NAICU Washington Update

Gainful Employment Final Rule Made Public

June 14, 2011

The "metrics" portion of the gainful employment rule was published in the Federal Register on June 13.  The rule carries an effective date of July 1, 2012 - with full implementation delayed years beyond even that date.  The final rule is viewed by many, including Sen. Tom Harkin (D-Iowa), as a step-back from the Notice of Proposed Rule Making published last summer, and a win for the for-profit sector. (See related story)

One way the final rule was weakened from the original proposal is by a lessening of the consequences of not meeting the gainful employment standards.  The first year a program could be ineligible would be 2015.  Also, poorly performing programs must fail the debt measure three times in a four-year period before losing participation in federal aid programs, rather than losing eligibility immediately.

The Department of Education is emphasizing program improvement, rather than elimination of programs.  Still, the Department estimates that 18 percent of the for-profit programs will fail at least once, and that five percent will lose Title IV eligibility.

Under the new regulations, a program would be seen as leading to gainful employment if it meets at least one of three metrics:  (1) at least 35 percent of former students are repaying their loans (defined as reducing the loan balance by at least $1); (2) the estimated annual loan payment of a typical graduate does not exceed 30 percent of discretionary income; or (3) the estimated annual loan payment of a typical graduate does not exceed 12 percent of total earnings.

The disclosure, reporting, and new program portions of the gainful employment rules - which also apply to credential programs at non-profit colleges - were finalized last October, and are effective next month.  Greater detail about them has been provided in written guidance and a webinar this spring. Access to all those materials is available on the Department of Education website.  Institutions must have the required disclosures posted on their websites by July 1. The reporting deadline for this year is October 1.

The Department will offer a webinar on National Student Loan Data System (NSLDS) gainful employment reporting at 11:00 a.m. (ET) Tuesday, June 28, and again at 1:30 p.m. Wednesday, June 29.  Advance registration is required for this training, and will be available on a first-come, first-served basis.  The Department also plans to offer additional webinars on the gainful employment regulations.

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