The Department of Education (ED) announced last month that it would rescind the Obama administration’s gainful employment rule, which penalized certain higher education programs that graduated students with too much debt relative to their earnings. Along with 21 other higher education groups, ACE submitted comments today on this proposal, advising ED to revise rather than eliminate the existing rule.
Under the 2014 rule, ED calculates an annual student debt payment for graduates of certificate programs at all schools, as well as degree programs at for-profit institutions. It then compares the estimated payment to those graduates’ typical earnings. Generally, if the debt-to-earnings ratio exceeds a set threshold for two years in a row, that program fails the gainful employment test and its students lose access to federal student aid.
ED is proposing to simply replace the rule with additional disclosures on the College Scorecard at some point in the future.
The associations write that the 2014 rule, while not perfect, addressed a serious problem and was targeted where the abuse occurred and where the department had clear statutory authority to act. They are particularly concerned that ED is proposing to rescind the existing rule prior to developing a viable alternative, as this will leave a meaningful gap that could hurt students.
Of particular concern is the impact on the Pell Grant program if this approach moves forward. According to ED’s own estimates, $4.5 billion in Pell Grant funding would go to programs that otherwise would not be eligible under existing regulations.
“Considering the importance of Pell Grants and the difficulties involved in providing sufficient funding to meet student needs, it is troubling that the Department is considering a move that would significantly increase the cost of Pell Grants by directing those additional funds to programs that demonstrate poor returns for students,” they wrote. “Taxpayers have a clear interest in seeing that the federal government is a careful steward of the funds it disburses, and the proposed rule runs counter to that.”