People often talk about the value of a college education, and how getting one leads inevitably to gainful employment and higher earnings. We have discussed this before, charting how different programs lead to different employment outcomes. This is valuable for students, especially as the cost of college continues to increase.
The federal government is concerned about this as well; they don’t want students taking out onerous loans for no reason, especially when they are the guarantor of those loans. Their program to ensure this is the concise and easy to remember Financial Value Transparency and Gainful Employment act. In this article, we’ll discuss the purpose of this act, how it works, and how it can help you. Let’s get started!
What is the Financial Value Transparency and Gainful Employment Act?
The act itself is the latest update of an old piece of legislation, the Higher Education Act. This is the act which established most of the modern federal funding for education, including loans, unsubsidized loans, Pell Grants, and other significant sources of money for students. Generally, if you can receive federal funding by filling out the FAFSA, it is because of this act.
Unfortunately, some institutions sought to take advantage of both students and the federal government. For-profit colleges provided a substandard level of education, charged high fees, and encouraged students to take out high loans. The level of education provided by these schools was often poor, leaving graduates unable to get the kind of jobs other college graduates were qualified for, and thereby unable to pay back their government loans.
In order to combat this, various amendments to the original act have been introduced. As the act has changed over the years, the impact of for-profit schools has waxed and waned, with each administration prioritizing their actions differently. The latest update came in 2023, and entered full effect on July 1, 2024. This is the act mentioned above, generally abbreviated FVTGE.
The purpose of this is to increase financial transparency from colleges for students; all colleges which received any federal funding are required to have net price calculators on their websites, and to make clear how much they charge, and what the overall cost to students will be up front.
Further, the act seeks to limit abuses by for-profit colleges, and make sure that students receive an education which allows them to become gainfully employed. This applies to both vocational schools and more traditional colleges.
Finally, there have been plans to use the act to serve debt relief programs, when certain schools are identified which took advantage of students by not providing full transparency or which misrepresented the value of their programs. There have been significant federal loan forgiveness programs for students who attended these for-profit institutions.
How Does This Impact Me?
While some of the data compiled by these reports is publicly available, much of it is in fairly dense formatting. That is because this information is meant primarily for government use, to make sure any college receiving federal funds (directly or through loans) is following all of the required regulations associated with these.
This legislation does impact you in several ways, a few of which are visible to and directly accessible by you. We’ll go through each of these in turn, and explain how to make use of them.
Net Price Calculator
A net price calculator is something all colleges receiving federal funding must have on their sites. The form and function of these can vary; for example, compare Harvard’s calculator to Stanford’s. The intent of them is universal though; to give you an approximation of how much you will need to pay to attend a particular college based on your financial situation.
They work by having you enter details of your financial situation, and running these through the aid policies of a college. This should tell you how much a college costs overall, how much aid you can expect to get, and how much in total you will be expected to pay. Note that these are not absolute, but only serve as estimates. Your actual aid award from a given college can be different from what a calculator suggests.
You should use the Net Price Calculator provided by every college you add to your college list, especially if the cost of college is a major concern for you. If a college does not provide any kind of price calculator on their site, that is a significant red flag; the education department provides schools with a template to work from, so they have no excuse to avoid having one unless they have something to hide.
College Scorecard
While the data from colleges is not collected in any easily viewable way on the FVTGE site, the government does present all of this data in a more accessible form for students through the College Scorecard. To see how this works, let’s look at the entry for Harvard.
The scorecard presents you with the school’s graduation rate, its average cost of attendance, and career and income data for graduates. Note that this data only comes from students who receive federal assistance, either grants or loans, but this provides a good picture of the value a school provides, and the cost associated with that value.
To compare, let’s look at DeVry University in Illinois, a for-profit school. Their graduation rate is lower, their costs are higher, and the average earnings of graduates is only marginally higher than the average for high school graduates. You do not need to look up the college scorecard for every school, but if you are suspicious of a college’s quality, this is a great external source to verify if it is worth your time and money.
Student Loan Debt
There is an ongoing debate on the rising costs of student loan debt, and whether and how any of it should be forgiven. This is less of a concern for future students, but know that adjustments to how college debt is handled will likely stem from new applications of this law.
A Note on For-Profit Colleges
Much of the debate and revision to the Higher Education Act has been in response to the actions of for-profit colleges, many of which have been accused of misleading students, and taking advantage of government programs while providing little in value. While this is not true for all vocational schools, there is a large subsection of for-profit colleges which do not provide value equivalent to their costs.
We recommend looking into any college which offers something which seems too good to be true, or which advertises aggressively. The tools provided by this act, and the public reporting by the US Government offer some protections to consumers, but being informed is still your best defense.
Final Thoughts
The government has a lot of influence over how education works in the US, both through the laws they set and because of how many students rely on federal loans to pay for college in the first place. As college is such a large purchase, it makes sense that they try to have some laws to protect the primary consumers: the students. After all, if students take out loans and can’t pay them back, that hurts everyone involved.
We hope this article has given you a good understanding of how this act works, and how these regulations can impact you, and your search for college. There are many tools and a lot of information out there, but finding and using it can be a major challenge for many students, as much of it is not well publicized. We have a long history helping students navigate the complicated admissions landscape, and find the information they need to make informed decisions when applying to college. If you want to learn more about how this works, or have questions specific to your situation, schedule a free consultation today. We’re always happy to hear from you.
