New student aid regulations proposed.

Education Department Proposes New Student Aid Regulations

The U.S. Department of Education (ED) has announced plans to publish proposed regulations intended to strengthen federal student aid programs by clarifying student eligibility rules, enhancing consumer protections, and defining the courses and programs that are eligible for federal assistance.  However, the agency decided to delay a proposed definition of “gainful employment” that could impact eligibility for financial assistance for many postsecondary career training programs.

The forthcoming Notice of Proposed Rulemaking (NPRM) is the product of a year-long negotiated rulemaking process that brought together agency officials 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 proposed rules include language that will, among other things:

• Require institutions to establish procedures for evaluating the validity of high school diplomas
• Extend eligibility for federal aid to students without a high school diploma if they complete six credits of college coursework
• Enhance the agency’s ability to take action against institutions engaging in misleading marketing and sales practices
• Eliminate a range of ‘safe harbor’ provisions allowing institutions to provide incentive payments to admissions recruiters based on enrollment
• Clarify state authorization requirements for institutions to receive federal student aid
• Provide a standard definition of a “credit hour”

The agency opted not to introduce full regulations on the controversial “gainful employment” issue, which had been viewed as a potential tool for reducing student loan burdens, particularly for individuals attending for-profit schools. Under current law, most programs offered by proprietary schools and postsecondary vocational institutions, as well as some non-degree programs at public or non-profit schools, are eligible for federal assistance 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 agency had been considering a definition that would have made programs ineligible if the median debt-to-income ratio of program graduates exceeded eight percent, but this proposal met with strong resistance from for-profit institutions, who argued that the rule would force them to shut down many of their current programs. The agency did propose partial regulations that would require these institutions to provide students with data on graduation and job placement rates associated with the covered programs, and also to report certain financial and academic data on program completers to the agency. The agency is likely to issue the full definition in a separate NPRM, which will be released later this summer.

The current  NPRM will be formally published in the Federal Register on June 18, after which it will be open for public comments for a period of 45 days. The agency anticipates publishing final rules incorporating both NPRMs by November.