With a newly-issued final rule, the U.S. Department of Education has opened another chapter in its efforts to regulate the meaning of the phrase “gainful employment in a recognized occupation.” Under its most recent iteration of a so-called Gainful Employment (or GE) Rule, many programs face loss of Title IV financial aid eligibility unless they satisfy two independent eligibility metrics – a set of Debt-to-Earnings Rates and an Earnings Premium metric. The new rule also greatly expands financial transparency disclosures across all sectors of higher education.
Powers Law Principal Dan Brozovic authored an article for Career Education Review, a Career Education Colleges and Universities (CECU) publication, breaking down the new final rule, including a summary of changes from the version initially proposed by the Department of Education. The rule is set to take effect on July 1, 2024, though certain transparency provisions are delayed until July 2026.
Below is an excerpt from the article. For the full text go to page 28, here.
The GE Rule: A Brief History
Many observers will recognize this as the third iteration of a GE Rule. While the Higher Education Act of 1965 has for decades required that certain Title IV eligible programs provide “training to prepare students for gainful employment in a recognized occupation,” (20 U.S.C. § 1002(b)) the notion that such requirement should be accompanied by a detailed regulatory regime – with loss of Title IV eligibility for programs failing to meet ED’s prescribed standards – first gained serious traction early in the Obama administration. The administration’s short-lived 2011 rule was invalidated by a federal court in 2012. The administration published a successor GE Rule in 2014, which the Trump administration formally rescinded in 2019. The new rule is broadly similar to the 2014 GE Rule – but different and more stringent in several important respects. Gainful employment was addressed in an omnibus negotiated rulemaking proceeding in early 2022. Among the various topics covered, GE was arguably the most controversial. Half of the negotiated rulemaking committee – including institutional negotiators representing every sector of higher education – withheld their consensus. With no consensus reached during negotiated rulemaking, the Department developed its own GE Rule proposal, via a Notice of Proposed Rulemaking (NPRM) published on May 19, 2023. Following its review of the over 7,500 public comments submitted, the Department then released its final rule on September 27, 2023.
Final GE Rule – What (Has Not) Changed?
As noted, ED received thousands of public comments, many of which were detailed and comprehensive. Several resulting changes to the final rule are highlighted below. Ultimately, however, the central elements of the GE framework – including the two eligibility metrics and their underlying methodology – are unchanged from the NPRM. On the other hand, institutions in Puerto Rico and other U.S. territories have been effectively exempt from the GE Rule. The Department clarified that the first official GE metrics will be released in “early 2025,” and the first year a program may become ineligible under the rule is 2026. Institutions’ first deadline will be to complete historical data reporting by July 31, 2024, which will involve organizing and reporting voluminous program- and student-specific data. However, the final rule introduces a “transitional” option allowing all institutions to report data for only the two most recently completed award years (i.e., 2022-23 and 2023-24) in lieu of the larger dataset required in the NPRM. ED will need to prepare reporting templates and instructions, though institutions wishing to plan in advance can find the reporting requirements at § 668.408 of the final rule.
To remain Title IV eligible under the final Department of Education rule, programs will need to satisfy both a Debt-to-Earnings Rates (“D/E Rates”) measure and a novel Earnings Premium (“EP”) metric.
D/E Rates compare program completers’ debt to their earnings about three years after graduation. Despite now being more stringent, the D/E Rates are broadly similar to the Obama-era concept and will be familiar to many observers. Arguably the more significant development is the new EP metric, under which a Title IV program’s graduates must have greater median earnings than that of all high school graduates in the workforce aged 25-34. If a program’s median earnings is equal to or below the median high school earnings threshold, the program is considered failing.
Read the rest of the article starting on Page 28 of the Career Education Review Fall 2023 Issue.