The Department of Education (ED) today published the official notice of proposed rulemaking (NPRM) for gainful employment and asked that comments on the rules be submitted to ED by May 27. The proposed rules have the same basic structure as the 2011 regulations that were largely vacated by court order, but with a few changes—both large and small—that may have a significant impact on gainful employment (GE) programs.
Through regulations, ED is seeking to establish an accountability framework that will define what it means to prepare students for gainful employment. These measures would assess whether programs provide quality education and training to their students that lead to earnings that will allow students to pay back their student loan debts, and a transparency framework that would increase the quality and availability of information about the outcomes of students enrolled in GE programs.
Because the rulemaking team did not reach consensus during their negotiations in the fall of 2013, the Notice of Proposed Rulemaking (NPRM) reflects regulatory decisions made by ED, although the preamble does include discussion of many proposals debated during negotiated rulemaking. Overall, the proposed rules are stronger than the 2011 rules, but weaker than ED’s last proposal discussed during negotiations.
As in the 2011 rules, the new metrics include debt-to-earnings (D/E) rates that evaluate the amount of debt students who completed a GE program incurred to attend that program in comparison to those same students’ discretionary and annual earnings after completing the program. In addition to the D/E rates, the 2011 rules included a repayment rate metric. The repayment rate metric, which was at the center of the court cases surrounding the 2011 rules, has been replaced in the new proposed rule with a program level cohort default rate (pCDR), which closely mirrors the current CDR (and thus, has stronger legal standing), but is instead calculated on the program level, rather than institutional level.
The NPRM includes several changes to the calculation procedures of the D/E rates from the 2011 rules:
During negotiations, ED proposed a minimum cohort size of 10 for the D/E rates. However, in the NPRM, ED reverted to the minimum “N-size” of 30, which was included in the 2011 rules. Generally, if at least 30 students did not complete the program during the two-year cohort period, then the applicable cohort period would be expanded to include the previous two years, the fifth and sixth award years prior to the award year for which the D/E rates are being calculated. Rates would be calculated if 30 or more students completed the program during that “four-year cohort period” after applying the exclusions. If, after applying the exclusions, 30 or more students did not complete a program over the two-year cohort period, or the expanded four-year cohort period, then D/E rates would not be calculated for the program.
However, unlike the 2011 rule, a program would not satisfy the D/E rates measure if rates could not be calculated because there was not a sufficient number of students who completed a program. Rather, the eligibility of the program would not be affected, either positively or negatively.
Importantly, the NPRM proposes a definition of “student” for GE purposes to include only those students who are Title IV recipients, instead of all students as was the interpretation under the 2011 rules. Depending on the program, this definition change can have a large impact on D/E rates.
Under the proposed rule, programs would fail the metrics if the annual debt-to-annual income exceeded 12 percent and the debt-to-discretionary income exceeded 30 percent. These ratios are the same as in the 2011 rules. However, the proposal rule adds a “zone” that was not part of the 2011 rules: programs with debt-to-income ratios of 8 to 12 percent or debt-to-discretionary-income ratios of 20 to 30 percent would fall in "the zone," and would therefore have to warn students that they might become ineligible for aid.
A program would become ineligible after failing both debt-to-income tests in two out of any three consecutive award years instead of in three out of any four consecutive fiscal years as the 2011 rules provided. In addition, programs that failed both debt-to-income tests or were in the zone for four consecutive years, or any combination of the two, would be ineligible for federal student aid.
The proposed rules incorporate a transition period that would apply during the first four years of implementation. During the transition period, an alternative D/E rates calculation would be made so that institutions could benefit from any immediate reductions in cost they make. During these four years, the transition period and zone together would allow institutions to make improvements to their programs in order to become passing.
For the pCDR metric, programs would lose eligibility if the pCDR is 30 percent or higher for three consecutive years, a threshold that mirrors the institutional CDR standards. The rules for institutional CDRs also require immediate loss of Title IV eligibility if the CDR reaches 40%, but the proposed rules do not incorporate that provision.
A key difference between the 2011 rules and the current proposed rules is that the metrics work independently in the proposed rules. That is, a program must pass both the debt-to-income metrics and the pCDR metric.
The proposed regulations would also provide that, if a program is failing or in “the zone” under the D/E rates measure, the institution may demonstrate mitigating circumstances by showing that less than 50 percent of all individuals, both Title IV recipients and non-Title IV recipients, who completed the program during the applicable cohort period incurred any loan debt for enrollment in the program. If the institution is able to make such a demonstration, the program would be deemed to pass the D/E rates measure.
Since the metrics work independently, the “mitigating circumstances” provision does not give low borrowing programs a pass; they will still need to pass the pCDR metric. Since the proposed pCDR rules largely mirror the existing rules for institutional-level CDRs, then a participation rate index appeal would be a possible avenue for programs with low borrowing rates.
The proposed rule would require a school’s most senior executive officer to certify, as part of the program participation agreement, that each of its eligible GE programs offered by the institution satisfies ED’s certification requirements:
Proposed rules would require that a school report any changes it makes, or that otherwise occur, for a GE program. An institution would report, for example, a change in the name or credential level of an eligible GE program it currently offers, or the addition of a GE program. When an institution updates its list of eligible programs maintained by ED to add a GE program, it would affirm that the program satisfies the same certification requirements as for existing programs. Except for a program subject to a three-year loss of eligibility, after the institution updates its list of eligible programs to include the GE program, the institution may begin to disburse Title IV aid to students enrolled in the program.
The proposed rules would retain most of the disclosures in the 2011 rules, and would expand the amount of information that ED may require to be disclosed. From year to year, in a notice published in the Federal Register, ED would identify which of the16 possible disclosure items institutions must include on their disclosure templates; where applicable, whether the disclosures should be disaggregated to reflect students who completed the program, students who did not complete the program, or both students who completed and those who did not complete the program; and any other information that must be disclosed.
If ED were to require disclosure of completion rates, withdrawal rates, loan repayment rates, median loan debt, or median earnings, ED would calculate the required information for each GE program based on information reported by the institution and provide the required disclosure to the institution to disclose.
The main differences between the 2011 disclosure requirements and the proposed rules are:
The proposed disclosures for all items, except for the number and percentages of the number of individuals who incurred debt for enrollment in the GE program and completed or withdrew from the program, would be made only for Title IV recipients;
The proposed disclosures could be required for all Title IV recipients enrolled in a program or disaggregated by whether or not they completed the program so as to provide students with the information necessary to make more informed choices; and
ED would have more flexibility to change the required disclosures from year to year to reflect new evidence about what information is most helpful to students.
The NPRM will be open for public comment for 60 days from the date of publication in the Federal Register, which has not yet occurred. We encourage you to submit comments through the regulations.gov web site when available. Please submit a copy of your comments to firstname.lastname@example.org.
Publication Date: 3/18/2014