By Jill Desjean, Senior Policy Analyst
On Friday, the Department of Education (ED) issued proposed regulations on financial value transparency and gainful employment (GE).
ED negotiated gainful employment in a rulemaking session held in early 2022, where it also discussed institutional and programmatic eligibility topics including the 90/10 rule, ability to benefit, financial responsibility, certification procedures, and administrative capability. This is the first article in a three-part series delving deeper into the specific provisions of the proposed rules. See previous coverage on the 90/10 rule, released as a final rule on Oct. 28, 2022.
Negotiators did not reach consensus on gainful employment, leaving ED free to craft its own language for public comment. The proposal largely matches ED’s proposal from last year and reflects feedback the department considered during negotiations.
Financial value transparency was not negotiated through the rulemaking process. Instead, ED put out a request for information earlier this year asking for public comment on how it could go about identifying what it referred to at the time as “low-financial-value” programs.
NASFAA, in its response to ED’s request, expressed concern about labeling programs in such a way that might make earnings an outsized factor in the decision to pursue postsecondary education, noting the myriad non-financial benefits of higher education. Friday’s proposed regulations represent ED’s first attempt at regulatory language on the topic since it solicited public feedback on the concept in January. The department opted to provide students with both debt and earnings information, but notes in the latest proposal its desire to balance increased earnings against other, nonpecuniary goals students may wish to achieve through postsecondary education.
Metrics and Financial Value Transparency
The financial value transparency regulations apply to all programs at all institution types. The financial value transparency will use the same metrics as the gainful employment framework: annual and discretionary debt-to-earnings (D/E), and a new metric dubbed the “earnings premium,” or EP. The earnings premium would compare program graduates’ median earnings to those of a high school graduate (“earnings threshold”), and programs whose graduates’ median earnings exceeded the earnings threshold would pass the EP metric.
While ED would use the same metrics for both financial value transparency and for gainful employment, they will be used in different ways. The financial value transparency regulations relate exclusively to transparency. No penalties or sanctions are associated with the financial value transparency regulations.
It is only when these metrics are applied under the GE framework — which continues to apply only to non-degree programs, including diploma and certificate programs at public and private nonprofit institutions, and nearly all programs at for-profit institutions — that failure to meet those metrics could result in a program’s loss of Title IV student aid eligibility.
Programs would be categorized as “high-debt-burden” if their discretionary D/E rate is greater than 20% and their annual D/E rate exceeds 8%. Programs would be labeled “low-earning” if their earnings premium is negative or zero.
Disclosures related to whether a program was classified as low-earning or high-debt-burden would be added to a website created by ED, and institutions would be required to distribute information about how to access that website to students prior to enrollment. Students attending non-GE programs classified as high-debt-burden (failing the D/E metric) would also be required to acknowledge having viewed these disclosures (via a system developed and maintained by ED) before they could receive Title IV student aid. The acknowledgment would not be required for classification as low-earning (failing the EP metric).
ED would be required to issue a notice of determination each award year informing institutions of their D/E rates for each program, the earnings premium measure for each program, determination of whether each program is passing or failing the GE measures, and whether the institution is required to provide disclosures or warnings to students based on a program’s failure of any of the metrics.
The gainful employment regulations continue to determine Title IV eligibility for GE programs only (non-degree programs, including diploma and certificate programs, at public and private nonprofit institutions, and nearly all programs at for-profit institutions). GE programs that fail the same measure in any two out of three consecutive years would lose eligibility to participate in the Title IV student aid programs.
Institutional warnings to current and prospective students would be required for GE programs if the program they are enrolled in or considering enrolling in could lose Title IV eligibility based on its next published D/E rates or earnings premium. The GE warning would have to include a description of the academic and financial options available to students to continue their education, including transfer information, whether the institution would continue to offer a program, and whether it would refund tuition and fees if it lost eligibility to participate in the Title IV programs. Students would have to acknowledge having seen the warning before the institution could disburse Title IV student aid funds.
ED would not issue D/E rates for programs with fewer than 30 completers during a two- or four-year cohort period, or in cases where median earnings are not provided from another federal agency to ED. As with the 2014 GE regulations, ED would use a different cohort period for programs whose students must complete medical or dental internships or residencies. ED asks for public feedback about accommodating other fields that require a similar post-graduate working period during which earnings may be lower than for others working in the field.
Other provisions ED retains from the 2014 regulations include:
Using different loan amortization periods based on program credential level to calculate the debt portion of the D/E ratio
Including private education loan debt in calculating the debt measure of the D/E ratio
In cases where a student completed multiple programs at the same institution, all loan debt is attributed to the highest credentialed program that the student completed
Excluding from D/E and new EP rates students with loans discharged for total and permanent disability, students enrolled full-time in another eligible program, students who completed a higher credentialed undergraduate or graduate program, and students who have died
Metrics calculated only for program completers
Metrics calculated only for programs with at least 30 completers in the applicable cohort
Three-year minimum period of ineligibility after eligibility is lost
A significant change to the GE regulations from prior iterations is that disclosure requirements, detailed later in this article, will apply to all programs at all institutions. Non-GE programs could not lose Title IV eligibility for failing the GE metrics.
Other differences between the proposed GE regulations and prior versions include:
No loan repayment rate metric
Zone alternative eliminated
Use of median program completers’ earnings rather than the greater of the mean or median
Use of 6-digit CIP code for distinguishing programs
Students enrolled in prison education programs or CTP are excluded from D/E and EP rate calculations
Students whose loans are in a military-related deferment would now be included in calculating the D/E rate
Capping loan debt for D/E rates at net direct costs (tuition, fees, books, equipment, and supplies less institutional grants and scholarships)
Source of earnings data can include the Internal Revenue Service (IRS), Social Security Administration (SSA), Department of Health and Human Services (HHS), and the Census Bureau (ED indicates a preference to use IRS data)
If a program has fewer than 30 completers in a 2-year cohort, ED will use a 4-year cohort to calculate GE metrics provided there are more than 30 completers in the 4-year cohort
No alternate earnings appeal
Of note with respect to the proposed GE regulations versus what was considered during negotiations, ED has abandoned its proposed calculation of small program rates, whereby ED would combine all programs with fewer than 30 completers to calculate D/E rates and earnings premiums.
Reporting Requirements and Consumer Information
The proposed regulations impose a significant amount of additional institutional reporting for all programs (both GE and non-GE). Required student-level data reporting would include the start date of the student’s attendance, enrollment status during the award year, enrollment intensity, total annual cost of attendance total tuition and fees, residency tuition (e.g., in-state), total annual allowance for books, supplies, and equipment, total annual allowance for housing and food, amount of institutional grants and scholarship disbursed, amount of state, tribal, or private grants disbursed, and the amount of private loans disbursed, including institutional loans.
For program completers and withdrawn students, institutions would (again, for both GE and non-GE programs) have to further report the date of completion or withdrawal, total amount of private education loans for the program, total amount of institutional debt owed by the student, total tuition and fees assessed for the entire program, total allowances for books, supplies, and equipment included in the COA for the entire program, total amount of institutional grants and scholarship provided for the student’s entire enrollment. ED could require further reporting through an annual Federal Register notice.
GE programs would have to comply with the GE reporting requirements, for the second through eighth award year, by July 31 following the regulations’ effective date. Non-GE programs could follow the GE program requirements or choose to initially report only for the two most recently completed award years. Non-GE institutions choosing to report less data initially would have transitional D/E rates calculated that would factor only federal debt in the D/E rate and would not cap total debt at direct costs minus institutional scholarships. Annual deadlines after the initial year of reporting would be October 1.
The consumer information regulations are also amended to add that institutions must provide, on a website to be developed by ED, program information to be determined by ED and published in the Federal Register, which might include program data including occupations the program prepares students to enter, completion and withdrawal rates, program length, median earnings and debt, among other items. Program webpages would have to prominently display a link to the ED website containing this data and must be distributed to prospective and returning students.
In addition to the high-debt-burden and low-earnings disclosures mentioned earlier, consumer information requirements are updated to require Institutions offering programs designed to meet educational requirements for a specific professional license or certification to make readily available to prospective and current students a list of all states where the institution is aware that the program does and does not meet such requirements.
ED acknowledges the sizable burden associated with data reporting compliance given the rules are expected to become effective on July 1 of next year, giving just one month for institutions to provide this data. ED indicates plans to provide training in advance of the due date, and to enable reporting systems to accept optional early reporting several months before the deadline to help institutions prepare.
ED Modeling of Anticipated Impacts of Proposed Regulations
ED’s proposal includes modeling of potential outcomes of the proposed transparency and accountability measures.
Financial Transparency Measures for non-GE programs
870 public and 760 nonprofit degree programs (representing 1.2% and 1.6% of programs and 4.6% and 7.8% of enrollment, respectively) would fail at least one of the D/E or EP metrics.
127,900 students (1.1%) at public institutions and 273,700 students (6.8%) at nonprofit institutions are in programs with failing D/E metrics and would be required to provide acknowledgment of having seen this information prior to having aid disbursed.
Accountability Measures for Gainful Employment Programs
Failing programs are disproportionately represented by a small number of fields of study, and include cosmetology, medical administration and assisting, dental support, and massage.
Failing programs have higher shares of female, Black or Hispanic, low-income, and Pell Grant recipients than passing programs.
ED provides a burden estimate for the new reporting requirements of 103.5 hours for the first year, which includes establishing systems to extract this data, testing, validating, and submitting reports. The department estimates a 35% reduction in subsequent years because things like queries created to comply with reporting can be reused. ED argues that burden is mitigated by the fact that much of the new GE reporting was required in the 2014 rules and institutions likely already have systems in place to collect the data and report it to ED. As for non-GE programs, ED notes that 88% of public and 47% of private nonprofit institutions have at least one GE program and, further, that many institutions already report this data in the federal National Postsecondary Student Aid Survey (NPSAS).
The new consumer information reporting and disclosure requirements are estimated to carry a burden of 50 hours per institution.
The proposal is open for public comment until June 20, 2023. If ED publishes a final rule by Nov. 1, 2023, the rule would become effective July 1, 2024. Read Today’s News for more coverage of the remaining issues for which proposed regulations were released in this package.
Publication Date: 5/22/2023
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