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Monday, February 11, 2013

Department of Education Final Rules for Postsecondary Education Programs That Prepare Students for Gainful Employment in a Recognized Occupation

David P. Smole
Specialist in Education Policy

Some types of postsecondary education programs at institutions of higher education that are eligible for participation in the federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended (HEA), face additional conditions for Title IV aid eligibility. These programs, which are offered by public and private not-for-profit institutions of higher education and postsecondary vocational institutions, and by for-profit proprietary institutions of higher education, must prepare students for gainful employment in recognized occupations.

For many years, the U.S. Department of Education (ED) had not promulgated regulations that explicitly defined what it means for a program to be preparing students for gainful employment in a recognized occupation. To address concerns about the quality of programs that prepare students for gainful employment and concerns about the level of student loan debt assumed by students who attend these programs, ED issued new rules on gainful employment in late 2010 and early 2011.

The final rules established a series of reporting and disclosure requirements for institutions of higher education that offer gainful employment programs and additional requirements for institutions that add new gainful employment programs. The rules also established a series of three performance metrics designed to measure how effectively completers of gainful employment programs repay the student loans they borrow to attend these programs, and the relationship between their student loan debt and their earnings. One metric, a loan repayment rate, was designed to measure how effectively students who are borrowers of federal student loans and who attended a gainful employment program repay the loans they borrowed to attend the program. Two additional metrics—an earnings rate and a discretionary income rate—are debt-toearnings measures and were designed to measure the proportion of students who complete a gainful employment program whose combined federal and non-federal student loan debt exceeds certain percentage thresholds of their earnings. A program failing to pass at least one of the three performance metrics for any three out of the most recently completed four fiscal years would lose eligibility to participate in HEA, Title IV programs.

The Department of Education’s efforts to establish new rules on gainful employment were very contentious. When ED published proposed rules in the summer of 2010, it received an unprecedented volume of comments. Overall, ED received more than 90,000 comments, with approximately three-quarters opposed to the rules and one-quarter in support. Many were concerned that the new rules would increase regulatory burden and potential adverse effects from programs losing eligibility to participate in HEA, Title IV federal student aid programs. Others supported the regulation of gainful employment programs, particularly with regard to the student loan debt of students who attend them.

Prior to the effective date of the gainful employment regulations, they were challenged in court by the Association of Private Sector Colleges and Universities. On June 30, 2012, the U.S. District Court for the District of Columbia issued a decision that vacated most aspects of the regulations and remanded them to ED for further action. At present, only the disclosure requirements remain in effect.

This report provides an overview of the Department of Education’s rules on gainful employment and their current status.

Date of Report: January 23, 2013
Number of Pages: 31
Order Number: R42011
Price: $29.95

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