Washington Watch: No consensus for gainful employment regulations

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Members of a U.S. Education Department’s (ED) negotiated-rulemaking committee failed on Wednesday to reach consensus on proposed regulations implementing the “gainful employment” (GE) language in the Higher Education Act. The consensus vote was held during the final, week-long negotiating session on a broad suite of proposed rules.

Six negotiators, most of them representing major sectors of higher education, withheld consensus on the GE regulations. Anne Kress, president of Northern Virginia Community College and the committee’s public two-year institution representative, was among those who withheld consensus. She was joined by representatives of financial aid administrators and four-year public, private and non-profit, minority-serving and proprietary institutions. Most of the negotiators who withheld consensus, including Kress, expressed support for the regulation’s intent, but had concerns or questions about some aspects of the proposed regulations.  

ED’s proposed GE regulations are similar in several respects to the GE regulations twice promulgated by the Obama administration and later rescinded by the Trump administration. Like the Obama regulations, the current proposal would judge whether a program led to gainful employment by weighing the debt incurred by students in a GE program relative to their earnings. A debt-to-earnings (DTE) ratio of greater than 8% and a debt-to-discretionary earnings ratio of greater than 20% constitutes a failing grade for a GE program. If a program fails in two out of three years, it would lose eligibility for the federal student aid programs.

Nearly all programs (including degree programs) at proprietary institutions and certificate programs at other institutions are GE programs.

What’s different

While there are important similarities between the Obama regulations and the current proposal, the differences between the two were key factors in the failure to reach consensus. The new proposal would add an “earnings threshold” metric in addition to the DTE metrics. To pass the earnings metric, the median earnings of GE program completers in the relevant cohort must exceed the median earnings of high school graduates ages 25 to 34 in the state in which the institution is located (or the national median if a program’s enrollment is more than 50% out-of-state students).

The regulations based this threshold on data provided by the Census Bureau, but several negotiators had questions and concerns about the exact source of the data and whether comparing GE program completers’ earnings to this data was comparing “apples to apples.”

Like the Obama regulations, programs with fewer than 30 completers over a four-year cohort period would not be subject to the regulations. Data provided by ED showed that the vast majority of GE programs at public and non-profit institutions fall into this category. Under the new regulations, an aggregate “small program rate” would be calculated for all such GE programs at the same credential level at a given institution. There is no eligibility metric assigned to the small program rate, so a program could not lose Title IV aid as a result.

However, the small program rate is one of several items that the regulations authorize ED to consider when certifying an institution’s Title IV eligibility. The small program rate was of particular concern for the private, non-profit sector.

ED’s move now

Other facets of the proposed regulations that non-consenting negotiators cited as reasons for their votes included the lack of a transition period before the regulations took full effect, insufficient opportunity for institutions to appeal ED’s DTE and earnings threshold calculations, and vague certification procedures.

The proprietary sector negotiator repeatedly urged ED to use its authority to calculate DTE rates for all higher education programs, and not just GE programs. This negotiator and others also expressed frustration with the lack of time to discuss this very complex regulation and urged ED to provide additional data that would shed more light on the regulations’ impact.

Failure to reach consensus does not doom the regulation. Had consensus been reached, ED would have been bound to propose the regulatory text agreed to by the committee in the next phase of the rulemaking. Without consensus, ED is free to propose what it wishes, likely something similar to what it put forward during negotiated rulemaking. This proposed regulation can be expected later this spring or in early summer.

About the Author

Jim Hermes
Jim Hermes is associate vice president of government relations at the American Association of Community Colleges.