Gainful Employment

The “gainful employment” definition was established in regulations during the Obama Administration to stop program abuse occurring largely in the career college sector.  The Obama Administration’s gainful employment regulations were short-lived. One of the first regulatory initiatives of the Trump Administration was to convene a negotiated rulemaking panel regarding the future of the gainful employment regulations, which led to the termination of the Obama-era regulations in July 2019.

The Obama Administration developed the controversial regulations out of a concern that a significant number of gainful employment programs were not providing students the skills needed to gain employment in the occupation for which a program was supposedly designed.  Further, there was concern that the jobs students got were low-paying, and thus not worth the expense of the education, leaving many of these students with debt on which they often defaulted. Thus, the gainful employment regulations were designed to ensure that students don’t take on large amounts of debt for training programs that lead to jobs with earnings too low for them to repay their loans. 

About

Certificate programs at private, nonprofit and public institutions, and nearly all for-profit degree and certificate programs must prepare students for “gainful employment in a recognized occupation” in order for those students to be eligible for federal student aid.  Any institution with a gainful employment program must provide a significant amount of information about its student body to the Department of Education and make disclosures about the success of its programs to the public.

Although the regulations were intended to combat fraud and abuse, they also have had the unfortunate effect of imposing significant burdens on legitimate programs. 

 

History

The Higher Education Act has long permitted the use of federal student aid funds at for-profit institutions for non-degree programs “of training to prepare students for gainful employment in a recognized occupation.”  However, the term “gainful employment” was not defined in statute or regulations until the Department of Education initiated a negotiated rulemaking process in 2009 to do so.  The negotiators did not reach consensus on the issue, meaning the Department was not bound by any agreements reached during the negotiations.

In 2010, the Department proposed two sets of regulations: one dealt with the disclosure of information by institutions about their gainful employment programs; and the second dealt with student outcomes intended to establish whether or not students were gainfully employed after leaving their training programs.  The disclosure requirements went into effect on July 1, 2011  However, most of the requirements related to student outcomes were overturned in a lawsuit brought by the Association of Private Sector Colleges and Universities, which represents for-profit schools.

The Department initiated a second round of negotiated rulemaking in 2013, and the negotiators once again failed to reach consensus.  A new set of regulations on student outcomes was published in December 2014 and the regulations were again challenged in court.  The regulations were upheld and went into effect on July 1, 2015.  The Trump Administration convened a negotiated rulemaking panel in 2017 to begin the process of formally rescinding the Obama Administration's gainful employment rules.  Secretary DeVos formally terminated the Obama-era gainful employment regulations and reporting requirements in 2019.

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naicu contact

Tim Powers: Tim@NAICU.edu
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