Trump Administration Proposes to Strike Gainful Employment Regulations

By Joelle Fredman, NASFAA Staff Reporter

The Department of Education (ED) announced Friday that it plans to rescind Obama-era regulations aimed at protecting students against poorly-performing programs, which tied their eligibility for Title IV aid to their students’ debt-to-earnings ratios. In lieu of the regulations, known as gainful employment (GE), ED said that it would update the College Scorecard, or a similar web tool, to include program-level data for all schools accepting federal funds, whereas now the online resource only provides institution-level information.

ED’s new proposed rule, which has yet to be published in the Federal Register, comes after a group of higher education stakeholders met numerous times over the course of three months to discuss issues such as which types of programs the regulations should target, what measures ED should use to judge a program’s success, and what sanctions to apply to failing schools, among other details. ED estimated that revoking the regulations would cost the government $5.3 billion.   

ED wrote that it based its decision to strike the regulations on “research results that undermine the validity of using the regulations’ debt-to-earnings (D/E) rates measure to determine continuing eligibility for title IV participation,” as well as feedback that the reporting requirements included in the regulations were too burdensome for institutions.

“At a time when six million jobs remain unfilled due to the lack of qualified workers, the Department is re-evaluating the wisdom of a regulatory regime that creates additional burden for, and restricts, programs designed to increase opportunities for workforce readiness,” ED wrote in the proposed rule. “We further believe the GE regulations reinforce an inaccurate and outdated belief that career and vocational programs are less valuable to students and less valued by society, and that these programs should be held to a higher degree of accountability than traditional two- and four-year degree programs that may have less market value.”   

The regulations are not final. The proposed rule, once officially published in the Federal Register, will be open to comment from the public for 30 days.

“Students deserve useful and relevant data when making important decisions about their education post-high school,” Secretary of Education Betsy DeVos said in a statement announcing the proposed rule Friday. “That’s why instead of targeting schools simply by their tax status, this administration is working to ensure students have transparent, meaningful information about all colleges and all programs. Our new approach will aid students across all sectors of higher education and improve accountability.”

The Obama-era regulations were originally intended to ensure that students in programs that lead to gainful employment could find work in their fields of study that would provide them with enough earnings to properly manage and repay their student debt. ED proposed to measure a program’s success at effectively serving students by calculating their students’ debt-to-earnings ratios, which would be tied to a program’s eligibility for Title IV aid.

The regulations were highly criticized since they were first published eight years ago. For example, some argued that they unfairly targeted for-profit institutions and should be expanded to include all institutional programs, while others complained the reporting requirements and alternate earnings appeals were too burdensome for institutions. In fact, when Education Secretary Betsy Devos announced in June 2017 that ED would be delaying the regulations she cited that they were “overly burdensome and confusing for institutions of higher education.”

The final round of three sets of negotiated rulemaking sessions on GE began in December 2017 and concluded three months later with no consensus. At the March session, many negotiators struggled with ED’s proposal to expand the regulation to all undergraduate institutions, and argued that it was illogical to compare students’ debt-to-earnings ratios, for example, at programs that are intended to lead to specific professions with those with more open-ended career paths. Other negotiators, however, argued that expanding the scope of the regulation to more programs would benefit students because it would allow them to make comparisons between a larger pool of programs.

The proposed rule received both support and critique from higher education stakeholders. While some applauded the Trump administration for expanding the College Scorecard, others argued that striking the GE regulations leaves students unprotected from fraudulent programs.

Sen. Lamar Alexander, chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, said in a statement that the rule “proposes to end a clumsy rule that consumed 945 pages to define two words in the higher education law and targeted just one segment of our 6,000 colleges and universities.”

“This reset gives Congress an opportunity to create a more effective measure of accountability for student debt and quality of institutions” Alexander said in a press release. “My own view is that Congress should focus on repayment rates—whether borrowers are actually paying back loans—rather than the current ‘default rate’ which measures only whether students have not paid back their loans for 270 days or more.”

Steve Gunderson, president and CEO of Career Education Colleges and Universities, wrote that this rule “could be the most significant consumer protection for all college students in all colleges and all programs.”

“This proposal represents the most significant action by any U.S. Department of Education to provide complete transparency on the outcomes of today’s higher education programs,” he wrote. “By making available, in a student friendly and transparent manner, key data points on debt, loan repayment, completion, and earnings of graduates, the Department will empower prospective students with the information needed to select their preferred academic and career preparation pathway.”

Sen. Patty Murray (D-WA), ranking member on the Senate HELP  Committee, however, said in a press release that this rule is proof that “there is no line Secretary DeVos won’t cross to pad the pockets of for-profit colleges—even leaving students and taxpayers to foot the bill.”

“The gainful employment rule empowers students to make meaningful choices about their education and employment opportunities—and yet Secretary DeVos is proposing to completely abandon this common-sense and effective consumer protection that helps students decide whether a career training program is worth the investment, and would hold predatory for-profit colleges and career training programs accountable for leaving students with extensive debt they cannot repay,” Murray wrote.

 James Kvaal, the president of The Institute for College Access and Success (TICAS), said that striking the regulations “would be costly for both students and taxpayers” because data from ED has shown that “more than 350,000 students graduated from substandard programs with nearly $7.5 billion in unaffordable debt.”

“The gainful employment rule is needed to prevent programs like these from bilking students and taxpayers,” Kvall said in a press release. “... In fact, there is stronger evidence than ever that the rule is working. Colleges have improved the value they offer students, and when they can’t improve, students can find better alternatives.”

Reid Setzer, government affairs director for Young Invincibles, wrote in a press release that by striking the rules, the Trump administration is “empowering the schools who already take advantage of far too many students, especially low-income students and student veterans.”

In the coming weeks, NASFAA's policy and federal relations team will publish an article with further analysis and solicit feedback from members. Stay tuned to Today's News for more information.


Publication Date: 8/13/2018

Darcy K | 8/17/2018 12:1:58 PM

I once read an interesting question posed in an article, "why are for-profit institutions eligible for federal aid anyway"? I do wonder this. I mean, they are telling you right up-front that they are in the game first and foremost to earn a profit. Why are taxpayers obligated to subsidize their profit margins? Solve this problem in a heartbeat, just don't allow for-profit institutions to be considered for T4 eligibility.

David S | 8/13/2018 3:31:56 PM

"...instead of targeting schools simply by their tax status..." That's an interesting spin. Schools weren't being targeted because of their tax status, they were being targeted because that's where the problems are, by every measure. Whether it's been default rates, repayment rates, job placement rates, incidents of fraud, or data used in GE statistics, the problems have always overwhelmingly been in one sector. And all of higher ed and T4 programs have taken a black eye for it. Are all for-profit schools bad and are all non-profits and publics perfect? No. But we have decades of evidence as to where the problems are concentrated.

But what more could one expect from an administration led by the founder of Trump University?

Michelle C | 8/13/2018 11:12:37 AM

How about a compensation ratio for CEO's and other executives for these for-profits tied to how much non-federal and state and VA funding is secured (i.e. the 90/10 rule) and see how long they stay in business - to be clear the faculty and student service/business/aid side of a school can receive competitive wages but the CEO's? limit the comp so no public dollars show up in their paycheck. That's one place to start as long as they have access to the cash cow that is financial aid.

Larry B | 8/13/2018 9:49:24 AM

How about regulating advertising? Allow half a dollar, or less, of advertising for every dollar spent on instruction. The overly aggressive advertising and recruitment (SALES) staff tactics on uninformed potential students is OUTRAGEOUS. They are worse than used car salespeople.

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