Education Industry Reporter

Very Few Changes Between Draft Gainful Employment Rule and One Published in the NPRM

Posted in Uncategorized

Dennis Cariello

As we reported yesterday, the Department of Education (Department) released the Notice of Proposed Rule Making (NPRM) for the gainful employment rule this morning.  The NPRM is long – 841 pages in the pre-publication format.  While we will have more on this topic as we pour through the NPRM, it looks like the proposed rule is very similar to the version discussed at the December 13, 2013 negotiated rule making session.  One change is that the Department will only review programs with 30 or more completers – rather than 10 completers as originally proposed.  Also, it appears that the Department will be using a graduated amortization  rate (10 years for certificate and associates programs; 15 years for bachelor’s and master’s degree programs; and 20 years for doctoral and first-professional degree programs)  for determining the annual loan payment .

Department of Education to Release Gainful Employment Rule Tomorrow Morning

Posted in Gainful Employment, Higher Education News, Higher Education Policy, Uncategorized

Dennis Cariello

Politico has just reported that the Department of Education will be releasing the gainful employment rule tomorrow morning.  From the reports, it appears that the rule is substantially similar to the one discussed at the December 13, 2013 negotiated rule making session.   The rule should appear on the Department’s website Friday morning.

Department of Education Sends Proposed Gainful Employment Rule to the Office of Management and Budget

Posted in Gainful Employment, Higher Education News, Higher Education Policy, Uncategorized

Dennis Cariello

As reported on the website for the Office of Management and Budget (OMB), on January 30, the Department of Education (Department) sent its version of the gainful employment (GE) rule to OMB (specifically, the Office of Information and Regulatory Affairs (OIRA)) for review.  Pursuant to Executive Order 12866, this review process typically lasts up to 90 days, with a possibility of a 30 day extension – although it is possible for this process to take longer.

For those that haven’t been following the ins and outs of the GE negotiated rulemaking, in late August/early September the Department proposed a “gainful employment” rule designed to impose a return on investment calculation for programs that are designed to lead to gainful employment in a recognized profession (namely, nearly all programs at proprietary schools, and certificate programs at nonprofit schools).  This proposal was very similar in form to the rule it published in 2011, containing debt-to-income and debt-to-discretionary income measures, but without the repayment rate that was invalidated by a judicial decision in June 2012.  In November, it greatly modified that proposal, including a programmatic cohort default rate — that is, applying the institutional cohort default rate regulations to each program — and added a repayment rate metric, which requires that the relevant cohort of borrowers (all students that left a program in their third and fourth years of repayment) have reduced the principal amount of the loans owed during the cohort period (the portfolio cannot be “negatively amortized”).  In December, however, the Department further revised the proposal, including eliminating the repayment rate metric.  For those interested, the Department maintains a website that has all the proposals from the Department and the negotiators, as well as additional data and analysis.

Given the fairly quick turnaround from the last session (December 16, 2013), my guess is the GE rule at OMB now is fairly consistent with the rule proposed prior to the December 16 negotiation session.  This would mean that a few of the December changes to the rule – (1) the lack of  a repayment rate; (2) a programmatic cohort default rate of 40% or more is no longer grounds for immediate loss of Title IV eligibility; (3) programs can avoid failing by providing students with institutional scholarship to reduce their debt burden; (4) programs are only charged with the debt incurred by students up to the level of tuition and fees charged – would likely be in this version.  It is unclear what the Department would do with other ideas expressed at the negotiation table, but for which there was a lack of data or time to evaluate.  One such proposal was exempting “exceptional performers” — schools with a three-year Cohort Default Rate below 10% — from having to comply with the rule.

Pursuant to Executive Order 12866 (as amednded by Executive Order 13563), OIRA must provide the public with “meaningful participation in the regulatory process.”  This typically means that persons or entities effected by a proposed rule may attempt to schedule time with OIRA to discuss the rule.  This can be a useful meeting, as OIRA typically reviews proposed regulations with a different perspective than the issuing agency.  However, a log of such meetings is publicly available (non-federal employee attendees are listed) and documents provided to OIRA can also be made available to the public.

Article on OCR’s Letter Regarding Rights of Disabled On Rights of Disabled Students to Participate in Extracurricular Activities

Posted in Athletics, Civil Rights & the Constitution, Department of Education, Higher Education News, Higher Education Policy

Dennis Cariello

A few months back, we discussed a dear colleague letter the Department of Education’s Office for Civil Rights published related to the rights of of disabled students to participate in extracurricular activities.  Subsequently, we had the opportunity to publish a longer article in Bloomberg/BNA Law Week.   As always, your comments are most welcome.

In the Tax Reform Crosshairs: The Advertising Deduction

Posted in Higher Education News, News from the Hill, Tax Issues

Dennis Cariello

Under current law, advertising costs are fully deductible as an ordinary business expense. As our DLA Piper colleagues Evan Migdail and Bruce Thompson write in a new client alert: “Both the House and Senate Tax Committee chairmen are considering proposals to limit the deduction for advertising expenses.”

As they report, Senate Finance Committee Chairman Max Baucus (D-Montana) has released a detailed discussion draft on business tax reform which includes a proposal to limit the advertising deduction to 50 percent, with the balance amortized over 5 years.  In that proposal (see page 104),  an “advertising expenditure” is defined (starting on page 105) as any expenditure paid or incurred for the development, creation or placement of advertising, or for any similar activity with respect to advertising. “Advertising” is defined as any message or other programming material which is broadcast or otherwise transmitted, published, displayed or distributed and which promotes or markets any trade or business, service, facility or product.  Importantly, “any amounts paid to employees and contractors for performing sales functions” are excluded from the definition of advertising.

Crucially, “House Ways and Means Committee Chairman Dave Camp (R-Michigan) is said to have a similar provision in his tax reform plan – which has yet to be released – limiting the deduction to 50 percent, with the balance amortized over 10 years.”  Given the apparent agreement on this point (at this time), this proposal must be treated as serious.

It remains to be seen, however, whether certain functions – such as online lead generation – will be classified as “advertising” or whether amounts paid for lead will be classified as “amounts paid to . . . contractors for performing sales functions.”

For more, please look at the client alert.

According to New NCES Study, Proprietary Higher Education Reduces Costs for Students by Over 10% Since 2007-08

Posted in Department of Education, Higher Education News, Uncategorized

Dennis Cariello

Yesterday, the National Center for Education Statistics released the 2011-2012 National Postsecondary Student Aid Study.  This report focuses on the average price of attendance paid by students to attend institutions of higher education (price of attendance includes tuition, fees, books and materials, housing, food, transportation, and personal expenses), and also specifies the “net price” (price of attendance, less grants) and the out-of pocket expenses (price of attendance, less grants and other aid, such as loans or work study).

There are a few findings of note, as we try to show below, which is derived from Tables 1-3 in the study:

2011-12 – Full Time Undergraduate Students

Institution Type

Public 2-year Public 4-year Private Nonprofit 4-year Private For-profit 2-year Private For-profit 4-year Private For-profit 2-year or more
Annual Price of Attendance $15,000 $23,200 $43,500 $29,700 $29,200 $29,200
Net Price $7,100 $14,300 $23,000 $18,600 $16,600 $17,100
Net “Out of Pocket” $6,000 $9,600 $15,000 $12,400 $9,000 $9,900

2007-08 – Full Time Undergraduate Students

Institution Type

Public 2-year Public 4-year Private Nonprofit 4-year Private For-profit 2-year or more
Annual Price of Attendance $13,600 $20,400 $38,800 $32,900
Net Price $6,400 $13,200 $22,300 $20,300
Net “Out of Pocket” $5,600 $8,800 $14,200 $11,500

From the chart below, what we see is that while higher education overall has increased the cost of attendance over the last four years, for-profit institutions have actually reduced the cost of attendance:

Institution Type

Public 2-year Public 4-year Private Nonprofit 4-year Private For-profit 2-year or more
2011-12 Annual Price of Attendance $  15,000.00 $  23,200.00  $  43,500.00  $  29,200.00
2007-08 Annual Price of Attendance $  13,600.00 $  20,400.00  $  38,800.00 $  32,900.00
Difference  $    1,400.00  $    2,800.00  $    4,700.00  $  (3,700.00)
Percentage Change





2011-12 Net Price of Attendance  $    7,100.00  $  14,300.00  $  23,000.00 $  17,100.00
2007-08 Net Price of Attendance  $    6,400.00  $  13,200.00  $  22,300.00  $  20,300.00
Difference  $        700.00  $    1,100.00  $        700.00  $  (3,200.00)
Percentage Change





Note, I have not considered students as a whole because part time students, which are disproportionally located at for-profit and 2-year public colleges, would have the effect of lowering the average and net price price.  So, by looking at full-time student, we get a fairly apples-to-apples comparison.


The reduction in cost of attendance at for-profit schools, relative to the industry, is fairly dramatic.  Looking at net price – which is fairer to private non-profits which commit substantial sums to institutional scholarship – we see a significant reduction in the cost gap between for-profit schools and public colleges.  In fact, on average, a four-year public college will only cost $2,300 less (net price) than one at a for-profit 4-year college.

There are, no doubt, reasons for all of this.  Declining state expenditures on higher education have forced public institutions to raise tuition.  On the other hand, proprietary schools, and to a lesser extent, private non-profit institutions, have had reasons to reduce price or commit to large institutional scholarships to attract students in the face of declining student demand.  It is, however, a positive story that proprietary institutions have responded to consumer demand and reduced price.  I do wonder how much further price would be lowered if the 90/10 rule were repealed.

Notes from the FSA Conference Day 1

Posted in Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy

Patricia V. Edelson

As usual, the it is a well attended conference Federal Student Aid (FSA) Conference here in Las Vegas is well attended.  It is nice to catch up with so many friends from schools and the Department of Education.  It is also a great opportunity to here about the upcoming initiatives for FSA and what FSA thinks schools should be focusing on.

The first day of the conference opened with a General Session and welcome.  The presenters for this session were FSA COO Jim Runcie, Jeff Baker, and Lynn Mahaffie.   They provided various updates concerning Department of Education’s Title IV activities and initiatives.  They also mentioned that there will be an experimental site announcement in an upcoming federal register.  Also, FSA encouraged schools to adopt the Shopping Sheet that was introduced last year.  While it is still not a requirement except for military students, currently 19,000 schools have signed up to use it.

One hot topic was the impact of the unconstitutionality of the Defense of Marriage Act (DOMA) on student aid. As you may recall, last term, the Supreme Court overturned DOMA and, as a result, the federal government must recognize marriages between same sex couples for federal benefit purposes.  For aid purposes, this means that if a student (or parent of a dependent student) is legally married they would file the FASFA as married, regardless of gender. This is effective in the current year and appropriate language will be included in the 2014/2015 FAFSA. Students (or parents) who are in a same sex marriage, but who already filed their 2013/2014 FAFSA, but could have filed married at the time they filed, may now correct their ISIR and file married. They may correct marital status, but are not required to. New filers must file married and a DCL will be coming out early next week with guidance. “Legally married” applies regardless of State of current residence. Conversely, if parents aren’t married but living together they will be required to report both incomes.

New on the verification horizon, the Department has eliminated the verification group V2, which required verification of SNAP benefits and added a new Group V6 that will require verification of income in cases where income and household size are inconsistent.

The upcoming negotiated rulemaking sessions were also discussed, and special note was made of the upcoming sessions related to VAWA and the Clery Act regulations, as well as the use of third parties to disburse Title IV aid.


Primer on Negotiated Rulemaking

Posted in Department of Education

Dennis Cariello

Given all the current and future negotiated rulemaking sessions fro the U.S. Department of Education (Department), it might be helpful to take a look at the Department’s FAQs on the Negotiated Rulemaking Process.  Also, here is the relevant statute concerning negotiated rulemaking.

Supreme Court Declines to Hear Liberty University’s Challenge to Affordable Care Act Suit

Posted in First Amendment, Health Care, Higher Education News

Dennis Cariello

As reported by multiple sources on Monday, the U.S. Supreme Court  declined to wade into the constitutionality of the Affordable Care Act’s (ACA) employer mandate.  Liberty University, a Christian university in in Lynchburg, Virginia, challenged the law’s employer coverage requirements, individual mandate and contraception coverage requirements as violative of the commerce clause.  Of particular note was Liberty University’s argument that the ACA and its implementing regulations violated the university’s religious rights by forcing Liberty University and its officials to fund abortions and to provide contraceptives.  While a lower court upheld the law in Liberty’s case, the Supreme Court took two other cases, brought by the Hobby Lobby craft-store chain and Conestoga Wood Specialties, that focus specifically on the law’s contraception coverage requirement and these for-profit companies’ claim of religious exemption.

On December 3rd, House Subcommittee to Discuss Proposals to Strengthen Pell Grant Program

Posted in Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

On Tuesday, December 3rd at 10:00 a.m. in room 2175 of the Rayburn House Office Building, the Subcommittee on Higher Education and Workforce Training, chaired by Rep. Virginia Foxx (R-NC), will hold a hearing entitled, “Keeping College Within Reach: Strengthening Pell Grants for Future Generations.”  The hearing will be webcast for those not able to attend.

The witnesses for the hearing will be:

Mr. Justin Draeger
President and CEO
National Association of Student Financial Aid Administrators
Washington, D.C.

Dr. Jenna Ashley Robinson
Director of Outreach
John W. Pope Center for Higher Education Policy
Raleigh, North Carolina

Mr. Michael Dannenberg
Director of Higher Education and Education Finance Policy
The Education Trust
Washington, D.C.

Mr. Richard C. Heath
Director, Student Financial Services
Anne Arundel Community College
Arnold, Maryland