New "gainful employment" regulations proposed.
Education Department Proposes “Gainful Employment” Regulations
Citing concerns about “wasteful spending on educational programs of little or no value,” the U.S. Department of Education (ED) announced on July 23 a set of proposed regulations that would define the term “gainful employment” as used under the Higher Education Act. The Notice of Proposed Rulemaking (NPRM) is the product of a year-long negotiated rulemaking process between the agency and stakeholders across the higher education community to address a set of fourteen “program integrity” issues under Title IV of the Higher Education Act. The agency issued an earlier NPRM in June that covered thirteen of the fourteen issues, including eliminating provisions that allowed schools to provide incentives for recruiters based on enrollment increases, and strengthening the agency’s authority to crack down on misleading marketing practices at for-profit institutions. However, the agency declined to issue its gainful employment definition as part of that proposal, after facing strong resistance from the for-profit sector and some key lawmakers in both the House and Senate.
Under current law, certain occupational training programs are eligible to participate in student aid programs under Title IV of the Higher Education Act only if they prepare students for “gainful employment in a recognized occupation,” but this term has never been defined in law or through regulations. The proposed regulations would establish a two-part test to determine whether programs were meeting a newly defined gainful employment standard: a debt-to-income ratio test, which would measure the relationship between the median annual loan payment for program completers compared to average discretionary income and annual earnings; and a loan repayment test that would measure the percentage of former students paying down the principal on their loans. Programs that achieve at least a 45 percent loan repayment rate, and whose median debt-to-income ratio for program completers did not exceed 12 percent of discretionary income or 8 percent of average annual earnings would continue to be fully eligible for Title IV student assistance. Programs that met some but not all of the requirements would be required to provide warnings to current and prospective students about the potential for high student loan burdens associated with the program, and in some cases could be placed on “restricted” status, which would require the institution to limit new enrollments in the program and provide evidence from employers testifying to the need for the training program. Programs that failed to satisfy any of the tests would be ineligible for further participation in federal student aid programs. The agency would cap the number of ineligible programs in the first year to five percent of all covered programs; programs that would have been declared ineligible but fall outside the initial five percent will be placed on restricted status.
The proposed regulations will impact federal student aid eligibility for virtually all degree and non-degree programs offered by proprietary institutions –and for many non-degree programs at public and private non-profit institutions—unless the schools are able to demonstrate the programs are preparing students for gainful employment. The new rules, which would take effect starting in the 2012-13 school year, are expected to render up to five percent of covered occupational training programs ineligible for Title IV student aid programs, and will require more than half of such programs to provide consumer warnings to students on student debt levels associated with the program.
The gainful employment NPRM is open for public comments through September 9, 2010, and the agency is specifically inviting comments on whether the proposed debt-to-income and loan repayment thresholds are appropriate. It is expected that the agency will issue a final rule incorporating both the June and July NPRMs by November 2010.
National Skills Coalition will continue to follow this issue and provide updates as new information becomes available.
