By Abbie Barondess, NASFAA Policy Staff

Part 3: The Current GE Proposal 

Editor's Note: This is the final article in a series of three articles examining Gainful Employment (GE) regulations. This article covers the current GE proposal, projected impacts, concerns, and NASFAA’s recommendations. 

Gainful Employment was brought back into the spotlight after ED announced its intention to conduct a fourth round of negotiated rulemaking in 2021. Negotiations once again failed to reach consensus, and ED released proposed GE regulations in May of 2023. In addition to GE, the proposed rules also cover financial value transparency, a new concept touched upon during negotiations and expanded in the proposed regulations. Financial value transparency requirements, unlike the GE requirements, would apply to all programs at all institutions but represent a transparency-only framework with no implications for Title IV aid eligibility.

Overview of GE and FVT Regulations

A new metric, the Earnings Premium (EP) was introduced in this round of regulations, and represents whether a program’s completers earn at least as much as a high school graduate. The EP is calculated as the difference in typical earnings of a program graduate three years after completion relative to the typical earnings of a high school graduate between the ages 25 to 34. A program would fail the EP metric if it was zero or negative, meaning program completers earned the same as or less than a high school graduate. The debt-to-earnings (D/E) metric looks at the share of a student's annual or discretionary income that would be required to make their loan payments under a fixed-term repayment plan. A program would fail the D/E metric if its discretionary D/E ratio exceeded 20% or its annual D/E ratio exceeded 8%.

All Title IV participating institutions would be required to report to the Department of Education the data necessary to calculate the EP and D/E rates and disclose those metrics. These measures would determine Title IV eligibility for GE programs only. GE programs that failed the same measure two out of three consecutive years would lose eligibility.

For non-GE programs, the financial value transparency framework would label a program as having a “high debt burden” if it failed the D/E metric, and “low earning” if it failed the EP metric. For non-GE programs classified as “high-debt burden”, students would have to acknowledge viewing disclosure of the classification prior to receiving Title IV funds. Students would not have to attest to viewing “low earning” disclosures for programs that fail the EP metric.

The new regulations address many of the concerns from the 2011 and 2014 regulations that were detailed in part 2 of this blog.

• In response to concerns over the D/E metric, the new regulations establish the EP metric, which measures the earnings boost the average program graduate receives in comparison to a high school graduate in that state. The EP is intended to better protect students from programs with low earnings than the D/E metric previously used. Programs with low borrowing and low earnings may pass the D/E metric, however students with low levels of debt may have high default rates, often due to low earnings. A D/E metric similar to that in the 2014 rule will still be used to measure debt burden. However, D/E thresholds will no longer distinguish between failing programs and programs in the “zone”, which will reduce the complexity and burden of administering the rule. The D/E threshold was established based on expert recommendations as well as mortgage industry practices. Programs will be required to pass both the EP and D/E metric because they measure two distinct but critical components of gainful employment.

• In response to concerns that the 2014 rule did not apply to all Title IV programs, the new regulations establish a Financial Value Transparency Framework to increase transparency for all Title IV programs. The framework would require all Title IV institutions to publish earnings premiums and debt burden for the typical graduate, as well as performance benchmarks which indicate programs that may leave students worse off. Performance benchmarks are intended to help students contextualize and assess the D/E and EP metrics.This information would be published on an ED-operated website. For non GE-programs classified as “high-debt burden”, students would have to acknowledge receiving disclosures before they can receive Title IV funds. In addition, all Title IV participating institutions would be subject to additional student-level data reporting requirements, such as dates of enrollment, total tuition and fees, institutional grants and scholarships, as well as private grants and loans. These data would be used to calculate the D/E and EP metrics, as well as newly required program disclosures such as completion rates and median loan debt.

• In response to concerns about socioeconomic and demographic differences across programs, the new regulations cite a growing body of research that dispels notions that outcome differences across programs are primarily due to demographic differences or student characteristics. Additionally, ED cited data that over 90% of students in failing programs have at least one other non-failing option within the same area, credential level, and field.

• In response to concerns that many GE programs at non-profit institutions were excluded from sanctions due to small program sizes, the new regulations would use a four-year cohort period to calculate D/E rates for programs with less than 30 students completing in the two-year cohort period. ED considered reducing the minimum program size from 30 to 10 students, however the new regulation maintains a minimum size of 30 as to ensure student privacy and statistically accurate D/E calculations. With the new four-year cohort period ED estimates that 69% of non-GE Title IV programs and 75% of GE Title IV programs would be large enough to produce a D/E metric. D/E rates would not be issued for programs with fewer than 30 completers in a two or four-year cohort.

• In response to concerns about the accessibility and utility of increasing consumer information, the new regulations take several measures to ensure that burdensome institutional reporting requirements translate to improved consumer choices. The new regulation acknowledges that merely posting information on the College Scorecard does little to help students make informed college choices, and cites research on effective information interventions as the basis for their disclosure requirements. Students attending non-GE programs that fail the D/E metric will be required to acknowledge they received disclosure before receiving Title IV aid. This requirement protects students from high debt burden while also acknowledging that many students attending non-GE programs may have other objectives unrelated to earnings. GE programs would not be allowed to enroll, register, or provide Title IV aid to students until three days after distributing information about the disclosure site.

• In response to concerns about programs that lead to higher returns over a longer time horizon, the Department states that the majority of programs that would be classified as “low-earning” would be certificate programs, where boosts in earnings are typically realized shortly after completion.

Data and Scope Concerns

Many stakeholders are concerned about the regulations expansion to non-GE programs and increased reporting requirements. In June, NASFAA released comments on the proposed regulations, taking issue with the requirement for all programs to disclose GE metrics because it was never discussed in the negotiated rulemaking process. Reporting the data necessary to calculate these metrics, in addition to the other additional reporting requirements, places significant burden on institutions, who were unable to express concerns during the negotiations process. NASFAA also questioned ED’s authority to collect the student-level data needed for the metrics. Earnings data will need to be obtained anonymously from another federal agency such as the IRS or SSA, but ED has not yet announced specific plans to obtain this data. Additionally, the ED-operated website that would house program disclosures as well as student acknowledgement of the disclosures has not yet been developed.

Metric Concerns 

NASFAA has expressed concerns about the use of GE metrics for non-GE programs. While ED stated the intended purpose of the Financial Value Transparency framework was to allow students to better compare programs, GE and non-GE programs vary greatly in their goals and purpose, making a comparison using the same metrics of little value. NASFAA also expressed concerns over the EP metric, recommending ED find a way to account for earnings disparities within states in order to improve its usefulness. In calculation of the EP metric, NASFAA recommends comparing earnings data based on time in the workforce, rather than age. Currently, the EP metric looks at median earnings of high school graduates aged 25-34, which could potentially compare the earnings of a high school graduate who has been in the workforce for 16 years, with a college graduate in the workforce for only a few years. NASFAA also recommends that ED account for the COVID-19 pandemic, when unemployment rates were high and loan repayment was paused, in the calculation of the debt-to-earnings metric.

Equity Concerns 

ED recognizes that the new EP metric may unfairly sanction programs that operate in low-income areas. It will be difficult for these programs to pass the threshold when graduates earnings are compared to median earnings across the state, which will include higher-income areas. ED has suggested establishing a list to identify these areas and making adjustments to the earnings threshold in order to more equitably hold programs accountable, but has not made specific plans to do so.

Under the proposed regulations, loan debt used to calculate D/E ratios would include private, institutional, and Title IV loans, while excluding Direct Parent PLUS loans. ED received concerns over including parent PLUS loans in the metric on the basis that students are not responsible for their parents’ loans repayment. ED also received concerns over exclusion of parent PLUS loans on the basis that it would create a loophole, incentivizing institutions to steer students away from Direct subsidized and unsubsidized loans and toward parent PLUS loans. Ultimately, ED decided to exclude parent PLUS loans in order for the D/E metric to serve its intended purpose–as an indication of graduates' ability to afford their own debt.

Administrative Burden Concerns 

To comply with the new regulations, institutions would be required to report a significant amount of program level data, including program identification information, name and length of program, accreditation status, licensure status, total students enrolled (both Title IV and non Title IV receiving), and indication of a medical or dentistry program. For students who receive Title IV funds, institutions would be required to report student-level data on date of enrollment, attendance dates and status, enrollment status, total annual cost of attendance, total tuition and fees, allowance for books and supplies, residency tuition status, allowance for housing and food, institutional grants and scholarships, state and private grants, and private education loans.

GE programs would be required to report this information no later than July 31 following the regulations effective date, and would need to report information for the second through seventh award years prior to this date. Eligible non-GE programs would have the option to only report information for the previous two award years, and receive a transitional D/E and EP metric. For each subsequent year eligible non-GE programs would be required to report by October 1 following the end of the award year.

Institutions would be provided with an optional 60 day review period after the end of an award year to update or correct program completer data. Without corrections, ED would automatically assume initial lists are accurate. ED acknowledges the increased administrative burden the new regulations would impose, but also points to the fact that much of the data was also required under the 2014 regulations so the reporting should be familiar to many institutions. ED also cites that 74% of public institutions and 37% of private non-profit institutions already report much of this information in the federal National Postsecondary Student Aid Survey.

Projected Impacts

Opponents of GE often frame their concerns around the regulations impact on low-income and students of color. For-profit institutions, community colleges, and Minority Serving Institutions (MSI’s) enroll large proportions of these students, making it important to understand how the regulations would impact these sectors.

On the whole, most institutions, across all sectors, have a small number of programs that would fail the GE metrics. ED projects that 1,800 out of 32,000 GE-programs would fail one of the two metrics. These data also show that public institutions would fare much better than private under the new regulations, with  93% of public two-year institutions having no high-debt or low-earnings GE-programs, while 58% of for-profit institutions would have at least one program that fails at least one of the metrics. ED’s projections show that 729 undergraduate certificate programs at public institutions would pass both metrics, 184 would fail the EP metric, and 6 would fail both. However, it is worth noting that the metrics can only be calculated for 4.8% programs, as the large majority of programs do not have enough completers to calculate metrics.

While many questions and concerns remain around data requirements, administrative burden, and the metrics formulas, it is hoped that the regulations will serve their intended purpose of protecting students from low-value and/or high-debt-burden programs, while steering them toward programs that provide upward mobility and a positive return on investment.

Publication Date: 9/19/2023

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