NAICU Washington Update

NAICU Weighs in on Proposed Regs to Curb For-Profit Abuses

September 17, 2010

NAICU, ACE, and other associations representing nonprofit higher education submitted joint comments to the Department of Education in response to the most recent set of proposed regulations aimed to curb fraud and abuse in the for-profit sector.

The proposed regulations are the second part of a two-part regulatory package proposed by the administration. NAICU commented on the first set of regulations in early August. Those earlier regulations proposed a dozen new rules to combat the growing incidences of fraud and abuse in the student aid programs. The second part of the package focused on a complex formula to be used to assess student repayment rates for gainful employment programs.

The gainful employment program formula has received much media attention in recent weeks.  The for-profit sector launched one of the fiercest higher education lobbying campaigns in memory, in an attempt to defeat the rules.  By the end of the comment period, the Department of Education had received more than 80,000 comments to the proposed rules, most of which appeared to have been generated through the for-profits' orchestrated campaign.

Contrary to misinformation being circulated, the proposal would affect short-term certificate programs at higher education institutions in all sectors, and degree programs at most for-profit institutions. The community letter endorsed by NAICU supported Secretary of Education Arne Duncan's efforts to address fraud and abuse concerns in the for-profit sector.  However, it recommended a number of changes to the proposed rules, and asked for clarification of several provisions.  The letter also urged the department to exempt from the rule very small programs, programs with few borrowers, and programs that required an associate's or bachelor's degree for admission.

The joint letter reiterated the importance of distinguishing between degree programs and job-training programs - the latter being the target of these provisions.  Based on the department's recognition of the distinction, the letter argued that certain degree-related certificate programs should not be included in the scope of the regulations.  It described two such types of programs: those that require an associate's or bachelor's degree for admittance and those that are integrated into, or whose credits are fully accepted toward, a degree program.

In addition, arguing limited risk and undue institutional burden, the community letter recommended exempting from the new regulations those institutions awarding less than 5 percent of their credentials in gainful employment programs, as well as gainful employment programs where less than 35 percent of the students take out federal loans.  

Under the new regulations, institutions with gainful employment programs must annually report to the Secretary, their completing students by CIP (program identification) codes, and the private student loan borrowing of the students in each program.  They also must disclose on their websites the occupation codes the programs prepare students for, the on-time graduation rate and cost of the programs, student placement rates, and median loan debt.  To maintain federal student aid eligibility, the programs will be evaluated annually on the repayment rates of their students, as well as the debt-to-income ratios of their students.

In its letter, the nonprofit higher education community objected to certain provisions for gainful employment programs that are placed in "restricted" status due to low scores on the two threshold tests (loan repayment rate and debt to income ratio) (see earlier Washington Update story)

The letter also raised concerns about proposed requirements for institutions wishing to establish new gainful employment programs.  Of particular concern was the fact that these programs, along with programs on restricted status, would have to receive affirmation from businesses on the need for graduates in that field in order to participate in the federal student aid programs.  Proposed programs also would be required to provide the Department with a five-year enrollment projection.  These requirements could be troublesome and subject to misuse, the letter said, and could delay colleges' ability to develop new programs in response to emerging fields.

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