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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