As Biden Administration Takes Hold, Some Speculate on the Return of Gainful Employment

By Hugh T. Ferguson, NASFAA Staff Reporter 

President Joe Biden has used the first few weeks of his term to reverse a number of policies implemented by the previous administration, but now with Cabinet positions beginning to be filled, agencies staffed, and Congress working through the legislative process, more far-reaching policies could be coming to the forefront.

One particular area of interest is gainful employment regulations, which were first proposed and finalized during President Barack Obama’s administration — first in 2011 before essentially being gutted when a federal judge said the core of the rule (a debt-to-income ratio) was developed arbitrarily, and again in 2014 — and then rescinded during President Donald Trump’s term through the regulatory process.

See NASFAA’s Coverage of the Negotiated Rulemaking Process for Gainful Employment

Those regulations, as finalized in 2014, aimed to ensure that higher education institutions improved their employment outcomes for students in non-degree-granting programs and programs at for-profit institutions — or risk losing access to federal student aid.

However, the regulations were highly criticized since their inception. 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.

Former Education Secretary Betsy DeVos rescinded the regulations, basing the decision on “research results that undermine the validity of using the regulations’ debt-to-earnings (D/E) rates measure to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.

Though NASFAA ultimately supported the concept of  gainful employment, the association was highly critical of a flawed rollout and implementation process, and has said that the responsibility of defining gainful employment should fall to Congress.

NASFAA, prior to the Department of Education’s (ED) 2018 rescission of the regulation, advocated that the challenges presented by the shaky rollout were not insurmountable and should not lead to a complete rescission of the rule.

Yet now with the rescission, there's ambiguity in what it means to be gainfully employed, leaving the phrase undefined and creating a vacuum in oversight in how certain programs prepare students for viable career paths.

Lesley Turner, associate professor of economics at Vanderbilt University, said having a gainful employment regulation or some future iteration of the rescinded rule is better than having no guidance.

“We know there's a huge amount of variation in student outcomes across different programs, sometimes even within the same institution,” Turner said. “It seems reasonable to set a lower bar on student outcomes, where most reasonable people could agree if students can't meet this bar, on average, that this is not a good program that should be getting federal student aid to keep it alive.”

Turner said it makes sense for schools to want to have programs that serve their students well, regardless of potential federal regulations, and that institutions could utilize data from the College Scorecard to demonstrate their program’s success.

Matt Falduto, director of financial aid at Kirkwood Community College, said that with a new administration he expects debate and guidance over gainful employment to return.

“We decided to kind of get ahead of the game a little bit, and come up with our own definition of gainful employment based on research that we have done,” he said.

This anticipation prompted Falduto to create a task force to help guide his institution and develop programs in a manner that could comply within the framework of what it means to be gainfully employed.

“We thought we would try to come up with a definition that makes sense for our students and for what we believe is the intent of the law,” he said. “We are working on a new policy that we're going to implement that will define gainful employment.”

His institution is looking to use two criteria for its gainful employment definition: economic independence and average debt level.

According to Falduto, that would mean looking at the median income for occupations that a given program prepares a student for, and seeing that the income is at least 250% of the national poverty level. That metric, in tandem with calculating the average monthly student loan payment for graduates to be no more than 8% of their gross monthly earnings for a standard 10-year repayment plan, would provide guidance as to whether students achieved gainful employment.

When it comes to calculating what it means to be gainfully employed, Stephanie Riegg Cellini, professor of public policy and economics at the George Washington University, said it’s appropriate to debate metrics around gainful employment measurements to judge programs.

There’s “really strong justification” for using earnings as a way to measure student outcomes, she said, noting that it allows students to think about the cost and the benefits of postsecondary education over the course of lifetime earnings.

“That's not to say that everybody agrees that those are the perfect metrics, or that they measure everything perfectly,” Cellini said. “But I think they're a really good step in the right direction at measuring what we'd like to know about these programs, about what students should be thinking about, and what the government should be able to track, given high-quality earnings data and high quality debt data.”

Moving forward, should the Biden administration seek to reintroduce gainful employment into the higher education regulatory sphere, it could simply reinstate the Obama-era guidance, though those rules had drawbacks that a new administration could look to improve upon.

“What the old policy did was it looked at each individual student's income, which, to me, didn't make a whole lot of sense, because — one — they couldn't,” Falduto said. “The reason why this never went through is because they couldn't get all that information. There were data-sharing issues with getting that information.”

Due to this lack of data coordination, Falduto said institutions should be looking at the median incomes for the various occupations for which a program is intended to prepare students.

Turner said she expects that the pandemic will also be on the minds of those involved in a reiteration of gainful employment.

The challenge, Turner said, is having some way to assess programs or schools that is fairly simple and understandable for students, but also is complex enough to take into account things like variation in earnings across states, or variation in earnings in recessions versus better economic times.

“I would not be at all surprised if there was an attempt to allow the criteria for [economic metrics] to depend in some part on economic conditions,” Turner said.

Turner would also like to see a change in gainful employment’s implementation to take into account the outcomes of non-completers, to ensure that programs with low graduation rates are not let off the hook.

While the effort to define gainful employment has been difficult, a number of higher education advocates are calling for the regulation to return.

In a letter to lawmakers this month, a group of 54 organizations working on behalf of students and college access initiatives urged new members of Congress to consider addressing gainful employment through legislation as part of a reauthorization of the Higher Education Act, making the rules permanent.

“There is a growing concern that, absent regulation, the twin crises of pandemic and recession will fuel a rise in predatory for-profit enrollment. With the GE Rule repealed, there are currently no guarantees that the amount of debt a student can take on to pay for a high-cost career-education program will lead to anything more than extremely limited career prospects,” the groups wrote in an accompanying fact sheet.

The path forward for implementing some version of gainful employment comes down to a two-pronged approach: negotiated rulemaking or congressional action through legislative statute.

While the Senate Health, Education, Labor, and Pensions (HELP) committee teed off its first hearings with a commitment to working in a bipartisan fashion, a rewrite of the HEA was not touted as a top bipartisan issue to tackle — though Rep. Bobby Scott (D-Va.), who chairs the House Education and Labor committee, has said reauthorization is a high priority for him. Congress continues to work its way through additional COVID relief, but it's highly unlikely such a policy would get tacked on due to the complexity of the regulation.

“I think gainful employment needs to be defined in statute, through a reauthorization of the Higher Education Act,” Falduto said. “There needs to be a definition assigned to what gainful employment is, and I think our criteria would be a pretty good definition of it.”

NASFAA, for one, has said the issue of gainful employment needs to be addressed by Congress.

“The turbulent history of the GE regulations, along with the changing political winds, begs for Congressional intervention, to make clear their intent for the meaning and measurement of gainful employment before any further administrative attempts are made to regulate in this area,” NASFAA wrote in its comments in response to ED’s 2018 decision to rescind the regulations. “The gatekeeping function for eligibility for the federal student aid programs falls squarely under the purview of Congress, and gatekeeping is best done before bad actors even enter the gate. It should be Congress, not ED, who articulates which programs should be subject to regulation and sanctions and, further, who should be working to keep bad actors from entering the higher education domain in the first place.”

But getting Congress to take up legislation that isn’t central to pandemic relief could be a tough sell, particularly with the incredibly narrow split in the Senate.

“The bar for passing legislation is pretty high and you need bipartisan support,” Turner said. “Congress would have much more flexibility in designing an accountability system than the executive branch if they were to reauthorize the Higher Education Act, but it seems to me at least that it's pretty unlikely that's going to happen.”

Should the issue not be addressed, or if it's something that can be easily revoked by a future administration, Cellini said colleges can offer important resources to prospective students by disclosing accurate, reliable data of the majority of their students and their outcomes.

“I would encourage colleges to make high-quality data available, where they have surveys or data that include all of their students and not their most successful 300 students who actually graduated and responded to the survey,” Cellini said. “Schools should be looking at their programs and the outcomes of each of their programs in terms of earnings and debt.”

Now that Biden’s education secretary nominee Miguel Cardona has completed his confirmation hearing — with a committee vote to advance his nomination to the Senate floor scheduled for Thursday February 11 — it’s possible the regulation could see movement, though ED has not indicated whether it will act on reintroducing gainful employment.

“We need to have [GE] defined,” Falduto said “So we can move forward and everyone can know what the rules are and what we need to follow.”


Publication Date: 2/8/2021

Joel T | 2/9/2021 10:9:46 AM

We would be truly grateful if NASFAA would push back against Gainful Employment regulations and remind the policy makers have how burdensome and pointless the previous regs were.

Ryan W | 2/8/2021 12:23:42 PM

I certainly supported the concept of gainful employment, but the disclosures seemed to be of very little value to our students. To require a list of questions where most of the answers said "N/A" due to the small sizes of GE programs we offered did not give any meaningful information to the very few students that even bothered looking at them. I think we're at continued risk of overwhelming students with disclosures and notifications so they become numb to reviewing any of them. I hope if it does return, there is an opportunity for feedback on the methods of communicating information to students with a consideration towards are the methods reasonable.

Lori V | 2/8/2021 8:37:08 AM

Institutions need a clear definition of what constitutes a GE program, and how it should go about measuring a potential program prior to a program being created, a simplified metric of sorts. The reporting piece it seems could be accomplished through some kind of system indicator(s), not through the painstaking reporting that was taking place on the back end just a few short years ago. The program or student "indicator(s)" can provide the Department with the data they may need. GE reporting should not slow program development and growth of an institutions offerings by overshadowing it with the burden put upon schools to do the reporting.

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