Gainful Employment Proves Contentious, Again

Higher education groups representing a range of colleges and universities told the Education Department this week that the agency has a lot of work to do over the next four months to fix its proposed gainful-employment rule.

They want some areas of the more than 1,000-page regulation clarified and others thrown out completely. Meanwhile, think tank analysts and consumer protection advocates applauded the department’s proposed rule, which they said would strengthen the higher education system.

The Education Department received more than 7,400 comments on a sweeping set of regulations that would once again define what it means to prepare graduates for gainful employment, require institutions to meet new conditions to access federal financial aid and make it easy for the agency to take action against institutions. The deadline to submit comments was Tuesday.

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Under the rule, programs subject to the gainful-employment requirement would have to show that graduates can afford their yearly debt payments and that they are making more than an adult who didn’t go to college.

The gainful-employment rule applies to programs at for-profit institutions as well as nondegree programs in any sector. Those programs that fail either test in two consecutive years could risk losing their eligibility for Title IV funding. Title IV of the Higher Education Act of 1965 authorizes federal financial aid programs.

The department also is planning to calculate and report how all postsecondary academic programs with more than 30 students fare on those gainful-employment tests, though the results of those tests won’t carry immediate Title IV consequences.

Hundreds of comments came from those connected to cosmetology schools. The stricter gainful-employment tests are expected to decimate the industry. The American Association of Cosmetology called the proposed rule illegal.

“It pains me to think the federal government would be the reason my beauty school is closed,” wrote Rochelle Carr, director of Tucson College of Beauty. “I do not feel the federal government has the right to decide what profession people can choose. It is the person’s choice, and financial aid should be available to everyone.”

‘Administratively Unmanageable’

Department staff will now have to review and respond to the comments before issuing the final draft of the regulations by Nov. 1, as it is currently planned. If the department meets the Nov. 1 deadline, the new rules will take effect July 1, 2024.

“With significant revision, we believe the department could promulgate a much improved, final rule that would put into place a meaningful and successful accountability framework,” wrote Career Education Colleges and Universities, which represents the for-profit higher education sector. “Absent such revision, we foresee a system that would be administratively unmanageable for the department, impossible for institutions to navigate, and in the end, fail to serve the best interests of the students and taxpayers it is meant to serve and protect.”

CECU, an organization that has previously challenged the department’s gainful-employment rules in court, wrote in its 87-page comment that it was concerned about an accountability framework that would only apply to career education and nondegree programs and about a lack of provisions that would allow institutions to appeal data, among other issues with the proposal.

Additionally, the proposed change that would require institutions to warn students in a gainful-employment program that failed one of the tests would “violate the First Amendment’s prohibition on compelled speech” and “cause irreparable harm to programs,” CECU wrote.

CECU and several other commenters took issue with having 30 days to comment on the proposed regulations.

“The suggested framework is lengthy, the calculations are complex, and the research and data cited by the department is voluminous,” CECU wrote in its comment. “Moreover, the stakes for institutions of higher education, their students, and the communities they serve are very high.”

The American Council on Education found that about 33 percent of programs at historically Black colleges and universities not subject to the gainful-employment rule would fail the debt-to-earnings or earnings premium test, while 8 percent of those at minority-serving institutions would do so. At public institutions, about 6 percent of programs would fail, along with 11 percent of those at private nonprofits.

“Given these alarming figures, we question the data used by the department to explain the impacts of the new financial value transparency and gainful employment regulation,” ACE president Ted Mitchell wrote in a 15-page comment on behalf of dozens of higher education groups. “It is apparent to us that far more programs will be impacted from what we know and that we do not have a clear understanding of the number of programs that will actually pass or fail the metrics.”

Mitchell questioned the department’s proposed changes that would allow the education secretary to consider how a program fared on those gainful-employment tests when deciding whether to end an institution’s eligibility for federal financial aid. He added that the change would mean that all academic programs at all institutions would be accountable to gainful employment.

“This represents a significant, if indirect, expansion of GE provisions to all academic programs that greatly exceeds what is provided in statute,” he wrote. “Furthermore, we question the authority granted by the department to give itself such broad discretion.”

The National Association of Student Financial Aid Administrators wrote in its comment that using the gainful-employment metrics for non-GE programs would be “inappropriate and illogical.”

“The GE metrics are designed to measure short-term ROI,” NASFAA wrote. “This is appropriate for programs that provide training in a specific field, but not for a broader education that provides more readily-transferable critical thinking skills necessary to solve problems, adapt, and lead as the world changes. Neither type of education is better, but they are different, as evidenced by the fact that they are defined differently in statute.”

NASFAA and others criticized the department for not proposing the reporting and disclosure requirements for all programs at the negotiated rule-making sessions last year that focused on gainful employment. The association said the department must abandon the provisions that exceed its statutory authority.

“Past experience shows lawsuits challenging new regulations lead to wasted time for financial aid administrators, who must prepare to implement new rules as if they will become effective, only to drop those plans once plaintiffs prevail,” NASFAA wrote.

ACE and several other higher education associations also urged the department to withdraw its proposal to require colleges and universities to follow consumer protection laws in all states where they enroll students if they want to receive federal financial aid—regardless of whether they are part of state authorization reciprocity agreements. Such a provision would undermine reciprocity agreements and should be better discussed as part of negotiated rule making this fall, they argued.

‘No-Brainer’

Third Way, a center-left think tank, supported the rules as proposed by the department and suggested some changes to improve them in its comment.

“The GE rule is an essential protection against low-performing programs that leave students with unmanageable debt, low earnings, or both,” Third Way’s comment says. “These bottom-of-the-barrel programs harm students and waste taxpayer dollars, and it is imperative that the Department finalize and implement its GE rule as quickly as practicable.”

The Heritage Foundation, a conservative think tank, opposed the department’s plan, but other left-leaning think tanks and organizations also backed the department’s proposals in their comments.

“These proposed regulations would make essential improvements to the higher education system to better protect both students and taxpayers,” wrote Kelly McManus, vice president of higher education for Arnold Ventures, a philanthropy. “While true accountability is needed to ensure institutions respond with such seriousness, we nonetheless appreciate and support the department’s efforts to bring a degree of public accountability to institutions and programs (including those not covered under the gainful employment authority) via disclosures to consumers.”

Meanwhile, Higher Learning Advocates, a bipartisan nonprofit that works to improve outcomes for students, wrote in its comment that the proposed earnings threshold does not take into account the different economic circumstances in a state. The nonprofit proposed a more localized metric that would compare an institution’s graduates’ earnings to the average salary of high school graduates in the county or region.

State attorneys general and members of Congress also weighed in. Senate Democrats applauded the department for the rule, which they said would be the strongest accountability framework for career training programs to date. House Republicans on the education committee said accountability is needed for all academic programs—not just those at for-profit institutions—and urged the department to abandon its proposed rule.

“It’s a no-brainer: any institution that wants access to federal financial aid must provide some value to its students,” California attorney general Rob Bonta said in a statement. “With its proposed gainful employment rule, the U.S. Department of Education is taking bold, necessary action to make that goal a reality.”

Theresa Sweet, who was one of several plaintiffs who sued the Education Department over its handling of borrower defense to repayment claims, wrote in a comment that she never would have needed her loans discharged if the proposed gainful-employment rule was in place when she enrolled in college. That’s because her college would’ve failed the gainful tests and lost its ability to access federal financial aid, she wrote.

“My school left thousands of people deeply in debt, with credits that would not transfer and a degree that was frowned upon or totally disregarded by potential employers,” Sweet wrote.

Several other plaintiffs in Sweet’s lawsuit also submitted similar comments. The lawsuit was settled last year.

“While I do see fairness in applying these rules to all institutions of higher education and training, it is IMPERATIVE that these rules be applied immediately to those schools whose bad behavior is already well known to the Dept of Ed, and we know that you already know who they are,” she wrote. “I have no doubt that these rules will be met with a plaintive hue and cry of ‘unfairness’ from the for-profit education industry. You would do well to offer them a hankie for their crocodile tears then turn around and finally do what is best for students and taxpayers.”