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Gainful Employment

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Gainful Employment Notice Published

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

As promised, here is the pre-publication version of the gainful employment rule, complete with Preamble (the informal text of the Rule was published earlier) as will be published int eh Federal Register tomorrow.  I suggest you pack a lunch if you are going to read it – the file comes in at 945 pages strong.  Of course, we will do the hard work so you don’t have to – stay tuned to the blog for further updates.

Department of Education Releases Gainful Employment Rule – Eliminates Proposed Programmatic Cohort Default Rate

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

Dennis Cariello

As most readers of this blog probably know by now (around 8:00 am on the east coast), the Department of Education (“Department”) will publish the “gainful employment” rule (“GE Rule” or “Rule”) later this morning.  The informal text of the rule has been made available, although the full draft notice has not been published yet on the Department’s GE website.  In sum, the Rule seeks to impose a return on investment metric to higher education programs at proprietary colleges and on one-year programs at any school (regardless of tax status).  Early reports on the Rule (from Inside Higher Ed and the Chronicle of Higher Education) indicate at least one major variance with the draft rule published in March 2014 – the new programmatic cohort default rate has been eliminated.  The proposed debt-to-income metrics have not been changed.  As this fact sheet explains, the Department estimates approximately 1,400 programs – effecting 840,000 students will be effected.

We will discuss these issues more later this morning when we review the draft text.  In the meantime, here are a few interesting comments/whitepapers that came out of the notice and comment period on the rule:

  • APSCU presentation that reviews the rule and synthesizes the Charles River Report;
  • Mark Kanterowitz’s white paper on the GE Rule;
  • Chris Ross of the Parthanon Group did an analysis of the rule form a student characteristic perspective;
  • Mark Schneider’s report of the American Enterprise Institute on how public and private; and non-profit schools would perform under the GE Rule’s metrics.

Department of Education Releases Updated Gainful Employment Template

Posted in Department of Education, Gainful Employment

Dennis Cariello

While higher education waits for the final version of the gainful employment rule, the U.S. Department of Education recently released an updated template for disclosures required under the existing gainful employment rule.  Institutions must, no later than January 31, 2015, update the disclosures for each of their GE programs to reflect the 2013-2014 award year using the updated disclosure template.

The Department’s release explains that the updated GE Disclosure Template:

  • Provides the institution name on the output screens;
  • Includes an option for “graduate certificate” as a credential level;
  • Has improved printing capability;
  • Allows institutions with programs of different lengths, but the same CIP code and credential level, to use the bulk upload tool;
  • Contains an updated list of standard occupational classification (SOC) codes that institutions may identify as associated with the program;
  • Contains improved skip logic for programs with fewer than 10 program completers;
  • Ensures that the output document will be accessible to individuals with disabilities (i.e., compliant with section 508 of the Rehabilitation Act); and
  • Provides optional context boxes for the institution to provide additional explanations and clarifications.


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.

Final Gainful Employment Rulemaking Session Scheduled for Friday, December 13

Posted in Department of Education, Education Data & Statistics, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

Politico’s Libby Nelson, in today’s “Morning Education” email (and in a tweet on Black Friday) reports that the U.S. Department of Education “has scheduled its third session of negotiated rule-making on the ‘gainful employment’ rule for Dec. 13 from 9 a.m. to 5 p.m. at the Education Department’s 1990 K St. offices, according to an email sent to negotiators Friday.”  This is also the last day of the next NACIQI meeting (the Department’s advisory committee on accreditation).  In case you are curious, 1990 K Street is no where near 415 New Jersey Ave. NW. (where the NACIQI sessions will be held).

As you may recall from our past reporting, one of the purposes of this session is to review data on the anticipated effect of the proposed rules.  It will be interesting to see how these various rules shake out and if there are a number of programs that would pass the debt metrics proposed in September, but would fail the new measures proposed by the Department before the last session.

UPDATE (8:23 PM): The Federal Register has the pre-publication notice for the new session.  Nothing else of note in the notice.

Some Thoughts on the Latest Round of Gainful Employment Negotiated Rulemaking Part 2

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

Something that seems clear after two rounds of negotiated rulemaking is the lack of trust those aligned with consumer advocates have for proprietary schools.  As I recall, one negotiator suggested they needed to think “deviously” when considering how a proprietary school would game the rules.  I understand these folks hear some very sad and angering stories from students that have been legitimately harmed – and we need to protect those students that are treated unfairly at any institution.  But, as one negotiator said, “the plural of anecdote is not data.”  The vast majority of schools are attempting, in good faith, to help their students improve their lives through education and, in fact, are doing a pretty good job providing students with the skills and education sought.  Even the NY Federal Reserve – in a report I will discuss in another post – noted that proprietary schools offering two-year degrees and certificates have completion rates that are “reasonably good” (57% graduate in 150% of normal time for two-year degrees, 66% graduate in 150% of normal time for degrees under two years).  Indeed, the proprietary school negotiators selected by the Department are sterling examples of my point.

The issue came to a head, I think, as related to Marc Jerome’s proposal to, in essence, be able to supplant student borrowing with institutional aid if that program has failed for one year to meet the debt-to-income or debt-to-discretionary income test.  As I see it, this is a very pro student proposal; in essence, he wants the ability to give away money to students to keep them from borrowing.  It would be done with the knowing consent of the students (they’d have to sign a document, presumably showing how much they could have borrowed and that they are not going to take out a loan for that amount and will instead get funds from the school).  The questioning however, was as intense as it’s been about anything else.  Concerns were expressed about letting a failing program have a “second bite at the apple,” and how schools would use this to game the rules – including finding ways to raise tuition and use this to reset the bar at the upper limit of the metric set by the Department.  It seemed, amidst these attempts to figure out how some school could leverage this proposal to “game” the rule, that the proposal at issue was one in which an institution could request the ability to provide free money to students to lower student debt.  To the Department’s credit, it embraced this idea (John Kolotos called it the “most proactive” idea negotiators put forth related to student debt). It seems, however, everyone should rally around such a pro-student measure, notwithstanding their opposition to each other on other issues.

Some Thoughts on the Latest Round of Gainful Employment Negotiated Rulemaking Part 1

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

I will apologize upfront for the length of this post.  Or that there will be multiple posts on this.  There’s just a lot to say after this latest session of gainful employment negotiated rulemaking.

For those of you that have missed the news, the Department of Education requested, and the negotiation committee agreed, to hold one more round of negotiations.  The sessions will last one or two days and happen somewhere between December 9-20.  If the goal is to achieve consensus around the proposal – or at least reach some agreement on some ideas – this is a good move.  I thought the Department made a mistake in not planning on holding three sessions in the first place.  While I understood the rationale – the Department has, after all, already held three sessions on this rule in the past, so everyone knows the issues – I thought not holding the last session failed to respect the normal process: the first session negotiators meet each other and talk philosophy; the second session they discuss actual proposals and coalesce; and the third session they negotiate over actual language.  Although many negotiators had a fairly solid grounding in the issues this time around, the process still remained the same, and wasn’t appreciably advanced by the Department’s release of proposed rule language prior to the first session.  I would, however, be remiss in not acknowledging that the Department’s dramatic revision to that first proposal prior to the second session also likely played a role in the failure to complete in two sessions.  By adding two new metrics, making schools comply with three of four of the proposed metrics, and not having data regarding how the two metrics would affect school programs, it may have been too much to expect negotiators to be in a position to vote on consensus this round.  Nonetheless, the Department deserves kudos for recognizing all of this and proposing to hold another session.

That said, I am curious how this final session will go.  Ostensibly, the purpose was to provide data to the negotiators on the effect of the new metrics.  What is unclear to me is whether the data will make any difference to the Department.  Indeed, the Department seemed to suggest that the main policy proposal (the four metrics) wasn’t going to change.  While we don’t have a transcript of the proceedings (the committee voted not to transcribe the proceedings on the first day of the first session), Ben Miller of the New America Foundation has done a live blogging of the sessions that squares with my recollection of the discussion:

Jones from Strayer says he appreciates the attempt to get data. He asks about the process going forward. He notes that some of the ideas the Department has put forward lies in the impact of the data. He asks if the terms of the rule appear to be set, what is the point of the data if there isn’t openness to using that data to find some critical underlying points. He says if the Department is going to have the data would it be used to revisit core components of the rule. Kolotos says it will give the data and we can discuss the metrics, but it must be done in one day and not have session after session. Jones says he in particular is concerned about the impact of complying with one of three metrics versus having to comply with all three metrics.

. . . .

Kolotos responds to Jones. He says he believes the Department put forward the right policy. The data should inform the policy, but it should not drive it. That seems to suggest that the policy should not be driven by the outcomes estimates but by what makes sense from a policy standpoint. (Italics in original).

I see this as an overreaction – perhaps an understandable one – to the court’s decision dealing with the last gainful employment rule.  As you may recall, the court in that case upheld the debt-to-income measures as the product of reasoned rulemaking but struck down the loan repayment metric.  While the court found that the Department based the debt metrics on “expert studies and industry practice,” which resulted in a “rational connection to the facts found tand the choice made,” the loan repayment metric was said to be based on an outcomes driven analysis:

The debt repayment standard, by contrast, was not based upon any facts at all. No expert study or industry standard suggested that the rate selected by the Department would appropriately measure whether a particular program adequately prepared its students. Instead, the Department simply explained that the chosen rate would identify the worst-performing quarter of programs. Why the bottom quarter? Because failing fewer programs would suggest that the test was not “meaningful” while failing more would make for too large a “subset of programs that could potentially lose eligibility.”  That this explanation could be used to justify any rate at all demonstrates its arbitrariness. If the Department had chosen to disqualify the bottom ten percent of programs, or the bottom half, it would have offered the same rationale: the rate chosen disqualified the percentage of programs that it was intended to disqualify, and to have disqualified fewer would have made the test too lenient while disqualifying more would have made the requirement too stringent. This is not reasoned decisionmaking. “As an expert agency, [the Department’s] job is to make rational and informed decisions on the record before it in order to achieve the principles set by Congress. Merely . . . picking a compromise figure is not rational decisionmaking.” In setting the debt repayment rate, the Department picked a palatable figure. Because the Department has not provided a reasonable explanation of that figure, the court must conclude that it was chosen arbitrarily.  (Decision, at page 31 (citations omitted).

As I read this case, the Department need not ignore what the data shows in coming up with the rule – the court only held that the data can’t be the sole basis for a rule.  Indeed, if a given rule would eliminate all or substantially all of a certain type of program, that should be a good reason to go back to the drawing board.  Now, I may be reading the Department incorrectly here; the folks I know at the Department are reasonable and would want that data so they could see the effect of the rule before they publish the rule.  I just hope the court’s decision hasn’t gotten the Department thinking otherwise.

Negotiated Rulemaking Conference Call Today

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

The Department of Education (Department) announced that the gainful employment negotiated rulemaking committee is holding a conference call today, Wednesday, September 25, 2013, from 1:00 p.m. to 3:00 p.m. Eastern Time to continue discussion on the topic of new gainful employment programs. This call will be open to the public for listening, and subject to a maximum of 200 callers. The Department asks that groups “dial in from one line to accommodate participation by as many members of the public as possible.”  Below is the conference line information:

Conference line: 877-610-1533
Participant code: 8001017

Based on the materials provided in the notice of the call, the call will be on the Department’s consideration and approval of new programs.  To that end, the Department asks:

  • Which new programs should be subject to the approval process?
  • What information should an institution seeking to establish a new program be required to submit to the Department?
  • What criteria should the Department use to ensure that its review of new program applications is meaningful and at the same time can be performed consistently?


New College Scorecard to Have Salary Information for Institutions

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

According to Libby Nelson at Politico, on Tuesday September 17,  deputy director of the White House Domestic Policy Council James Kvaal announced at a National Press Club that the administration is revising the College Scorecard to include median incomes of graduates.   In Ms. Nelson’s wonderful morning education email (which is sadly not available online), she reports “[t]he methodology will likely be similar to that used for determining debt-to-earnings ratios in the ‘gainful employment’ rule for for-profit colleges, Kvaal told POLITICO – meaning the Education Department will get median income for groups of borrowers without sharing personally identifiable information.”

As I understand it – and there’s lots more to learn about this move – the salary data will come from students in the cohort for a school’s cohort default rate.  It is also our understanding (at this time) that the Department of Education will link this data to programs.  It’s not entirely clear, among other issues, which year’s salary data will be used (i.e., the third and fourth after leaving the institution, as proposed in the gainful employment rule) or how the data will present students that attended multiple institutions.

More to come  . . .


Some Thoughts on the Gainful Employment Negotiated Rulemaking Session – Part 1

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

I attended the negotiated rulemaking sessions hosted by the U.S. Department of Education to discuss the Department’s proposed “gainful employment” rule.  As we reported previously, these sessions are a second attempt at enacting a regulation to regulate all programs at proprietary institutions of higher education and vocational programs (certificate programs) at other institutions based on a  debt to income measure.  The draft version of the Department’s gainful employment rule (which has many deviations from the 2011 published gainful employment rule that was invalidated by a court order; this was our take on the 2011 version) would impose a 8% debt to income ratio and a 20% debt to discretionary income ratio on these programs.

The negotiated rulemaking sessions (or “neg reg”) began on Monday, September 9 and lasted until 12 noon today (Wednesday, September 11).  There will be a final session from October 21 to 23.  The New America Foundation did a live blogging of the neg reg session (no recordings or transcripts of the sessions were permitted) that is worth looking at to get a sense of the discussion (Monday’s session, Tuesday morning, Tuesday afternoon, and Wednesday morning  Also, here is Inside Higher Ed’s take on the Monday and Tuesday sessions).

One of the impressions I am left with is that the Department may have made a mistake by only having two sessions.  If the goal of this process is to merely hear additional views that the Department can use in coming up with a draft rule, then the Department was probably fairly happy with the results so far.  The discussion over two days (the first day included a number of procedural issues not germane to the rule) was often wide ranging and presented a number of issues for the Department’s consideration – including issues with the draft rule and proposals for new rules altogether.  So, if the goal was educating the Department, this neg reg is going well.

If, however, the goal was to achieve consensus on a rule, the Department can’t be too happy.  Typically, there are three neg reg session to a process – the first is a “get to know everyone” session (a list of the negotiators is after the jump) that includes a broad discussion on the topics.  This is usually helpful and necessary, as many negotiators don’t know each other.  This conversation serves a useful purpose leading up to the substantive negotiations.  That is very much how the discussion felt this week.  While the negotiating committee was able to review all the topics the Department wanted discussed, there wasn’t a lot of time spent on specifics.  While issues with the rule were raised (Marc Jerome of Monroe College raised some particularly interesting points on how the rule would work in practice), few solutions to these issues were offered and there was no agreement from the committee on even whether these issues were problems.  If the Department believes consensus could be reached – and many have opined that it cannot given the committee’s makeup – the next (and final) session is going to have to be awfully substantive and efficient to achieve consensus.

I will have more thoughts (including on some policy ideas) in future posts.  But the thing I’m thinking now is we may need more time to do this right. Continue Reading

Department of Education Publishes Gainful Employment Proposal for Negotiated Rulemaking

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

Earlier today, the U.S. Department of Education published a new web page containing “information about our rulemaking efforts to establish standards for programs that prepare students for gainful employment in a recognized occupation.”  This site includes a draft version of the Department’s gainful employment rule, a comparison between the 2013 draft gainful employment rule and the previously published gainful employment rule, and a number of other documents. In sum, (and this is a preliminary view) the proposed rule:

  • gets rid of the repayment rate metric
  • applies a 10-year amortization schedule for debt from all programs (previously, bachelors programs had 15 year schedule and graduate programs had a 20 year schedule)
  • eliminates the cap on debt (schools could cap median debt to tuition and fees)
  • reduces the debt to earnings threshold from 12% to 8% and debt to discretionary earnings threshold from 30% to 20%
  • revives an earlier concept of being “in the zone” if an institution has a debt to earnings ratio between 8%-12% and a debt to discretionary earnings threshold between 20%-30% in which sanctions are imposed
  • reduces the minimum size of a program to be reviewed from 30 students to 10 students
  • programs lose Title IV eligibility if they fail two out of three years (as opposed to three out of four years) or if a program fails to pass for one year out of four (essentially a cap on the time a program may remain “in the zone”

There are a number of issues we intend to explore about the proposal in the days leading up to the September 9, 2013 negotiated rulemaking session.  One in particular concerns how the Department will collect information on private loan data without violating the prohibition on creating a unit record system.  As you may recall, the subject that was covered explicitly in the March 19 2013 ruling on the Department’s motion to amend the judgment in the court action on the gainful employment rule.

One issue worth looking at now, however, is the effect of the rule.  Here is what the Department has published on what the effect of the new rule will be as opposed to the old. In short – more programs will be subject to the rule (the byproduct of reducing the size of the program (click on the chart to get a better view)  Essentially, while 90% of programs passed under the old debt to earnings ratios, only 79% will pass the rule this time around:

Filling the Missing Piece in the College Scorecard

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

Dennis Cariello

There’s been a lot of commentary on the “College Scorecard” – the Obama Administration’s new tool that is designed to help students and families make intelligent choices about college.   As my colleague David Lewis noted previously, the Scorecard focuses on:

  • the average net price to attend (and the change in net price from 2007-2009);
  • the graduation rate;
  • the three-year loan default rate; and
  • the median amount borrowed for undergraduate study and monthly payment required to pay that amount off in ten years.

A number of experts have weighed in with excellent criticisms of this approach. Abigal Seldin has argued that the average net price is inferior to the net price calculators and using average net price may provide misleading information to students, particularly from poor families.  In another article, five different higher education experts weighed in on a number of flaws with the Scorecard, including its use of the government’s graduation rate metric, the use of the default rate as opposed to a repayment rate, and the use of a median amount borrowed as opposed to a metric that offers a clearer picture of the number of students at the institution with excessive debt.  This is in addition to other arguments about how the value of an education or the worth of an institution of higher education is not reflected in metrics like cost and likelihood of graduation, how information about faculty and faculty workload should be included, or even arguments that government should let the private sector provide this information to families.

The Scorecard also includes a section covering “What kinds of jobs do students have when they graduate?” but this section has no data and is still under development.  Presumably, this is because the Department of Education lacks the sufficient legislative or regulatory basis to collect this data.  As The New York Times points out, “PayScale, a company that analyzes payroll data for millions of workers, publishes annual rankings of colleges based on graduates’ long-term earnings.”  This source could this serve as the basis for the data for many colleges – and expansion through payroll providers like ADP and Paychex could make it even more robust.

In addition, PayScale provides salary data for graduates of a four-year program (those with higher degrees are excluded) both upon graduation and after ten years in the workforce.  This feature provides a much clearer picture of the overall return on investment in a degree from a particular college and should form the basis of any metric promoted by the government.  Providing this range addresses one of the biggest problems with graduate salary data: determining the years on which to focus.  While some, like Mark Kantrowitz have focused on the salary upon graduation — typically as a metric used to determining the ability to repay loans – and the Department of Education focused on salary in the third and fourth years upon graduation in the gainful employment metric, focusing on the early years after graduation tends to make certain degrees – such as liberal arts – unfairly appear far less valuable.  As the PayScale data suggests, many liberal arts graduates – such as from Haverford College – experience a significant jump in salary between the first and tenth year after graduation.  Indeed, according to PayScale, while Haverford graduates can expect a $37,500 salary on average after graduation, the salary in the tenth year averages $98,700.  Thus, providing the these salary data points provides a more accurate picture of the economic value of a degree and, consequently, provides a firmer basis for students and families to make decisions about colleges.  It also

Certainly, return on investment is only one of many factors to be considered in choosing a post-secondary institution – and a “vocationally focused” one at that.  Finding an institution to help advance a student’s goals best needs to encompass more than a simple number can express.  The data PayScale has put forth, however, does provide an important tool for students and families and the provision of the first and tenth year salary data would be well worth considering as the administration revises the College Scorecard.

Current Status of the Gainful Employment Litigation

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

A number of people have recently asked us about the current status of the gainful employment litigation.  After the June 30, 2012 decision in Ass’n of Priv. Sector Colls. and Univs. v. Duncan, No. 11-1314, on July 30, 2012, the Department of Education filed a Motion to Alter to Amend the Judgment (the “Motion to Alter”). On August 15, 2012, the Association of Private Sector Colleges and Universities (“APSCU”) filed an Opposition to the Motion to Alter. On September 6, 2012, the Department filed its Reply in Support of the Motion to Alter.  (We discussed these motions in a September 17, 2012 post)

On September 24, 2012, the Court issued an Order in APSCU v Duncan requesting supplemental briefing and responses to seven questions. The Department and APSCU responded to these questions in supplemental briefs filed with the Court and on November 2, 2012, the motion was fully briefed. The parties await the Court’s decision on the Motion to Alter.

Note, pursuant to the Federal Rules of Appellate Procedure Rule 4(a)(4), the Department’s Motion to Alter effectively tolled the time for the Department to file an appeal of the Court’s June 2012 Order. The Department will have 60 days after entry of any order on the Motion to Alter to file an appeal.

After the jump, you can read the questions posed by the Court: Continue Reading

Remember to Update Your Gainful Employment Statistics by January 31, 2013

Posted in Department of Education, Gainful Employment, Higher Education News

Dennis Cariello

As we noted previously, all schools that are required to publish gainful employment (“GE”) disclosures pursuant to 34 CFR 668.6(b) must do so by January 31, 2013.  On November 23, 2012, the Department of Education posted an electronic announcement reminding institutions they are required to update their GE disclosures with data for the 2011-2012 award year no later than January 31, 2013. The court litigation on gainful employment did not affect the requirement to post these disclosures, even though the GE reporting requirements were vacated by the federal court through the APSCU litigation.  Note, the Department has not provided any template for this disclosure (because of the pendency of the litigation) so institutions are permitted to determine the form of the web site disclosure as they have in the past.

By way of a reminder, the following items must be included in a GE Program’s disclosures:  Continue Reading

Department of Education Issues Guidance on 2011-2012 Gainful Employment Disclosures

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy, Litigation News

David P. Lewis

As we previously discussed herehere and here, on June 30, 2012, the U.S. District Court for the District of Columbia issued its decision in Association of Private Sector Colleges and Universities (APSCU) v. Duncan.  In that decision, the Court vacated several key provisions in the Gainful Employment (GE) regulations that the Department published on October 29, 2010 and June 13, 2011, including those that required schools to report their repayment rates and debt-to-income ratios. The Court left standing, however, the adopted regulations that require schools to disclose their gainful employment results (see 34 CFR 668.6(b)). Those requirements are still in place.

Following that decision, the Department had informed schools not to update their GE disclosures pending further guidance from the Department.  On November 23, 2012, the Department distributed an electronic announcement providing that guidance.  In summary:

  • GE Program Disclosure Template.  The Department is waiting for the Court to rule on its request to reinstate the GE reporting requirements before it provides a template GE disclosure form (referred to in the regulations at 34 CFR 668.6(b)(2)(iv)).  Further guidance on the development of the template and institutional disclosure obligations is to come.


  • Format for 2011-2012 Updates to Institutional Disclosures Regarding GE Programs.  Because the template is not yet available, institutions must make their GE Program disclosures using an institutionally-determined format by no later than January 31, 2013.


  • Required GE Program Disclosures.  The following items must be included in a GE Program’s disclosures:


  • Occupations (by names and SOC Codes) that the program prepares students to enter
  • Normal time to complete the program (e.g., one year certificate program)
  • On-time graduation rate for completers (on-time completion is defined in 34 CFR 668.6(c))
  • Tuition and fees for completing the program in the normal time, costs for book and supplies, and costs for room and board, if applicable;
  • Placement  rate for completers, if required by state or accreditor; an
  • Median educational loan debt incurred by completers, disclosed in three separate categories: Title IV loans, private loans, and institutional debt.  With regard to this item, the guidance notes that because institutions did not report data to NSLDS for the 2011-2012 award year, institutions should calculate their own medians using data about students who completed the GE Program during the 2011-2012 award year and should not use the 2010-2011 medians the Department previously calculated using the GE program information that was previously reported. In future years, if the litigation referred to above gets resolved, the Department  expects to make these calculations itself.


  • Display of GE Program Disclosures.  As a reminder, under the regulations, GE Program disclosures must be displayed  on the educational programs’ websites and on any promotional materials for the program in a simple and meaningful manner.  Additionally, any other web page containing general, academic, or admissions information about the GE Program must also contain a prominent and direct link to the single web page that contains all the required information.  Finally, GE Program disclosures must also be provided in all promotional materials whenever feasible, including such items as flyers, brochures, invitations, program catalogs, and other content published to broadcast, print, direct mailings, email, social, or on-line media channels that promote a GE Program. If not feasible, due to  the size or format of the promotional materials, the institution may display the URL or provide a live link to the single web page where the required information is located, with a clear explanation of the information that is available at that web page.

See GE Frequently Asked Questions D-Q/A3 and D-Q/A18 for answers to questions pertaining to promotional materials.

Reminder on Gainful Employment Reporting

Posted in Department of Education, Education Data & Statistics, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

A number of institutions that were required to report gainful employment data have asked whether they can/must report that data for the 2011-12 academic year.  The Department of Education has said institutions “should not submit GE Program reports for the recently ended 2011-2012 Award Year“.  This comes on the heels of the Department’s original notice that the district court’s June 30, 2012 decision in Association of Private Sector Colleges and Universities v. Duncan, “vacated the gainful employment reporting requirements in 34 C.F.R 668.6(a). Therefore, institutions are not required to submit gainful employment reports for the just ended 2011-2012 award year.”  Institutions may, however, still correct previously reported data.

Perhaps some of the confusion relates to the Department’s recent request to amend the June 30 judgment to permit the collection and publication of the GE data.

The Battle Over the Gainful Employment Regulations Continues

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Nicole Daley

The U.S. Department of Education (Department) and the Association of Private Sector Colleges and Universities (APSCU) continue to battle over the Department’s gainful employment regulations struck down by the U.S. District Court for the District of Columbia this summer.


In June, the Court, in Ass’n of Priv. Sector Colls. and Univs. v. Duncan, No. 11-1314 (D.C. Cir. June 30, 2012), vacated the gainful employment regulations that were set to become effective on July 1, 2012.  Under the regulations, a program would qualify as leading to gainful employment in a recognized occupation—and remain eligible to participate in Title IV Programs—only if its former students satisfied the threshold for at least one of three gainful employment metrics on an annual basis.

The Court determined that the threshold set by the Department for one of the metrics—the 35%-debt repayment rate for former students successfully repaying their loans—was arbitrary and capricious.  Because it found that the debt-to-income ratio and debt-to-earnings ratio were inextricably intertwined with the debt repayment rate measure, the Court vacated all three gainful employment metrics.  In addition, the Court invalidated two related regulations—the program approval requirements (see also) and the reporting requirements—based on its finding that these regulations are tied to the now-invalid debt repayment metric.  On the other hand, the Court upheld the disclosure regulations, which require, among other things, that schools disclose each program’s median loan debt and gainful employment metrics to students, as a valid exercise of the Department’s authority, severable from the vacated reporting regulations that would have required institutions to provide data to the Department.

The Department’s Motion to Amend the Judgment

On July 30, 2012, the Department filed a motion asking the Court to amend its June 30 ruling based on misunderstandings about the relationship of the gainful employment metrics and reporting regulations to the disclosure regulations.  The Department argued that even if the gainful employment metrics can’t be used to terminate a program’s Title IV eligibility, the reporting requirements and gainful employment metrics are valid for the independent purpose of providing information to prospective students so they can make informed decisions about whether to enroll in a particular program. Continue Reading

On the State of the Union and the President’s Speech at the University of Michigan

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

Dennis Cariello

Last week saw an interesting development in higher education — on top of the now-official (meaning marked with a good-bye party) retirements of a number of higher ed folks from the U.S. Department of Education, including Dan Madzelan and Fred Sellers (Congratulations and best of luck to all!).  In the President’s State of the Union address on Tuesday, he outlined a number of broad proposals designed to, among other goals, reduce the cost of higher education.  As Insider Higher Ed reported the next day, given the lack of specifics, while some were immediately critical, many in the the higher ed community took a “wait and see approach.”

Although still in development, last Friday the President discussed the plan in more specific terms in a speech at the University of Michigan.  Mark Katrowitz provides an excellent summary of the budget proposals.

In short, it looks to impose a “gainful employment”-like rule on all of higher education.  Recall that the gainful employment rule requires that proprietary schools (and some programs and non-profit schools)  offer programs that exhibit a sufficient return on investment – or, are a “good value” — lest those programs not be eligible for Title IV funds.  The new proposal seeks to condition receipt of Supplemental Educational Opportunity Grants (SEOG), Perkins Loans, and Work Study funds based on meeting the Administration’s goals of:

1) Setting responsible tuition policy, offering relatively lower net tuition prices and/or restraining tuition growth.
2) Providing good value to students and families, offering quality education and training that prepares graduates to obtain employment and repay their loans.
3) Serving low-income students, enrolling and graduating relatively higher numbers of Pell-eligible students.

It will be interesting to see what happens with this idea.  Certainly, most observers would suggest that the Secretary does not have the authority to enact such a rule absent legislation.  Of course, many observers thought/still think the Secretary needed legislation to enact the “gainful employment” rule that was published in June 2011.   I would also be surprised if there wasn’t a significant amount of criticism of this proposal.  As Inside Higher Ed reported, a similar proposal was scuttled the first time it was offered up, back in 2003:

Rep. Howard (Buck) McKeon, a California Republican who was then chairman of the Committee on Education and the Workforce’s 21st-Century Competitiveness Subcommittee, proposed penalizing colleges that increased their cost of attendance by more than twice the rate of inflation for two consecutive years, including cutting off federal aid. Colleges attacked the idea as calling for “price controls,” and McKeon’s bill never made it out of committee.

Thus, what began with the gainful employment debates and proprietary schools is merely being extended to others institutions of higher education.   This seems even more likely considering that the President is also proposing to collect earnings and employment data from colleges to help create a proposed “College Scorecard”.  I’m sure that more details will come in the future and, most importantly, we will see if the administration believes it can enact these changes absent new legislation.

Dennis Cariello’s Speaking Engagements – November 18 in Ellenville, NY

Posted in ATB, Credit Hour, Department of Education, Financial Aid (Loans & Grants), Gainful Employment, Higher Education News, Misrepresentation

Dennis Cariello

Please join me at the annual meeting of the Coalition for New York State Career Schools.  The meeting is from November 16-18 at the Honor’s Haven Resort and Spa, and I will be part of a panel at 10:00 on November 18 that looks at various compliance issues for postsecondary institutions that accept Title IV funds.


Dennis Cariello’s Speaking Engagements – November 17 in Boston

Posted in ATB, Credit Hour, Department of Education, Financial Aid (Loans & Grants), Gainful Employment, Higher Education Policy, Incenitve Compensation, Misrepresentation

Dennis Cariello

Although it won’t be as warm as being in Puerto Rico, Boston has a great conference this week as well.  I will be speaking at the Wunderlich Securities – Signal Hill Education Conference on Thursday at The Taj Hotel, Boston.  While the full schedule looks great, I encourage you to get  up at 7:20 in the morning and hear me, along with my esteemed co-panelists – Nancy Broff of Dickstein Shapiro, Doug Lederman of Inside Higher Ed and Teddy Downey of TJ Strategies — discuss the regulatory and legislative initiatives affecting the sector with our moderator, Trace Urdan of Wunderlich Securities.  Sure it will be a mix of the here and now (gainful employment, various enforcement issues, increasing prominence of the office of the inspector general, etc.) and the future (90/10 and the GI Bill, the future of providing financial aid, accreditation agencies of the future, etc).   I imagine we will also wade into topics like job placement reporting and the work of the state attorneys general.

Of course, I encourage you to stay for the rest of the day, for which you will be rewarded with a great mix of public and private company presentations and talks about substantive policy issues and market trends.


New Obama Proposal to Benefit Student Borrowers Could Adversely Impact Proprietary School Repayment Rates

Posted in Department of Education, Gainful Employment, Higher Education News, Higher Education Policy

David P. Lewis

Yesterday, the Obama Administration announced a series of steps that it plans to take to make college more affordable and to make it easier for students to repay their federal student loans.  These steps include:

  • Caps on monthly loan payments.  Currently, student loan borrowers participating in an income-based repayment (IBR) plan can limit their loan payments to 15% of their discretionary income and can have the outstanding loan balance forgiven after 25 years of payments.  In 2010, Congress adopted a changed IBR plan that, beginning on July 1, 2014, will allow student loan borrowers to cap their monthly payments 10% of their discretionary income.  The new proposal will allow approximately 1.6 million students to cap their loan payments at 10% of their discretionary income starting in 2012 and will also provide for the balance of any outstanding loan to  be forgiven after 20 years of payments instead of 25 years. 
  • Loan consolidation.  For student loan borrowers with both outstanding guaranteed FFEL loans and Direct Loans, the new proposal will allow borrowers to consolidate their FFEL loans into the Direct Loan program beginning in January 2012. The purpose of this consolidation is to simplify the repayment process by allowing borrowers to make only one monthly payment instead of two or more.  In addition, the consolidation proposal would provide, for borrowers who take advantage of the consolidation, a 0.25% interest rate reduction on their consolidated FFEL loans and an additional 0.25% interest rate reduction on their entire consolidated FFEL and Direct Loan balance.

While the merits of the proposal, including the President’s authority to take this action by executive order and the Administration’s claim that the actions “carry no additional cost to taxpayers,” will be debated, one potential issue with the proposal for proprietary schools is already apparent.  Continue Reading

New Department of Education Webinars on Gainful Employment Program Issues

Posted in Department of Education, Gainful Employment, Higher Education News

Dennis Cariello

The Department of Education’s Office of Federal Student Aid (FSA) recently posted webinars on topics related to the new gainful employment regulations.  Gainful Employment Webinar #3 discusses the process for adding a new gainful employment program, pursuant to the new regulations published on October 29, 2010.  Note, although this change is currently the law, the Department has proposed to revise these regulations which, if they become effective, will greatly reduce the instances when an institution will need to seek approval for new programs.  In Gainful Employment Reporting Webinar #4, the Department explores the reporting process for gainful employment programs on the National Student Loan Data System (NSLDS).