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ACE Comments on Administration's Proposed Gainful Employment Rules

May 28, 2014

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​ACE was among the many organizations weighing in yesterday on the Department of Education’s (ED) proposed rules on gainful employment, the latest move in the Obama administration’s effort to ensure that individuals who enroll in career training programs will earn enough money to repay their student loans.

The regulations, which would take effect in 2015, are extremely technical—click here for a summary of the 845-page proposal. The basic provisions include:

  • Programs would be flagged as weak if the average loan payments of graduates consumed eight percent or more of total earnings or 20 percent or more of discretionary earnings.
  • Programs also would be flagged if the loan default rate for former students exceeded 30 percent.
  • Programs must satisfy the requirements of both tests or ED can refuse to extend financial aid to their students.

ACE’s comments, submitted on behalf of 17 higher education groups, express strong support for the gainful employment rules goal, which is to help potential students make prudent decisions about which higher education programs to pursue and assure those students a valuable educational experience.

However, the groups believe the proposed rules fall short of these goals, and moreover will impose a cost burden that will be felt most strongly at institutions with the fewest financial resources, especially community colleges.

Among the areas of concern the groups identify are that the proposed regulations are not well-targeted and provide no reasonable safe harbors for institutions operating in good faith within the system, and that the proposed metrics are too weak to be effective against underperforming programs.

“While we strongly share the department’s goal of protecting students and better serving taxpayers, the regulations need substantial revision along the lines we have proposed in order to meet those aims,” the groups write. “It will not benefit students, policymakers, or institutions to produce confusing and misleading data at great cost to all institutions with gainful employment programs while not adequately addressing the real problem of underperforming programs that represent a real risk to students.”

The road to final gainful employment regulations has been long and controversial. In 2012, a federal judge blocked elements of the final rule put forward by the department, which would have pulled federal student aid from career education programs whose graduates had high debt-to-income ratios and low student loan repayment rates.

The department’s appeal of that ruling was denied in March 2013, and it declined further judicial actions, deciding instead to convene another negotiated rulemaking panel to craft a new set of rules. However, that panel failed to reach a consensus in December, leaving it up to ED to move forward with its favored approach.

Final regulations are expected to be released by November 1.

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