load of $13,973, data that include those who don’t complete the program. Many don’t, since the school’s graduation rate is just 33 percent. According to a typical student loan repayment calculator, this works out to a student paying about $6,986 per year, or $160 per month. The Department would likely look at the weighted average salary of someone working in culinary arts in America, which works out to $27,648, or $2,304 per month. So that means the average student’s debt-to-income ratio is just less than 7 percent.
Since the cutoff is 8 percent, the culinary arts program at the Art Institute of Houston would likely still be fully eligible for student aid. The Art Institute of Houston did not respond to a request for comment placed on Tuesday.
The claim Derry makes that other minority students like her wouldn’t be able to access student aid at her school for a culinary arts program under the gainful employment rule is false. Derry, and other who oppose the gainful employment regulation, exaggerate the impact on for-profit schools. In fact, a report last year from the independent think tank Education Sector found that only a very small number of programs would be affected by the rules as proposed.
Schools have to be performing really badly on both default rates and debt-to-income ratio rates to risk having their funding pulled, even with astonishingly high default rates and troublingly low graduation rates. Organizations like The Institute for College Access and Success and the advocacy arm of Campus Progress urged [PDF] Secretary of Education Arne Duncan to make the proposed gainful employment regulation stronger.
Furthermore, Derry fails to disclose in her opinion piece for The Hill what her Bravo TV bio makes clear: Derry has worked as an instructor for the Art Institute of Dallas.
Derry even appeared on Fox Business Channel this week (without disclosing she has served as an instructor for the company), insisting that students like her would not be able to go to the Art Institute of Houston and enter into the program they wanted to. “If you’re telling me that I cannot go to the school I want to go to, and I cannot get the career I want to because I’m not going to be making enough money when I graduate so now it’s almost like they’re forcing you to do something else that your passion is not in,” she said.
She went on to insist that students take “personal responsibility” and be made “more aware” of the debt they’re taking on. This would be good advice, but the Art Institute of Houston’s own website offers conflicting information about how much debt a student is looking at taking on, claiming on one page a culinary arts associate degree will take 108 credit hours and on another saying it will take 90. Even multiplying those 90 credit hours by the credit hour rate ($488) and adding the school’s listed fees total more than the page says is the program’s “Total Tuition & Fees.”
Additionally, for-profit schools have been found to use deceptive recruiting tactics and fraudulent student loan forms. For-profit schools have already been pushed by the Department of Education to be more honest about their costs in a previous round of regulations they implemented. Since it’s virtually impossible to discharge student loan debt in bankruptcy, it seems that this rule is providing a valuable public service by protecting students from bad programs.
What Derry misses is that these regulations are designed to protect students from taking on too much debt, not to mention that high default rates on guaranteed student loans cost taxpayers a lot of money. Programs that don’t have good repayment rates are actually a disservice to poor and minority students. By protecting students from bad programs, and encouraging the for-profit education industry to make their programs better value for the money, you’re helping students, not hurting them.
Kay Steiger is the editor of CampusProgress.org.