Nearly two months ago, the U.S. Department of Education published proposed regulations intended to define postsecondary educational programs that train students for gainful employment in a recognized trade or business. These "gainful employment" regulations are the Department's attempt to identify ineffective
programs that unduly burden students with debt.
Under the proposed regulations, gainful employment programs are measured by comparing the debt incurred by graduates with the incomes earned by such graduates. If the debt-to-earnings ratio for a particular program meets the Department's standards, then students at that school remain eligible for participation in the federal student aid programs. If the program's debt to earnings ratio exceeds the Department's standards, then the institution and its students risk losing the ability to participate in the federal student aid program.
Under the proposed regulations, gainful employment programs are measured by comparing the debt incurred by graduates with the incomes earned by such graduates. If the debt-to-earnings ratio for a particular program meets the Department's standards, then students at that school remain eligible for participation in the federal student aid programs. If the program's debt to earnings ratio exceeds the Department's standards, then the institution and its students risk losing the ability to participate in the federal student aid program.
Public comment with respect to these proposed regulations ends on Tuesday, May 27, 2014. After reviewing these proposals and analyzing data published by the Department, I have significant concerns regarding the proposed rules.
As commented in an earlier posting, I am concerned that if these proposed regulations are implemented as drafted they will negatively impact student access to postsecondary education. The proposed regulations do
not focus on program outcomes such as graduation rates, student licensure rates
or graduate job placement rates. Program eligibility is tied solely to
the debt-to-earnings ratios of the program's graduates. A program's
graduates may actually be repaying their federal student loans.
Theoretically a school could have 0% loan default rate. Nevertheless, if
earnings are not enough when compared to debt levels, then participation in the
federal student aid programs may be jeopardized.
By focusing solely on debt and earnings ratios, the
Department will actually limit access to postsecondary education for those who
need it the most. Focusing solely on students' economic outcomes
place schools located in economically challenged areas in jeopardy. Jobs are harder to attain in such areas.
Schools located in more affluent locations with identical program
offerings would have an advantage in their efforts to satisfy the Department's
proposed standards. As drafted these
regulations may actually work to limit access to potential students who most
need an education to improve their job and career opportunities.
Measuring repayment rates and debt-to-income ratios is
simply not an accurate or fair indication of a particular school’s program
effectiveness. Even if reliable income
and debt data could be obtained, the proposed rules do not recognize what may
be significant fluctuations in any field that are dictated by economics which
are beyond the control of the student or the school.
Another significant flaw with the proposed regulations pertains to the students who are included in the Department's calculation of a program's debt-to-earnings ratio. Under the proposed regulations, the definition of “student” excludes those who do not
participate in the federal student aid programs. The
Department defined “student” in this manner in response to issues raised from
the federal court’s decision that invalidated much of the first version of the
gainful employment regulations. However,
inclusion of those students would reduce a school’s median debt number, which
in turn would improve its debt-to-earnings metric. Under the proposed regulations the
only way to get these students into the school’s cohort is for the student to
take federal loans.
The definition
of “student” should be revised to include all students who file an application to participate in the federal student aid programs (the Free Application for Federal Student Aid, or FAFSA),
whether or not the student ultimately borrows.
If the student files a FAFSA, then he or she can be included in the school's cohort
without running afoul of the prohibitions stated in the prior court cases. Not only would this remove a perverse
incentive to increase student borrowing, but also more accurately and fairly
evaluates school performance by creating a method for inclusion of all students
in the cohort.
The proposed regulations also create a new layer of rules that
are unnecessary and create significant additional administrative burdens. State regulatory agencies and national
accreditation boards currently monitor educational program effectiveness. Student completion rates, state licensing
exam pass rates, and job placement are all measured by state and accrediting
agencies. Schools failing to meet
minimum performance requirements risk losing their licensing and/or
accreditation, which ultimately leads to the loss of eligibility to participate
in the federal student aid programs. With
respect to actual loan repayment rates, the Department evaluates institutional
cohort default rates.
These rules already exist, and provide a much more direct
measure of not only educational program effectiveness but actual student loan
repayment. The proposed regulations will
create an extreme administrative burden on schools and tax already limited
Department resources. The Department
will need to coordinate efforts to develop effective, reliable and trustworthy
data sharing with the Social Security Administration for millions of students. Given the stakes for schools who fail to attain
the proposed thresholds, the Department will need to devote significant resources
to manage appeals related to student debt calculations, student earnings
calculations, and programmatic cohort default calculations.
There is simply no need to add this level of complexity and
burden to students, schools and the Department.
State regulatory agencies and accrediting agencies already monitor
school performance. The Department
already monitors actual student repayment rates through the cohort default rate
system. All schools are subject to
strict oversight requirements as it relates to student information disclosures,
and face significant administrative penalties and legal exposure for
misrepresentation of school performance.
Adding the additional level of complexity associated with the proposed
gainful employment regulations does not provide any additional meaningful
protection to students and creates significant administrative burdens not just
to schools but to the Department as well.
Finally, I am concerned that the
Department’s actions in promulgating these proposed regulations were not conducted in good faith.
For one example, I am troubled by the limited time offered by the
Department to the negotiated rulemaking process. As initially proposed, the Department offered
only two negotiated rulemaking sessions, and subsequently added a third one-day
session. In total seven days were spent
in the negotiated rulemaking process as it relates to gainful employment. In comparison, the Department has devoted
four separate sessions consisting of eleven total days to the negotiated
rulemaking for the program integrity rules.
With all due respect, and without in any way denigrating the importance
of the program integrity rules, the potential impact of the proposed gainful
employment regulations is exceedingly more important to students, families, schools
and the Department. I can conceive of
no justification for the Department spending more time in negotiating the
program integrity rules as compared to gainful employment.
In addition, the proposed debt-to-earnings metrics contained in the
proposed regulations seem to be punishing schools for the federal court’s
decision that invalidated most of the first set of gainful employment
regulations. In the first set of
published gainful employment regulations, the Department established passing rates
for schools at 12% debt-to-earnings and 30% for discretionary income. In the current version these thresholds have
been reduced to 8% and 20%, respectively.
This suggests that the prior debt-to-earnings and discretionary income
metrics, which the Department supported and the federal court upheld, could be viewed
as arbitrary. The fact that the Department is now second-guessing its own
decision-making, proposing a much more complex approach, while at the same time
reducing the eligibility assessment period – these actions suggest either a
lack of justification for the prior metrics and/or efforts to be intentionally more punitive in constructing the latest proposal.
I recognize and certainly approve of the Department's goal to identify ineffective educational programs that leave students with excessive debt loads. However, significant state and federal regulations as well as accreditation oversight already exist to ensure quality education standards and to punish ineffective programs. Furthermore, I believe that the proposed gainful employment regulations will limit student educational choices without providing meaningful benefits. I encourage the Department to reconsider its approach and to develop final rules that will effectively protect the public interest and assist schools in delivering the highest quality education that our workforce requires.
I recognize and certainly approve of the Department's goal to identify ineffective educational programs that leave students with excessive debt loads. However, significant state and federal regulations as well as accreditation oversight already exist to ensure quality education standards and to punish ineffective programs. Furthermore, I believe that the proposed gainful employment regulations will limit student educational choices without providing meaningful benefits. I encourage the Department to reconsider its approach and to develop final rules that will effectively protect the public interest and assist schools in delivering the highest quality education that our workforce requires.
