Washington Watch: ED proposes gainful employment and related rules


The U.S. Education Department (ED) on Wednesday released its highly anticipated rules governing federal student aid eligibility for all Title IV-eligible certificate programs, under the “gainful employment” (GE) language in the Higher Education Act (HEA). 

The GE Notice of Proposed Rulemaking (NPRM) is quite similar to what ED proposed during negotiated rulemaking last year and has a number of the same general concepts as the Obama administration’s 2014 GE regulations. (The Trump administration later rescinded those rules.) However, the just-released package includes several provisions outside of the gainful employment eligibility metrics that could greatly impact community colleges. 

ED has emphasized that the regulations primarily target proprietary institutions, which the department asserts “have demonstrated particularly poor outcomes.” Nonetheless, even though community colleges will have very few programs that stand to lose eligibility through the GE metrics – at least according to ED estimates – they will still be significantly affected by the regulatory package. This goes beyond the administrative requirements that have been a prime concern of community colleges under previous versions of the GE regulations.

ED aims to finalize the regulations by November 1 so that they will take effect July 1, 2024 under HEA’s “master calendar.” The American Association of Community Colleges (AACC) will respond to the NPRM with comprehensive comments. The NPRM provides only a 30-day comment period, a steep challenge given the 1,077-page regulatory package.

GE metrics

Under the department’s regulations, in order for certificate programs to retain their Title IV eligibility, they must pass two separate metrics. One metric is the familiar debt-to-earnings (D/E) ratio, which closely tracks the 2014 regulations, and a new “earnings premium.”

The D/E ratio compares the median earnings of program completers receiving federal financial aid to the median annual payments on loan debt borrowed for the program. Program graduates cannot have debt payments greater than 8% of their annual earnings and 20% of their discretionary earnings (defined as annual earnings minus 150% of the federal poverty guideline for a single individual), or the program will be considered to have a “high-debt-burden” and would fail the D/E metrics. AACC generally supports debt-oriented GE metrics, given that a prime purpose of a community college education is to ensure that it is broadly affordable and that most students will not need to borrow to finance their programs.

If fewer than 30 students completed a program during the given two-year or four-year cohort period, D/E rates will not be calculated, and the program will maintain its previous year’s D/E status.

The earnings premium measures how much a typical program graduate is earning three years after completion compared to a typical high school graduate in their state who is between the ages of 25 and 34 and who is active in the workforce (about $25,000 nationally). Programs with graduates who earn less than the median high school graduate will be deemed “low-earnings” and would fail the earnings premium metric. AACC expressed opposition to an earnings threshold in last year’s public negotiation sessions. Many community college certificate program completers are barely 20 years old and cannot always be expected to match the earnings of people who have been participating in the economy for close to two decades, in many cases. 

If the federal agency from which ED is deriving earnings data does not provide the median earnings for a program, the earnings premium will not be calculated.

If a program fails either or both metrics in a single year, it would be required to provide warnings to students that the program is at risk of losing federal aid eligibility. If a program fails the same metric in two of three consecutive years, its Title-IV eligibility would be revoked.  

Impact on community colleges

According to ED’s estimates, most community colleges do not have certificate programs that would fail either the D/E metrics or the earnings metric. Of two-year public institutions, 93% have zero enrollment in programs that would fail the GE accountability metrics.

For undergraduate certificates at public institutions, 729 programs would pass both metrics. One program would fail the D/E metrics, 184 would fail the earnings premium and six would fail both.

However, data can’t be calculated for the vast majority of programs at public institutions. Only 4.8% of public undergraduate certificate programs will have valid D/E and earnings data because they have an insufficient number of completers.

“There are many very small programs with only a few students enrolled each year,” ED said in the NPRM. “More than half of all programs have fewer than five students completing per year and about 20 percent have fewer than five students enrolled each year.”

As a result, ED is focused on capturing the greatest percentage of enrollment under the GE accountability metrics rather than the greatest number of programs. The 4,100 GE programs across all higher education sectors that can have D/E and earnings data calculated constitute 65.3% of all students enrolled in GE programs.

Cost, administrative burden

For the GE rules, community colleges will primarily be affected by the cost and administrative burden of complying. ED estimates that it will take 95.75 hours per institution plus an additional 7.75 hours per GE program at the institution to adhere to the reporting requirements in the first year. The department estimate that burden will decrease in subsequent years.

This means that all public two-year institutions are projected to spend a total of 1,238,082 hours and $57.7 million implementing the GE rules in the first year, according to ED’s calculations, and a total of 356,042 hours and $5.5 million annually in subsequent years. ED’s estimates cannot be verified but generally it underestimates the costs of compliance. The two previous sets of GE regulations were considered to be extremely onerous, and costly, by most community college leaders.

It should also be remembered that for the purposes of GE and most related ED data sets, a “student” is only those students who receive federal Title IV aid. Less than half of all community college students receive such aid. Therefore, the GE framework data and related earnings data are plagued by its incompleteness. This situation would be rectified by passage of the bipartisan College Transparency Act, but House Education and the Workforce Committee Chair Virginia Foxx (R-North Carolina) and other legislators remain adamantly opposed to that legislation and have thus far prevented its passage. 

Financial value transparency

A new aspect of the proposed regulations includes calculating D/E and earnings premiums for almost all programs at all institutions, regardless of whether they are GE programs. The programs would be categorized as low-earning or high-debt-burden, and the information would be available on a new website created by ED. The department has suggested it might include the earnings of non-completers, which AACC has long maintained is not a useful indicator of program impact. 

Institutions would have to provide students with a link to the site and its program disclosures prior to enrollment. The website “may” also contain information to contextualize the D/E and earnings premium measures, as well as the typical earnings and debt levels of graduates; the net yearly cost of attendance at the program and the total costs paid by completing students; and information about typical amounts of student aid received.

For non-GE programs classified as “high-debt-burden,” students would have to acknowledge that they viewed the disclosures before they can receive Title IV aid to enroll in the program.

The department’s regulatory package does not end with GE. There are several proposed provisions in the other sections of the regulations that would reshape and enhance the federal government’s ability to condition, or limit, the participation of institutional participation in Title IV, and otherwise regulate their operations.  Some of the more prominent provisions include:

  • New authority to reject an institution’s participation in the federal aid programs on the basis of new “supplementary performance measures,” which may include withdrawal rates, debt-to-earnings rates, earnings premiums measures, educational and pre-enrollment expenditures and licensure pass rates.
  • A requirement that gainful employment programs not exceed the minimum length of clock hours, credit hours or its equivalent, if the state has established such a requirement.
  • A new requirement that “adequate career services” be provided by all Title IV institutions. It is unclear how this would be implemented. 

AACC will keep its members informed about the impact of the regulations and its strategies relating to them. 

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Alexis Gravely is a legislative analyst at the American Association of Community Colleges (AACC).

David Baime is AACC’s senior vice president for government relations.

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