Revised ‘Gainful Employment’ Rule Breaks Little New Ground

Career College Central summary:

  • The Education Department has released a revised "gainful employment" rule, a little less than two years after a federal judge threw out the original measure, calling portions of it "arbitrary." The new proposal hews closely to a draft version rejected by a rule-making committee in December, judging for-profit and vocational programs based on their graduates’ debt levels and their borrowers’ default rates. The cutoffs for programs to pass and fail the rule are unchanged from the draft proposal, as are the associated penalties.
  • After the revised rule is published in the Federal Register, the public will have 60 days to comment on it. The department will consider that feedback before publishing a final rule in the following months.
  • Debt-to-Earnings Measures: Under the new proposal, programs would fail if their graduates' student-loan debt payments exceeded 12 percent of their incomes and 30 percent of their discretionary incomes, the same ratios as in the original rule and the draft considered by negotiators this past fall. As in the draft, programs whose graduates have debt-to-income ratios of 8 to 12 percent or debt-to-discretionary-income ratios of 20 to 30 percent would fall in "the zone," and would have to warn students that they might become ineligible for aid.
  • Programs that failed both debt-to-income tests twice in any three-year period or were in the zone for four consecutive years would be ineligible for federal student aid. However, the department did make a couple of key concessions to for-profit institutions in the latest rule, exempting programs with 30 or fewer borrowers, rather than 10, and extending the assumed repayment period to 15 years for bachelor’s and master’s degrees and 20 years for doctoral programs. The combined changes bring the rule back in line with the 2011 version.

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