NAICU Washington Update

Department of Education Aims to Update Gainful Employment Regulations

September 19, 2013

The Department of Education held its first of two negotiated rule-making sessions on September 9-11, to review changes it is proposing to the gainful employment regulations.

In the latest round of changes, the Department proposes to take non-Title IV recipients out of the data collected on gainful employment programs and proposes to eliminate low loan repayment rates as an indicator of a failing program, although programs would still have to disclose their repayment rates. The loan repayment rate was designed to provide a clearer indication of which borrowers were repaying their loans than was possible through the cohort default rates which were being manipulated by some for-profits schools.

During the neg-reg discussions some panelists suggested that a high repayment rate might be used as an indicator of good program performance and exempt such programs from further gainful employment program requirements.

The Department is also proposing significant changes to the way it calculates annual and discretionary debt-to-earnings ratios used to judge the quality of gainful employment programs. Overall the changes increase substantially the number of programs covered by the gainful employment rules and likely the number of programs that will fail. Data provided by the Department to allow negotiators to analyze the impact of the proposed changes were only at the program level, and it was not possible to identify the institutional location of the programs. That and other manipulations of the data made them of little use in determining the potential impact of the proposed regulations. For further information please click here.

The sessions are the latest chapter in the long story of the controversial regulations, which were originally devised to get at problems in the for-profit education sector.

The negotiated rule-making sessions are being conducted to respond to recent court action brought by for-profit institutions that sought to invalidate the original regulations. The judge threw out portions of the regulations because of issues related to the loan repayment threshold and the inclusion of non-Title IV recipients in the data collected on the programs. Even aside from the court action, the Department had already issued 44 clarifications to its complicated and often unclear original regulations.

The panel is comprised of interested parties including students, consumer advocates, representatives from various higher education sectors (Jenny Rickard from the University of Puget Sound represents private nonprofit colleges), including for-profit institutions, veterans’ groups, state attorneys general and state higher education officials. As such, it got off to a rough start, with consumer groups and for-profit representatives at opposite ends of the policy spectrum leaving little hope consensus will be ultimately achieved.

All programs at for-profits are considered to be gainful employment programs. Only certificate programs at nonprofit private and public institutions are. Negotiated rule-making is a required part of the process of writing Title IV regulations. Without consensus, the Department is free to publish the proposed regulations it wants.

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