On March 25, 2014, the Notice of Proposed Rule Making (NPRM) on Gainful Employment was published in the Federal Register. The 291 page proposal begins a 60-day public comment period that will be followed by another White House review of the impact of the regulations. Comments must be received on or before May 27, 2014 and may be submitted through www.regulations.gov. Instructions for submitting comments can be found in Federal Register.
Under the proposal, gainful employment programs must satisfy two different standards relating to student loan debt. The debt to earnings metric will be used to evaluate the amount of debt students incurred in a program in comparison to their discretionary and annual earnings after completing the program. Programs would fail the metrics if the annual debt-to-annual income exceeded 12 percent and the debt-to-discretionary income exceeded 30 percent.
The proposal also adds a “zone” that was not part of the 2011 rules: programs with debt-to-income ratios of 8 to 12 percent or debt-to-discretionary-income ratios of 20 to 30 percent would fall in “the zone,” and would therefore have to warn students that they might become ineligible for aid.
A program would become ineligible after failing both debt-to-income tests in two out of any three consecutive award years instead of in three out of any four consecutive fiscal years as the 2011 rules provided. In addition, programs that failed both debt-to-income tests or were in the zone for four consecutive years, or any combination of the two, would be ineligible for federal student aid.
The proposed rules incorporate a transition period that would apply during the first four years of implementation. During the transition period, an alternative D/E rates calculation would be made so that institutions could benefit from any immediate reductions in cost they make. During these four years, the transition period and zone together would allow institutions to make improvements to their programs in order to achieve a passing status.
The second proposed metric is the Program Cohort Default Rate (pCDR) and replaces the loan repayment metric that was blocked by the 2011 court ruling. This new metric looks at the share of a program’s former students who default on their loans; regardless of whether they completed the program. For the pCDR metric, programs would lose eligibility if the pCDR is 30 percent or higher for three consecutive years.
The final rules are anticipated to be published in the Federal Register on November 1, 2014 with an effective date of July 1, 2015. Schools will have until July 31, 2014 to report data on students who were enrolled in their gainful employment programs for the prior six years (08/09; 09/10; 10/11; 11/12; 12/13 & 13/14).
For additional information on the Gainful Employment rulemaking effort, please see the OPE website at:
You can access the Federal Register at: http://www.gpo.gov/fdsys/pkg/FR-2014-03-25/pdf/2014-06000.pdf