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Department of Education Addresses Gainful Employment Standards at For-Profit Institutions

On Friday, March 14, the Department of Education announced the release of a proposed rule containing the “gainful employment” standards for vocational programs at for-profit institutions and community colleges. The 841-page proposal would require career colleges to meet certain standards for gainful employment or risk losing access to federal student aid. The goal of the rule, as stated by the Obama administration, is to ensure the programs are preparing students to obtain jobs where they can earn enough money to pay back their loans.

The proposed rule will make four significant changes to the gainful employment rule previously proposed by the Obama administration in 2011. These changes include stricter criteria for the debt-to-earnings thresholds, inclusion of a “warning zone” for institutions barely passing the metrics, a shorter time period for failing programs to be ineligible, and the requirement these programs pass both metrics to successfully qualify for student aid. The standards would affect approximately 8,000 academic programs and institutions, totaling about 1 million students across the country.

Programs would be measured by their debt-to-earnings ratios. The Department would “fail” the program if graduates contribute more than 12 percent of their annual income or more than 30 percent of their discretionary earnings on student debt. The agency would consider programs with students spending 8 percent of annual income or 20 percent discretionary spending on debt in the warning zone. The second metric requires programs keep student loan default rates below 30 percent. Certain accreditation requirements and state or federal licensure standards will also have to be met for programs to qualify for aid, and institutions will have to publicize program costs, student debt levels, and student outcomes.

To lose eligibility for federal student aid, a program would have to fail at least one metric for multiple years. However, as currently written, 16 percent of all covered programs would be expected to fail the new metrics immediately after the standards took effect, and another 8 percent would fall within the “warning zone.” For-profit institutions would fare the worst; about 20 percent would be expected to fail while an additional 10 percent would most likely fall into the warning zone.

The Association of Private Sector Colleges and Universities has expressed concern the rule reflects an undue focus on for-profit institutions and will negatively impact the student populations they serve. On the other hand, critics of for-profit institutions believe the rule doesn’t go far enough to ensure the bad actors in for-profit higher education will stop engaging in predatory practices.

The public will have 60 days to file comments once the rule is published in the Federal Register. A final rule is expected by November, which would allow it to take effect by July 2015.

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Wow! The Obama admistration really put a big value not only to the education on the students but although for their employment. By this, every student can easily find good jobs after their graduation.