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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.

Restructuring in Higher Education

Posted in Bankruptcy, Higher Education News, Higher Education Policy

Dennis Cariello

Since 2011, there have been an increasing number of restructurings in higher education.  What may have started with the foreclosure and sale of ATI Schools and Colleges has continued this year with last month’s conversion of $400 million in debt to equity in the case of Education Management Corporation. Indeed, as Joe D’Angelo from Carl Marks explains, lower profits, increased regulations and lower student enrollment have caused an increase in higher education restructurings in the last three years.

We have handled a number of these restructurings and one legal issue that surprises people is that Title IV institutions cannot file for bankruptcy and remain a Title IV institution.  Section 102 of the Higher Education Act (20 USC 1002) provides that an institution shall not be eligible for the Title IV programs is “the institution, or an affiliate of the institution that has the power, by contract or ownership interest, to direct or cause the direction of the management or policies of the institution, has filed for bankruptcy.”  This restriction is also codified in regulation.  Moreover, although sparse, case law has consistently held that these provisions trump any powers of the bankruptcy court or the non-discrimination provisions of bankruptcy law (the government’s brief in the Lon Morris bankruptcy matter has a good discussion of the legislative history concerning this provision).

Removing bankruptcy from the equation changes the restructuring equation dramatically.  Unlike a typical restructuring, in higher education the institution and its creditors have to come to grips with the reality that creditors are essentially in the position of equity rather than of traditional lenders.    Indeed, creditors must be as concerned about maintaining the institution as a going concern as the institution is.  This is even more the case with for-profit higher education providers.  While non-profit institutions often have substantial assets (such as land and buildings) that it may sell off to pay debts, proprietary schools typically lease space and equipment, thus leaving the institution with only one “asset”: the ability to disperse Title IV funds. As a result, while bankruptcy is a theoretical possible vehicle through which a non-profit school could satisfy its debts (if the parts are truly greater than the sum of the whole), that will almost never be the case for a proprietary school.

As a result, instead of more traditional restructurings, we have seen far more schools and their creditors utilize liability management, cost cutting, shutting down campuses, and consolidation as means of creating liquidity to pay down debt.  In the most problematic cases, however, parties have engineered sales of all or some of the institution as a means of paying down the debt.  So far, three models for doing so have emerged:

1. Debt to Equity Swaps;

2. Foreclosure Sales (including where the creditor(s) purchases the institution through credit bidding); and

3. Pressured Sales (such as with Anthem Education).

Obviously there are various permutations on these and each method has its own positives and negatives and need to be carefully considered.  Also, regulators will need to be involved in approving these transactions which unfortunately will take time.  In the end, however, such transactions can leave institutions with far less debt (or debt-free) and much better able to serve its students.

New Paper On the Merits of a Three-Year Bachelor’s Degree

Posted in Higher Education Policy

Dennis Cariello

On September 17, 2014, the Progressive Policy Institute issued a new paper entitled “Give Our Kids a Break: How Three-Year Degrees Can Cut College Costs.”  The paper, written by Paul Weinstein Jr. who, in addition to being a PPI senior fellow directs the Graduate Program in Public Management at Johns Hopkins University, focuses on two ideas to help cut college costs: (1) to move colleges to offer three-year bachelor’s degrees, and (2) to simplify the federal grant programs to provide each of the 85% of students currently receiving federal aid an annual grant of $3,820 (the per student share of the $82.5 billion in Title IV grant programs and tax benefits). In short, while both ideas deserve more study, the paper failed to address a number of the issues required to fully develop the proposal.  Moreover, the focus on the reduction of student debt – a worthy goal to be sure – crowded out the consideration of other important concerns.  A more comprehensive follow up would hopefully address these concerns.

First off, I think the one grant for all students idea is an interesting one.  As the author notes, while the grant would be lower than the current maximum Pell Grant of $5,730, “it is greater than the average Pell Grant, which is currently estimated at $3,651.”  It isn’t entirely clear, however, what the effect of this will be on student access for the underprivileged or if this will affect the ability of students to graduate.  Indeed, the author spends little time discussing these effects.  Perhaps it will raise degree attainment – a July 2013 report of the Department of Education’s Advisory Committee on Student Financial Assistance found that “[a]s the percentage of a college’s students who are Pell recipients (serving Pell recipients) rises, 6-year graduation rate declines from 80% to 25%, and average test score declines from 29 to 19.”  Thus, directing aid to more-well off students may raise graduation rates.  On the other hand, a number of studies have found a positive correlation between need-based aid and graduation rates (see here, here and here).

Unfortunately, the author doesn’t tackle access or completion (or consider them in conjunction with his proposal for a three-year degree), but remains only focused on decreasing student debt.  Moreover, while I am a fan of the “One Grant, One Loan, and One Work-Study Program” put forth in a number of whitepapers (including, the House majority paper on Higher Education Act reauthorization), I would have liked to see what eliminating all those programs might do to the interests represented therein – in addition to what broadening the coverage of the grants will do on access and completion. Continue Reading

Great Article of the State of Things with the College Rating System

Posted in College Rankings, Higher Education News, Higher Education Policy

Dennis Cariello

As we have reported a few times, the U.S. Department of Education (Department) is currently working on college rating system. Libby Nelson, formerly of Politico and now the education reporter with Vox, has a great new piece up on the Obama Administration’s attempt at adding college ratings to the College Scorecard.  It provides a nice summary of where things for those new to the issue.  As she explains, the formula for the ratings is expected to be released later this Fall and “will probably be based at least in part on graduation rates, debt levels, and some information on graduates’ earnings.”  [Note – the current College Scorecard reports data  on Average Net Price, Graduation Rate, Loan Default Rate, Median Borrowing and self-reported employment statistics.]  She also discusses a number of the problems with the proposal, not the least of which is the likelihood – given the experience with the lists of colleges with the highest tuition and largest tuition increases – that students won’t consider the information.

While I am generally in the “more information is better” camp, I think there is good reason to think that this doesn’t add much to what is out there.  The Department can only focus on objective data in determining quality and, while those factors should be in the mix (and are considered in many other ratings formats), choosing a college is a fairly subjective process.  The best graduation rates in the world won’t mean much if the school is a bad fit for a particular student.  A definitive grade based on such criteria will, however, raise the potential of turning students off to schools that really would have been a good fit for them, despite not scoring well on Department criteria.

Moreover, although Ms. Nelson reports that the Department plans to address concerns that less selective colleges will be harmed in the scorecard because the student bodies in those colleges are more likely to dropout and take on debt, it seems hard to imagine how the Department will do so – without just awarding points for serving a large percentage of Pell-eligible students.  Such a reward would greatly benefit proprietary schools, which would be a very surprising outcome given this administration’s criticisms of that sector.

New California Law Requires Publication of Accreditation Documents

Posted in Accreditor News, Higher Education News, Higher Education Policy, State Authorization

Dennis Cariello

On September 17, 2014, California Governor Jerry Brown approved Assembly Bill No. 2247. As explained by the Senate Bill Digest, this law “requires all campuses of every public and private postsecondary education institution in California that receives state or federal financial aid funding to make available on the institution’s Internet Web site” specified final accreditation documents.

Codified as Section 66014.8 of the California Education Code, the law specifically requires publication of the final version of any:

  • accreditation visiting team reports;
  • accreditation agency action letters following an accreditation agency’s action relating to an initial accreditation, reaffirmation, comprehensive review, special visit, or
  • any sanction or adverse action taken against an affiliated institution.

An earlier version of the bill also required publication of a institution’s self-study, a provision that was strongly opposed by the Association of Independent California Colleges and Universities (AICCU).

The law applies to public colleges and universities in California, as well as “Private Postsecondary Education Institutions” (a “private entity with a physical presence” in California that “offers postsecondary education to the public for an institutional charge”) and “Independent Institutions of Higher Education” (“nonpublic higher education institutions that grant undergraduate degrees, graduate degrees, or both, and that are formed as nonprofit corporations in this state and are accredited by an agency recognized by the United States Department of Education”).  Some consumer advocates, such as Robert Shireman, the former Deputy Undersecretary of Education at the US Department of Education, have previously called for increased disclosure of accreditation documents for all institutions of higher education.

National Association for College Admission Counseling Issues Guide on International Recruiting

Posted in Higher Education News, Higher Education Policy, Incenitve Compensation, International News

Dennis Cariello

In May 2013, the National Association for College Admission Counseling (NACAC) issued a report considering claims of abuse in the recruiting of international students and the propriety of using commission-based recruiters in that setting.  As a follow up to that report and a decision to permit its member institutions to continue to pay incentive compensation to international recruiters, on September 12, 2014 NACAC issued “International Student Recruitment Agencies: A Guide for Schools, Colleges and Universities” which details concrete steps institutions can take to engage with agencies responsibly.

In the guide, NACAC recommends that institutions that work with international student recruitment agencies should take the following steps:

  • Consult with critical campus constituents to address campus impacts;
  • Develop     a     unified     or     coordinated     institutional     policy     concerning international student recruitment agencies;
  • Communicate     the     institution’s     agency     policy     to     international students and their families, via the institution’s Web site;
  • Develop    a    contract,    involving    campus    legal    counsel,    risk    management and affiliated departments;
  • Identify    and    vet    prospective    agency    contractors;
  • Commit     to     delivering     regular     trainings     and     other     elements     of rigorous, continual quality assurance; and
  • Provide    international    student    support    services    commensurate    with the expected growth and diversification in enrollments.

A Look at Higher Education Bills in the House of Representatives

Posted in Higher Education News, Higher Education Policy, News from the Hill, Uncategorized

Dennis Cariello

The House of Representatives has seen a lot of action on the higher education front this year.  Not only has Committee on Education and the Workforce (Ed and Workforce) Chairman John Kline passed a number of bills out of committee that were ultimately passed by the House, but there has been a flurry of other activity in the lower chamber.  Indeed, in addition to “Expanding Opportunity in America,” a proposal put forth by Budget Chairman Paul Ryan that has a number of higher education proposals (and was discussed in our Education Alert last week), the House has seen a broad number of bills to address a host of higher education issues.

The following bills have passed the House:

Advancing Competency-Based Education Demonstration Project Act – H.R. 3136

On September 19, 2013, Representative Matt Salmon (R-AZ) introduced the Advancing Competency-Based Education Demonstration Project Act to the House. The bill passed the House on July 23, 2014 by a vote of 414 to 0, and enjoyed 10 bi-partisan co-sponsors (including Ed and Workforce Chairman John Kline and Ranking Member George Miller).  The bill would create a competency-based education initiative.  Specifically, the bill would

  • Implement competency-based education demonstration projects at up to 20 volunteer institutions.
  • For the pilot programs, allow the Secretary of Education to waive current statutory and regulatory requirements (i.e. seat time and credit hours) to receive funding
  • Require an annual evaluation of each demonstration project to determine successes and obstacles for competency-based education programs going forward.

Strengthening Transparency in Higher Education Act – H.R. 4983

On June 26, 2014, higher Education Subcommittee Chairwoman Virginia Foxx (R-NC) introduced the Strengthening Transparency in Higher Education Act to the House. The bill passed the House by a voice vote on July 23, 2014, and enjoyed 16 co-sponsors (including Reps. John Kline and George Miller). The bill would streamline higher education information disclosures and require publication of those disclosures via one College Dashboard website.

Empowering Students Through Enhanced Financial Counseling Act – H.R. 4984

On June 26, 2014, Rep. Brett Guthrie (R-KY) introduced the Empowering Students Through Enhanced Financial Counseling Act to the House. The bill passed the House on July 24, 2014 by a vote of 405-11, and enjoyed 16 co-sponsors (including Reps. John Kline and George Miller).  The bill would:

  • Ensure yearly interactive counseling for all borrowers (not just first-time borrowers) tailored to their individual borrowing circumstances. Counseling can be either online or in-person to suit the borrower’s needs.
  • Require borrowers to consent each year before receiving federal student loans.
  • Require annual counseling about Pell Grant program.
  • Create a consumer-tested, online counseling tool for institutions to act through when providing counseling.
  • Remove “sample information showing the average” from borrowing explanations, and replace with info based on the borrowers actual outstanding balance.

In addition, the following bills have also been introduced in the House: Continue Reading

New Jersey to Consider Price Caps on Higher Education

Posted in Financial Issues, Higher Education News, Higher Education Policy

Dennis Cariello

There are many possible responses to the problem of the increasing cost of higher education.  Once such response is to impose price controls on colleges and universities.  Last week, the committe on higher education in the New Jersey Assembly voted 6-0 (with 2 abstentions) to approve a bill (A2807) that would prohibit all four-year colleges and universities — public and private (except for Princeton University) — “from raising the tuition of undergraduate students who are from New Jersey for nine continuous semesters after they enroll.”

The bill, sponsored by Assemblyman Joseph Cryan (D-Union), would except Princeton University (or any institution with an endowment of $1 billion or more) from coverage.  In addition, “students who take a leave of absence of more than one year would have to pay the new tuition rate.”

An article on the measure notes that a number of representatives of college an universities opposed the measure.  Indeed, “Michael Klein, executive director of New Jersey Association of State Colleges and Universities, said a tuition freeze could hurt schools’ bond ratings, making it more expensive to borrow money. And he said the state bears responsibility for continually underfunding higher education.”

For the bill to become law, it must pass the New Jersey Assembly and Senate, and then be signed by the Governor.

More on the Higher Education Legislative Proposals from the Senate

Posted in Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

Continuing in our series of reviews of higher education bills that may be influencing the upcoming Higher Education Act reauthorization.  Please be sure and look at the first part in our review of bills, and the Alert we distributed last week that kicked this series off.

Higher Education Reform and Opportunity Act – H.R. 4612 / S. 1904

On January 9, 2014, Senator Mike Lee (R-UT) introduced the Higher Education Reform and Opportunity Act of 2013 (Rep. Ron DeSantis (R-FL) introduced a related bill to the House on May 8, 2014.) In a move to encourage innovation, this bill would allow states – through an agreement with the Secretary of Education – to create alternative accreditation process for institutions of higher learning.  Like currently existing forms of accreditation, state-created accreditation processes would be a gateway to Title IV participation by the accredited institution.

Importantly, these new alternative accreditators could confer accredited status on, among other things, any “postsecondary education course or program offered at an institution of postsecondary education, a nonprofit organization, or a for-profit organization or business” so long as the “entity provides credit that will apply toward a postsecondary certification, credential, or degree.”  In sum, companies like StraighterLine and the various MOOCs in existence can become Title IV eligible.

CREATE Graduates Act – S. 2506

On June 19, 2014, Senator Kay Hagan (D-NC) introduced the Correctly Recognizing Educational Achievements to Empower (CREATE) Graduates Act to the Senate. The bill would:

  • Authorize grant funding to institutions that will locate and award degrees to former students in the workforce who have enough accumulated education credits for an associate’s degree, but  never received one
  • Provide outreach to students within 12 credits of obtaining an associate’s degree and implement procedures to help future students receive degree audits and other important information about graduation requirements.
  • Establish partnerships between 2-year and 4-year institutions to help students transition into a bachelor degree program after earning an associates degree.

Student Right to Know Before you Go Act – S. 915 / H.R. 1937

On May 9, 2013, Senators Ron Wyden (D-OR) and Marco Rubio (R-FL), and Rep. Duncan Hunter (R-CA), introduced the Student Right to Know Before You Go Act to both houses of Congress. The bill would provide for more accurate and complete data on student retention, graduation, and earnings outcomes at all levels of postsecondary enrollment. To accomplish this, the bill would, among other things:

  • “Replace existing IPEDS reporting requirements with a state-based and individual-level system which excludes any personally-identifiable data.”
  • Require the new data systems to match individual transcript data to post-graduation employment and earnings outcomes
  • Further support a federal Statewide Longitudinal Data System
  • Make the data system – which would be disaggregated and not include personally-identifiable data – available for research.

Creating Higher Education Affordability Necessary to Compete Economically Act – S.2374 / H.R. 4902

On May 21, 2014, Senator Mary Landrieu (D-LA) introduced the Creating Higher Education Affordability Necessary to Compete Economically Act. (Rep. Loretta Sanchez (D-CA) introduced an identical bill to the House on June 19, 2014.)  The bill would:

  • Increase maximum Federal Pell Grant for 2014-2015 academic year, and award additional Pell Grants to students who have already received the grant.
  • Raises the period in which students may receive Pell Grant funding from 12 semesters to 15 semesters.


Senators Harkin and Merkley Introduce “Protecting Students from Worthless Degrees Act”

Posted in Higher Education News, Higher Education Policy, Marketing and Recruiting, News from the Hill, State Authorization

Dennis Cariello

As part of our review of currently pending higher education legislation, we wanted to let you know about a recently introduced bill that was introduced after the release of our Education Services Alert last week.  On September 19, 2014, Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Senator Jeff Merkley (D-OR) introduced the “Protecting Students from Worthless Degrees Act,” which is designed to “crack down on worthless degrees peddled by unscrupulous academic institutions.”  Although the bill text was not immediately available, it is likely that the bill would closely resemble a bill introduced by Senators Harkin and Merkley (and Senator Barbara Mikulski) under the same name in 2012.

In short, the bill would require that institutions offering programs that lead to licensure or the ability to sit for a licensure exam to meet the standards to allow graduates to obtain such licensure in the state in which the institution is operating – including obtaining any programmatic accreditation.  Additionally, the institution must disclose to any potential student if the program does not qualify a graudate to obtain licensure or sit for a licensure exam in a state in which the student is located.


Our Thoughts on the Current Higher Education Legislative Proposals

Posted in Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

Late last week we released an Alert entitled,”Congress and the Higher Education Act: what’s on the table? What’s to come? Our look at the major proposals,” which summarizes our views on where things stand legislatively in higher education.   In it we try to do some trend spotting while summarizing the various bills out there dealing with higher education, as well as review the proposal from Budget Committee Charmian Paul Ryan, who issue a detailed paper on his proposed reforms, albeit not in formally introduced legislative language.

There is a lot out there and as you would imagine, we had to condense things a bit.  As a result, we will be releasing our somewhat longer summaries on the blog, in case you are interested. Today, we turn our attention to two Senate bills — also recently discussed by American Council on Education Senior VP for Government Relations, Terry Hartle — one from the outgoing Chairman of the Committee on Health Education Labor and Pensions (HELP) and one from the current Ranking Member of that committee – who will likely be the Chairman is the Republicans take control of the Senate.  Continue Reading

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.

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.


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

Department of Education Announces Negotiators for Rulemaking Concerning the Violence Against Women Reauthorization Act of 2013

Posted in Clery Act, Department of Education, Higher Education News, Higher Education Policy

Dennis Cariello

Following up on our prior coverage of this rulemaking session, late last week, the U.S. Department of Education (Department) announced the negotiators for the rulemaking session seeking to “prepare proposed regulations to address the changes to the campus safety and security reporting requirements in the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, made by the Violence Against Women Reauthorization Act of 2013 (VAWA).”  The negotiations sessions, which start on January 13-14, 2014 (and continue on February 24-25, and then end on March 31-April 1), run from 9:00 a.m. to 5:00 p.m. and will be held at the Department’s office at 1990 K Street, N.W., Eighth Floor Conference Center, Washington, DC 20006.  Gail McLarnon was named the Department’s negotiator.

Additional information, including the original Federal Register Notice, can be found on the Department’s VAWA Negotiated Rulemaking web site.  This will be an interesting session and will attempt top answer a number of difficult questions.  My presentation on the changes required by VAWA tries to highlight a few of the more thorny topics.


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.

The Department of Education Announces More Negotiated Rulemaking

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

Dennis Cariello

It will be a very busy year for the U.S. Department of Education (Department).  Already engaged in a controversial negotiated rulemaking on “gainful employment,” and having announced a rulemaking on the implementation of the Violence Against Women Reauthorization Act of 2013, the Department published a notice in the Federal Register of its Intention To Establish a negotiated rulemaking committee to discuss topics for “Program Integrity and Improvement.”  The committee meetings will be held at the Department’s offices at 1990 K Street NW., Eighth Floor Conference Center, Washington, DC 20006.  The committee will meet from 9am -5 pm on the following days:

  • Session 1: February 19-21, 2014
  • Session 2: March 26-28, 2014
  • Session 3: April 23-25, 2014

The “Program Integrity and Improvement” rulemaking will likely focus on six topics:

  • Cash management of funds provided under the title IV Federal Student Aid programs, including the use of debit cards and the handling of title IV credit balances.
  • State authorization for programs offered through distance education or correspondence education.
  • State authorization for foreign locations of institutions located in a State.
  • Clock to credit hour conversion.
  • The definition of “adverse credit” for borrowers in the Federal Direct PLUS Loan Program.
  • The application of the repeat coursework provisions to graduate and undergraduate programs.

The Department is seeking nominations for this committee.  All nominations should be received by December 20, 2013.  The nominees  should fill one of the following constituencies that “are significantly affected by the topics proposed for negotiations”:

  • Students.
  • Legal assistance organizations that represent students.
  • Consumer advocacy organizations.
  • State higher education executive officers.
  • State attorneys general and other appropriate State officials.
  • Business and industry.
  • Institutions of higher education eligible to receive Federal assistance under title III, Parts A, B, and F, and title V of the HEA, which include Historically Black Colleges and Universities, Hispanic-Serving Institutions, American Indian Tribally Controlled Colleges and Universities, Alaska Native and Native Hawaiian-Serving Institutions, Predominantly Black Institutions, and other institutions with a substantial enrollment of needy students as defined in title III of the HEA.
  • Two-year public institutions of higher education.
  • Four-year public institutions of higher education.
  • Private, non-profit institutions of higher education.
  • Private, for-profit institutions of higher education.
  • Regional accrediting agencies.
  • National accrediting agencies.
  • Specialized accrediting agencies.
  • Financial aid administrators at postsecondary institutions.
  • Business officers and bursars at postsecondary institutions.
  • Admissions officers at postsecondary institutions.
  • Institutional third-party servicers who perform functions related to the title IV Federal Student Aid programs (including collection agencies).
  • State approval agencies.
  • Lenders, community banks, and credit unions.


Senate Forms Task Force to Review Higher Ed Regulations and Reporting Requirements

Posted in Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

In an statement earlier today, Senate education committee Ranking Member Senator Lamar Alexander (R-Tenn.), and members Barbara Mikulski (D-Md.), Richard Burr (R-N.C.), and Michael Bennet (D-Colo.) “announced the formation of a task force to examine burdens on institutions of higher education.”  The “Task Force on Government Regulation of Higher Education” will review federal regulations and reporting requirements affecting colleges and universities and “make recommendations to reduce and streamline regulations.”

The task force is to be co-chaired by Nicholas Zeppos, chancellor of Vanderbilt University, and William Kirwan, chancellor of the University System of Maryland.  It will comprise 14 college and university presidents and higher education experts. Also, the American Council on Education will provide organizational assistance.