Hope/Optimism; Debt/Earnings

Recently I read an interview with Paul Loeb about the state of the world in which he quoted Vaclav Havel about hope, specifically engaged hope,  which ”is definitely not the same thing as optimism. It's not the conviction that something will turn out well, but the certainty that something makes sense, regardless of how it turns out.”

I thought of that quote as I read the Department of Education’s  945 page document on the new gainful employment regulations for federal student loans. (I also thought of the Talking Heads song, “Life During Wartime”: this ain’t no party/this ain’t no disco/this ain’t no fooling around.)

IF I am reading them correctly, it looks like the bureaucracy that has been sustaining the acupuncture profession in the US has just turned on it — or rather, on half of it.

Here is the summary, as I understand it, starting with a quote from the DOE:

“The regulations are intended to address growing concerns about educational programs that, as a condition of eligibility for title IV, HEA program funds, are required by statute to provide training that prepares students for gainful employment in a recognized occupation (GE programs), but instead are leaving students with unaffordable levels of loan debt in relation to their earnings… GE programs include nearly all educational programs at for-profit institutions of higher education, as well as non-degree programs at public and private non-profit institutions such as community colleges.” 

These regulations do two basic things. First, they create “an accountability framework”: a structure by which the DOE can evaluate the economic success of a program’s graduates relative to what the school charges for tuition. They call this the debt to earnings rate, or D/E. “The D/E rates measure evaluates the amount of debt (tuition and fees and books, equipment, and supplies) students who completed a GE program incurred to attend that program in comparison to those same students’ discretionary and annual earnings after completing the program.” If a program flunks the D/E test for two out of three years, that program will no longer be eligible to offer federal student loans.  Second, these regulations create “a transparency framework” through which programs have to disclose certain numbers to both students and prospective students. The DOE hasn’t decided exactly which numbers they want programs to disclose, because they realize that too much information can be overwhelming and not really useful. I think we can safely assume, though, that the D/E rates will be on the disclosure list.

Under the regulations, to pass the D/E rates measure, the GE program must have a discretionary income rate less than or equal to 20 percent or an annual earnings rate less than or equal to 8 percent. I am not a math whiz, so if someone can help me interpret this more accurately, I would be very appreciative. There was a sample on page 834 of the DOE document that gave an example of a program that would pass the D/E rates if a representative student had an annual income of $30,714 and a total annual loan payment of $1284. ( If you have a master’s degree, you are supposed to pay your loan off in 15 years; a certificate, 10 years.)   A sample failing program had a representative student earning $21,106 with a total annual loan payment of $3622. There were also samples of passing and failing rates for loan repayment and defaults. Under these regulations, “loan repayment” means the balance of student loans has to actually be going down — IBR does not count.

The DOE calculates the D/E rate using a formula for student cohorts that I didn’t really grasp: the people in a cohort, whose income is being evaluated, may have graduated anywhere from 18 months to 42 months ago. What was pretty clear, though, was where they get their numbers: from the Social Security Administration. The government itself gathers the income data.  A program may substitute an institutional survey to gather the data, but the requirements for such a survey look fairly strict and it would cost the program more to do it. The  DOE then plugs the mean or the median of what this cohort is earning into its formula, along with what the program’s tuition, books and fees cost or what students have borrowed (whichever is less), and so it generates a D/E rate for the program.

It seems that these regulations are aimed squarely at the place where the acupuncture profession has virtually no infrastructure — the period right after students graduate and are supposed to start applying what they learned in order to earn a living in the real world, those three to five years where we estimate that 80% of graduates give up on acupuncture altogether, the point of time in an acupuncturist’s life that John Weeks once described as “a push on to an ice floe.” For a program to pass the D/E test, its students have to graduate and start working in their field as soon as possible, earning wages that are proportional to what they borrowed.

To make this all slightly  less abstract, let’s use POCA Tech as an example. The Board of Directors of POCA Tech stated a couple of months ago that they are not currently interested in pursuing federal student loans for POCA Tech. (That’s a slightly bigger topic.) But say our BOD changes its collective mind. What would POCA Tech need to do to comply with these new regulations?

Here’s where I could use some help with the math. It looks to me like we would at least have to continue to pursue our current goal of making sure that the total cost of tuition, books and fees for POCA Tech is equal to or less than the amount that a graduate could expect to earn by working in a POCA clinic the first year after graduating. We would also have to continue to pursue our current goal of making sure that each graduate has the opportunity to work as an employee earning a steady paycheck — what the DOE calls “robust efforts to place students”.

But even that wouldn’t be enough. What about the students who want to work in an area where there are no clinics to hire them? If they start their own clinics, POCA Tech would have to worry about whether or not they can earn as much as the students who are placed as employees, meaning we would have to worry about whether they genuinely understand how to start their own clinics and whether they have the skills to be successful. But it isn’t enough to worry about what they know — we’d have to worry about whether or not they had access to start-up capital and ongoing support, and that their level of student loan debt didn’t prevent them from accessing either one. Because the DOE looks at what the students take home as income; they are quite clear on the difference between gross and net.  And for self-employed graduates, the program that trained them is at an inherent disadvantage, because most self-employed people underreport their earnings in an effort to minimize self-employment taxes.

We’re lucky — we’ve already worried about all those things.

POCA Tech has POCA itself: to create jobs for its graduates;  to offer and manage micro loans; to provide not only tested systems and materials but real live mentors and the seeds of a patient base; to support and encourage and cheerlead new employees and new clinic owners. POCA Tech had POCA even before it started, to keep its costs low enough so that its tuition could match what we knew graduates were going to earn.  We knew what graduates were going to earn — because we’d been collecting our own data for years.

Before we built an acupuncture school, we built infrastructure where there was no infrastructure. Before these regulations existed, we were all over this problem.  Hey, whatever anybody else can say about us, we’re self-starters.

How could a typical for-profit acupuncture school hope to do what needs to be done — alone? Without a coop? How could the conventional economics of the acupuncture profession be of any use at all? How could you possibly address these regulations without mutualism?

It looks like exactly half of the acupuncture schools in the US are for-profit, and half are non-profit. So apparently about half of the acupuncture profession is going to be forced to think about what POCA thinks about, while half can continue ignoring it.

This is where I find it useful to think about the difference between hope and optimism. It would be great if we knew for sure that these regulations would catalyze a change in the culture and the economics of the acupuncture profession. For a thousand different reasons, though, they might not. Despite all the years that went into creating these regulations, they could still be de-funded by an unsympathetic Congress or a different administration. I didn’t see any loopholes, but then I wasn’t looking for them like my income depended on it (because it doesn’t); maybe someone else in the acu-world will spot some.

But if hope is the certainty that something makes sense, regardless of how it turns out, we can still have hope. Even in the dry bureaucratese of those 945 pages, these regulations are shining out sense (accountability, transparency, doing the math!) in every direction. Many student advocates have complained that the regulations don’t go far enough, but in our world, they represent great progress.  If the acupuncture profession has to spend the next couple of months, or the next couple of years, poring over them to figure out what they mean, well then  we will collectively be that much more in the presence of sense. At least for awhile.

For a more indepth discussion of the regulations, check inside the forums at: https://www.pocacoop.com/forums/viewthread/7512/P30/

Author: lisafer