Neg Reg Day 3: Negotiators Far From Consensus on Gainful Employment Regulations

By Owen Daugherty and Hugh T. Ferguson, NASFAA Staff Reporters

The third day of the final session of the Institutional and Programmatic Eligibility negotiated rulemaking committee saw a consensus vote taken on the much debated gainful employment (GE) proposed regulations from the Department of Education (ED) take place despite frustrations from some committee members that sufficient time was not allocated to discuss such an important topic.

After all of Tuesday was dedicated to discussing the GE issue paper, the committee started Wednesday by wrapping up discussions on the topic before taking a consensus vote.

Six negotiators issued “no” votes, with each expressing their reasoning behind why they were unable to support the proposed regulations.

The six negotiators were: Brad Adams, a negotiator on behalf of proprietary institutions; Anne Kress, a negotiator on behalf of two-year public institutions; Emmanuel Guillory, a negotiator on behalf of non-profit institutions; Marvin Smith FAAC®, a negotiator on behalf of four-year public institutions and a NASFAA member; Ashley Schofield, a negotiator on behalf of minority-serving institutions (MSIs); and David Peterson, a negotiator on behalf of financial aid administrators and also a NASFAA member.

A common sentiment among those casting “no” votes was that they are in favor of GE regulations, but could not agree with the details of this proposal, with several citing the rushed nature of the process that allowed limited time for discussion, and ED’s unwillingness to compromise on important issues.

Peterson said he entered into negotiations excited to discuss gainful employment and was unhappy that the committee was unable to come to consensus. He cited uncertainties with the new small program rates, the lack of a transitional rate, and the appeals process as proposed as his reasons for withholding consensus.

Smith expressed similar thoughts to Peterson and the other negotiators, saying the current GE regulations being considered have him worried that institutions will question whether it's worth the risk of offering GE programs to low-income students.

The committee then moved on to discussing the financial responsibility issue paper, including ED’s proposed changes to  discretionary and mandatory triggering events.

Before diving into discussion on financial responsibility, Ernest Ezeugo, a negotiator on behalf of students and student loan borrowers, chided negotiators who voted against the GE regulations, saying that the public perception is that they aren’t putting students’ interests first.

“All of the dissents for gainful employment … seems to trend on everybody wants gainful employment, but no one wants to keep any schools out. Everybody wants to protect students but doesn't want to do what's necessary to do that,” he said.

The committee then began discussion on financial responsibility, starting with mandatory triggering events. Adams took issue with ED’s addition of new language that would make a creditor’s action calling due a balance on a line of credit a mandatory trigger, noting that this is a common practice among creditors and may have no bearing on the institution’s financial responsibility. He requested clarifying language that such actions would only constitute a mandatory trigger when they were taken because of an institution’s financial troubles.

Adams also called on the department to remove language proposed in an earlier session that establishes a new mandatory trigger when an institution is subject to two discretionary triggers in a fiscal year, arguing that the secretary of education already has the discretion to make any triggering event a mandatory trigger.

However, Carolyn Fast, a negotiator on behalf of consumer advocacy organizations, pushed for keeping the proposed language, saying the department has historically been slow to respond to discretionary triggering events given other priorities, and that a mechanism is needed to identify major issues and ensure protections can be put in place.

Other negotiators supported Fast and wanted two discretionary triggers to become mandatory, arguing that it provides timely protection for students.

The committee then picked up with the change of ownership section, but at  the start of the afternoon session there were significant issues with the public-facing live feed in which some clarity over the discussion was adversely impacted.

ED noted that there were issues with the video component of the live feed but said that the audio quality was sufficient for the purposes of continuing with the negotiations. Following these sessions ED does provide a link to the recording so it is possible that better quality video will be available at a later date.

When the committee turned to a vote, they did not reach consensus on the issue paper.

Adams was the lone “no” vote and cited, in addition to concerns already noted, his serious reservations with new language that an institution receiving more than 10% of Title IV revenue from failing GE programs would constitute a mandatory trigger. He argued that the 10% of Title IV revenue could represent a single GE program’s failure.

The committee then turned to a walkthrough of the change of ownership and change in control issue paper, where ED highlighted changes in the definition of a nonprofit institution, intended to be non substantive changes made for clarity.

New language added from the last session states that, in order for an institution to be classified as a nonprofit institution, the institution would not enter into or maintain a revenue-sharing agreement with any party, or be a party to any other agreements (including lease agreements) with a former owner of the institution, unless payments made under such an arrangement are reasonable based on the market price or fair market value.

Several negotiators expressed concern about the addition of the qualifying language related to reasonableness, market price, and fair market value, arguing that the language could unintentionally provide a safe harbor for problematic deals. Others noted the difficulty ED would have with assessing fair value given the likely lack of comparable transactions given their unique nature.

Here, committee members urged ED to return to language in an earlier version of the issue paper, which negotiators said would provide more flexibility to ED — a suggestion that ED was amenable to and agreed to gauge the full committee’s interest on Thursday morning.

In the public comment period, members of the public discussed student veteran experiences with higher education, the 90/10 rule, concerns over GE’s impact on cosmetology programs, and student loan debt financing.

During Thursday’s session the committee will return to the change in ownership and control issue paper. Facilitators urged negotiators to look  back at previous issue papers on this topic to revisit language that would be discussed for a temperature check to start Thursday’s session. That proposed temperature check is meant to indicate whether members would be more comfortable with ED using language in the session 2 agenda, which was conducted in February. 

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: 3/17/2022


David S | 3/24/2022 2:33:31 PM

Peter - I don't think anyone who supports GE thinks that it's the only protection for students; that's why we have accreditation and standards for administrative capability and regulations to follow. But like it or not - whether it's even true or not - the student/borrower negotiator is absolutely right; a vote against GE is definitely perceived by the public (as well as regulators and elected officials) as schools protecting their own interests ahead of those of the students we serve. Opposing GE makes us look as though we're trying to hide something.

No, the feds are not going to pay for this labor. And no one - the government, students, parents, elected officials or taxpayers - cares that it's a lot of work. I've been in this business a long time, and about 99.9% of the concern I've heard about administrative burden on financial aid professionals comes from financial aid professionals. No one else cares.

Peter G | 3/18/2022 12:53:30 PM

"Ernest Ezeugo, a negotiator on behalf of students and student loan borrowers, chided negotiators who voted against the GE regulations, saying that the public perception is that they aren’t putting students’ interests first...Everybody wants to protect students but doesn't want to do what's necessary to do that."

I think this passage highlights the problem with the makeup of the current committee, in that the majority seems to view student interest primarily if not only through the lens of protection from bad actors, when in reality student interests are much more complex and often in tension in a larger policy and educational ecosystem.

I say this from the standpoint from a community college that had 50+ GE programs and not a single one fail in the last GE regime. It's not like the federal government is proposing to pay for this labor - the re-implementation of GE is going to come at a significant investment of time and money that our students are going to pay in increased costs and/or reduced service at a time community college budgets are already under tremendous strain.

Protection is absolutely a significant consideration, but in most policy spheres including this one, it can't be the only. If it were we would require cars to have speed governors of 50 mph and 2 feet of shock absorbent bubble wrap.

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