NAICU Washington Update

Another Try at Gainful Employment Regulations

December 17, 2014

The Department of Education has again published a final gainful employment rule and has again been sued by the Association of Private Sector Colleges and Universities (APSCU). In an attempt to avoid further litigation, the Department doesn’t use program cohort default rates (p-CRD) as a measure of a college’s eligibility for federal student aid in the new rule. In 2011, the US District Court of Washington, DC vacated the previous gainful employment rule declaring the use of p-CDR “arbitrary and capricious.”

Despite the change in the new rule, in November APSCU filed suit claiming the regulation is still arbitrary and capricious, unlawful, unconstitutional, relies on a single measure for determining whether students are prepared for gainful employment, and will harm millions of students.

According to the Department, the issuance of regulations on gainful employment is part of its efforts to address growing concerns about programs that are required by statute to provide training that prepares students for gainful employment, “but instead are leaving students with unaffordable levels of loan debt in relation to their earnings, or leading to default.” Except for the disclosures, the regulations, which finalize the proposed rule from last March, are effective July 1, 2015 and cover nearly all programs at for-profit schools as well as non-degree programs at public and private, nonprofit colleges.

Detailed Accountability and Transparency Frameworks included in the Regulations

The accountability framework creates a process to establish an institution’s eligibility for HEA Title IV funds and outlines how eligibility is maintained. This certification requires that gainful employment programs meet federal and state accreditation and licensing and certification requirements. In order to determine if the gainful employment program retains eligibility, the accountability framework also establishes a debt-to-earnings measure, comparing a student’s debt to the student’s discretionary and annual earnings after completion of the program. Depending on the ratios, a program can pass, fail, or be in the zone. A program is ineligible for title IV funds if it fails two out of three consecutive years.

The transparency framework outlines the reporting and disclosure required for gainful employment programs. Program information will be used in the department’s accountability framework. The disclosures will be provided to students and the public through a template developed by the Department.

Both the reporting and disclosure requirements are extensive. Institutions must report on each student enrolled in a gainful employment program, providing identifying information and details of their program, enrollment status and outcomes, debt (including that from private education loans), tuition, fees, and other program expenses, and job placement information if required to do so by their accrediting agency or state.

Based on consumer testing, institutions may have to disclose any of the following: the occupations (and SOC code) that the program prepares students for, completion rates for various categories of students, length of the program, number of individuals enrolled, the loan repayment rate for various groups of students, cost of tuition and other costs, placement rates, percentage of students who receive title IV or private loans, median loan debt and earnings for various groups of students, program cohort default rate, information regarding meeting state licensing requirements and program accreditation, and a link to the Department’s “College Navigator Web site.

The institution must update the disclosure template information annually, and provide it, or a link to it, prominently on any Web page that contains academic, cost, financial aid, or admissions information about the program. Institutions must provide each prospective student a copy of the program disclosure template prior to signing an enrollment agreement, completing registration, or making a financial commitment to the institution. Institutions must maintain records of their efforts to provide the disclosure to prospective students. The final determination of what must be disclosed will be provided in a subsequent Federal Register notice.

The Department provided several corrections to the gainful employment regulations on December 4. One important correction is that the disclosure requirements (Sec. 668.412) are effective January 1, 2017.

MORE News from NAICU