The Department of Education (ED) released new draft rules for career education programs on Friday, an effort to ensure students who enroll in these programs will earn enough money to repay their student loans.
The road to final regulations in this area—known as “gainful employment”—has been long and controversial. A federal judge previously blocked parts of the gainful employment rule proposed in 2011, which would have pulled federal student aid from career education programs whose graduates had high debt-to-income ratios or low loan repayment rates.
ED’s appeal of that ruling was denied in March 2013 and the department declined further appeals, 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.
The fundamental provisions of the latest proposed regulation, which would take effect in 2016, include:
- Programs would be flagged as weak if their graduates’ average loan payments consumed 8 percent or more of their total earnings or 20 percent or more of their discretionary earnings.
- Programs also would be flagged if the loan default rate for former students exceeded 30 percent.
- ED would refuse to extend financial aid to students enrolled in a program that failed those tests two out of three consecutive years.
After the proposal is published in the Federal Register, which should be sometime this week, there will be a 60-day public comment period followed by another review of the regulation’s impact by the administration.