Neg Reg Day 3: Negotiations Gain Momentum as Clock Ticks on Final GE Session

By Joelle Fredman, NASFAA Staff Reporter  

After two days of negotiated rulemaking sessions stunted by concerns about a lack of data and debates around which groups of students to apply regulations to, negotiators made some progress on the third day of the final session to rewrite gainful employment (GE) regulations, coming to a general agreement on using different time horizons for calculating students' earnings in different types of programs, and moving onto a discussion on disclosure requirements.

Mediators began Wednesday's session by reminding negotiators that if they don't come to consensus during this session, the Department of Education (ED) will write the regulations as it sees fit and several negotiators expressed their frustration over a lack consensus on any issues from earlier in the week.

"I feel very frustrated by this process. We have tried to work on this together, but things have been kind of stacked against us," said Johnson Tyler, who represented legal assistance for students, in reference to the weakening of sanctions as well as ED's changes to proposed language from what was discussed in session two.

Rep. Mark Takano (D-CA) spoke during the public comment period of his frustration with representatives of the for-profit sector at the negotiating table for "not eagerly embracing a platform to solidify their credibility," urging them to be "champions for the gainful employment rule," and citing patterns of deception and fraud by bad actors in the sector that could be identified and remedied via these regulations.

Negotiators spent the morning revisiting a discussion from yesterday on what lookback period to use in the earnings portion of the debt-to-earnings rate. As negotiators began to debate the merits and drawbacks of various time horizons, it became clear that they were not satisfied with a 'one size fits all' approach. Jeff Arthur, representing private, for-profit institutions, suggested that ED use the two-year cohort comprised of the fifth and sixth years prior to the award year for which the rates are being calculated for associate degree and certificate programs, and the sixth and seventh years prior for bachelor's degree programs as the basis for students' earnings in the debt-to-earnings rate calculation.

Neal Heller, president and CEO of the Hollywood Institute of Beauty Careers, however, argued that even certificate programs cannot be lumped together in the context of time horizons for purposes of debt-to-earnings rates due to the vastly different natures of programs. For example, while a student with a certificate in welding may earn the average amount for the field after five years, a cosmetology student needs a longer amount of time to bring in significant earnings because of the need to build a clientele.

As other negotiators agreed that grouping programs together in this way ignores the distinctions between them, Anthony Mirando, representing accrediting agencies, argued that there needs to be some kind of mechanism put in place where an institution can appeal to ED.    

"We need a mechanism so that institutions being unfairly grouped together have an opportunity to claim, 'hey, this doesn't fit me,'" Mirando said.

Later in the day, negotiators seemed generally in favor of the idea that ED should consider different time horizons for different types of programs, although they did not agree on what those amount of times should be or how to distinguish between programs.  

Following that discussion, ED began to walk negotiators through the process they devised, based on the proposals and issues raised earlier in the day and week, to determine whether an institution will be subject to some sort of sanction by ED, such as a program review. Talking the group through a flowchart developed by ED, federal negotiator Greg Martin explained that programs meeting the debt-to-earnings benchmark would face no actions and would not be required to issue notifications to students about their debt-to-earnings rates. Those not meeting debt-to-earnings benchmarks would have a loan repayment rate applied, in a sense as an appeal, with institutions meeting that benchmark also not subject to further action. Only failure to meet both debt-to-earnings and loan repayment rate would introduce required notifications to students and potential action by ED.

On debt-to-earnings rates, Martin indicated that ED was interested in looking at two data points for earnings, the cohort's median, as well as, essentially, the median of the top 75 percent of cohort incomes— a concept introduced earlier this week that ED is interested in exploring as an alternative to the median of the entire cohort for programs with median earnings that caused them to fall below the passing threshold.

On loan repayment rates, ED raised the idea of using Classification of Instructional Program (CIP) codes to compare repayment rates to those of similar programs, with the possibility that different loan repayment rate thresholds would apply to different programs.

Martin also said that ED was very interested in running with a proposal offered yesterday by Chad Muntz, director of institutional research for the University System of Maryland, to represent debt-to-earnings as a simple total debt-to-total earnings figure, without factoring in things like amortization period or interest rate. The threshold would be a 1-1 ratio of debt-to-earnings. Under this proposal, for example, a cohort with an average of $50,000 in debt and $50,000 or more in earnings would not be subject to further review by ED.

Earlier in the day, however, Jordan Matsudaira, representing business and industry, presented data to the group to show such a proposal would result in a less strict rule for two-year programs, and would be similar to or stricter than current rules for bachelor's degree programs. He argued that using a 1-1 metric would relax the requirements for institutions that are producing poor results, which GE regulations were designed to combat.  

"I find the change entirely perverse given the original rationale for the rule," Matsudaira said.

Other negotiators were also concerned about the proposal and some argued that because ED proposed to strike reporting requirements for schools, and therefore would not include data on institutional and private loans, many students would meet this 1-1 benchmark despite other outstanding debt.  

In the final hour of the day, negotiators sped through the sixth issue paper regarding disclosure requirements and took issue with ED's proposal to strike language to require that the secretary of education conduct consumer testing.

Tyler said he was worried that programs hide disclosures on their sites, and recommended that in order for ED to ensure that disclosures are being presented in a clear way, it assign some sort of punitive measure to programs that do not disclose information well, such as a monetary fine.

Negotiators will have one more day to inform ED of their concerns and suggestions for GE regulations before it begins to draft its proposal.


Publication Date: 3/15/2018

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