Neg Reg Day 2: Gainful Employment Issue Paper Dominates Discussion, Prompts a Host of Negative Temperature Checks

By Hugh T. Ferguson, NASFAA Staff Reporter

Throughout the second day of work for the Institutional and Programmatic Eligibility Committee, negotiators primarily focused on the Department of Education’s (ED) updated regulatory text on the gainful employment (GE) issue paper, working through a number of presentations and diving deep into the regulatory framework outlined by federal negotiators.

Prior to turning to the bulk of the day’s agenda, the committee briefly wrapped up work on the  Standards of Administrative Capability issue paper from Monday’s session.

The final section of that paper concerned adequate procedures to evaluate the validity of a student's high school diploma, which received a positive temperature check. Members raised some concern over how the language could ensure that students with legitimate hurdles to obtaining documentation of a high school diploma could be given flexibility in the regulatory language.

In kicking off discussions on gainful employment, Gregory Martin, ED’s negotiator, provided a brief overview of the proposed rule and walked committee members through ED’s framework of the issue paper.

For an overview of the gainful employment regulations, NASFAA members should reference our gainful employment web center.

Since ED, in the first session of the committee’s work, did not provide the committee with amendatory text for the gainful employment rule, Martin highlighted details from the gainful employment issue paper’s summary before diving into the regulatory text.

Adam Looney, a non-voting advisor and labor economist from the University of Utah, also gave negotiators a presentation on gainful employment, providing a summary of why accountability rules exist, details on evidence of the 2014 rule’s efficacy, a review of the mechanics of the 2014 rule, as well as potential modifications and an overview of what programs have been affected by the regulation.

During the question segment of the presentation, Marvin Smith FAAC®, representing four-year public institutions of higher education, expressed concern about using 2020 and 2021 income data in light of the ongoing COVID-19 pandemic.

Looney indicated his opinion that implementation of the rule would be sufficiently delayed — due to the need for ED to re-establish the reporting infrastructure to calculate GE metrics — that the pandemic’s impacts on income will have passed by the time ED calculated metrics under the new rule.

Chris Bennet, a representative on behalf of ED, then walked negotiators through a pair of memos detailing coverage of gainful employment metrics for small cohort sizes and a second paper analyzing the effect of capping total loan debt at tuition, fees, books, and supplies.

Martin then returned to walking the committee through the regulatory language of the issue paper. In outlining the text, Martin underscored that ED mostly adopted the framework of the 2014 rule following the committee’s recommendation during last session.

With ED’s intention to wrap up discussions on the issue paper during Tuesday’s session, Brad Adams, a negotiator on behalf of proprietary institutions, expressed deep concern over the allotted time left to review the issue paper.

“In the past, entire rulemakings have been designated to this rule and now, at best, we have about three hours left of today and maybe one day in the next session to discuss the most important rule for our industry in many years,” Adams said, arguing that “insufficient” time spent on the paper will have dire consequences. “Schools will go out of business, people will lose their jobs, and students will be left with nowhere to go while our economy is left with over 10 million jobs.”

In resuming the walkthrough of the gainful employment regulatory text, Martin continued to work through the definitions section with the addition of “small program” and “small program rates” as new definitions aiming to provide ED with more data. The new small program rates would be calculated by ED by aggregating all of the institution’s programs at the same credential level with fewer than 30 completers in the four-year cohort period and applying the annual and discretionary debt-to-income ratios to that total, provided it included more than 30 completers. Small program rates would not be used to deny program eligibility for Title IV funds. However, under the proposed rule ED could use those rates as supplemental information in determining whether to certify or condition an institution’s Title IV participation.

Martin noted a divergence from the 2014 rule that would identify programs using their four-digit Classification of Instructional Program (CIP) code, as opposed to the six-digit CIP that was used in the 2014 rule. This proposal received mixed reviews. Some agreed with the department that the move would allow more programs to have published GE metrics, and others expressed concern that poorly performing programs could get rolled up with better programs and be protected from loss of eligibility by nature of higher earnings and/or lower debt of students in other programs that happen to fall in the same four-digit CIP code.

Some negotiators expressed concern over ED’s proposed cohort period for earnings data. Adams indicated that in some instances, ED would be using earnings at a point just 18 months following a student’s completion of the program, and argued that this would not be long enough to accurately reflect wages outcomes for a given program.

For the definitions section the committee recorded a negative temperature check, with three members recording a thumbs down.

ED then walked through the gainful employment framework section, covering debt-to-earnings rates. 

The proposed regulatory text showed that a GE program would pass the GE criteria if its debt-to-discretionary earnings rate is less than or equal to 20% or its debt-to-annual earnings rate is less than or equal to 8%, similar to the 2014 rule. Unlike the 2014 rule, ED removed the zone alternative, meaning programs that fail the two metrics in two of three consecutive years lose Title IV eligibility.

For this section, Adams cited significant concern over ED’s removal of the zone concept, which provides institutions additional time to come into compliance, noting that it deviated from previous regulation. He also opposed the requirement that institutions warn students after one year of a program failing the GE metrics.

ED underscored that its goal is to create accountability in the regulatory framework and ensure that students are warned when a potential program that they are considering is providing students with poor outcomes and is in danger of closing.

Negotiators ultimately recorded a negative temperature check on the framework sections, with some concern expressed over the removal of the zone regulation.

In continuing the negotiations ED then detailed language on calculating debt-to-earnings rates.

Here, Martin explained that ED proposes to use only median earnings rather than the higher of median or mean earnings, and provided details on how ED will calculate debt-to-income rates.

While in 2014 ED limited its earnings data source to the Social Security Administration (SSA), the proposed rules expand the list of federal agencies from which ED can obtain earnings data to include the Department of Treasury, the Department of Health and Human Services, and the Census Bureau, in addition to SSA. According to ED counsel, the flexibility in the language is written this way in the event that any Memorandum of Understanding is not renewed, as happened with the SSA MOU, leaving ED unable to calculate GE rates for 2019.

In this section, Adams voiced concern over unreported and underreported income data, urging ED to incorporate language that protects an institution's ability to appeal the earnings data when it can provide evidence that completers’ incomes are higher than what they reported on tax returns. ED countered that many federal programs rely on lawfully reported income and that it is ED’s position that only that income should be used in calculating GE metrics.

Another significant change to the regulations is the addition of Parent PLUS loan debt to the total debt used in the debt-to-earnings metrics. Johnson thanked the department for broadening the scope of loans incorporated in determining the loan debt for a student under gainful employment, and noted that some schools steer families toward PLUS loans as a way of complying with cohort default rate reporting.

Ultimately, this section resulted in a negative temperature check, with three committee members offering a thumbs down.

During the public comment period, speakers provided details on their experiences with topics concerning unreported income metrics, adverse experience with a for-profit law school, work with institutional career services, combatting predatory lending, clock hour programs, College Scorecard data, use of GI benefits, and gainful employment.

The committee will resume its work on Wednesday and turn back to the gainful employment issue paper, beginning with the regulatory text on D/E rates.

Stay tuned to NASFAA’s Today’s News for more coverage of negotiated rulemaking sessions throughout the week, and read up on our previous rulemaking coverage

 

Publication Date: 2/16/2022


Darren C | 2/16/2022 2:24:01 PM

In my opinion Gainful Employment appears to be just another way that the Government wants to hold everyone accountable other than themselves. This is not a true solution to a broken economy from mandates, unemployment and overpriced education. The more they regulate everyone else, the less they are looked at for the very large role they play in the problems they say they are trying to help solve. Until someone takes a real look at the core of debt and education issues in this country, then things like Gainful employment will only create more paperwork and problems, while pushing accountability further away from ED. Trying to negotiate something like this in a few days’ time is not an honest attempt at providing any kind of solution.

Jeff A | 2/16/2022 10:31:56 AM

GE is such a complex issue, with such serious consequences. ED has to get this right. It can NOT be negotiated in good faith in one day, having only been provided proposed language in the 2nd session. Then one more day in the 3rd session. It has taken 3 weeks of negotiations previously, and still has produced a failed process that required over 100 Electronic Announcements, DCLs, hundreds of pages in the FR, and training after training after training, and it still was a failed administrative process at the least.

Justin B | 2/16/2022 10:20:18 AM

I feel it would be inappropriate to include PLUS loans into the D/E rates as that is the parent's loan unless it is a Grad PLUS loan. Additionally, at a previous cosmetology school, I worked for we did the alternate earnings appeal because under the main metrics and income data from SSA we failed the metrics. Upon completion of the alternate earnings appeal we discovered that many of our graduated students had made significantly more money in cash tips that they failed to report on their taxes and no government agency had a way to track their cash tips. We completed the appeal with a passing rate but it was a large administrative burden on us to compile that data and including us to need to hire an attorney to assist in the process to ensure compliance under those rules. If our industry is trying to remove and reduce administrative burden I feel reimplementing GE rules will be a big step backwards in that regard.

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