Rule-Making Panel Again Snags on Defining ‘Gainful Employment’

The third and final round of discussions for a panel that is re-examining 14 rules that affect for-profit colleges and other higher-education sectors got under way here on Monday, with the issue of defining "gainful employment" taking up most of the day and provoking some strong responses.

To be eligible to participate in the federal student-aid programs, providers of vocational programs are required to prepare students for "gainful employment in a recognized occupation." But federal regulations do not define "gainful employment" or how institutions should measure their performance on that score.

Alternatives for Remaining Eligible
So the department revised its proposal with more specifics. Under the new proposal it offered Monday, a vocational-training program would comply with the gainful-employment rule if a graduate’s annual debt payment, based on a 10-year repayment schedule, did not exceed 8 percent of the expected earnings of the occupation the student was preparing for.

However, programs in which student-debt payments exceeded 8 percent could still maintain federal-student-aid eligibility by meeting one of three alternatives: showing that the actual earnings of the institution’s graduates (rather than the expected earnings as determined by the Bureau of Labor Statistics) are high enough to reduce the ratio below 8 percent; showing that 75 percent of students who entered repayment in the previous three years were repaying their loans without deferrals or forbearances; or showing that the program had at least a 70-percent completion and placement rate.

The new proposed language got mixed reactions from the panel. Elaine Neely, from Kaplan Higher Education Corporation, who is representing the for-profit higher-education sector, strongly objected to the proposed language and questioned whether the department even had the authority to regulate such a matter. "This is unworkable," she said.

Terry W. Hartle, of the American Council on Education, didn’t mince words in speculating whether the department had just randomly selected percentages in crafting the proposed language. He said it seemed as if the proposal had been "put together on the fly" and that the department had not considered the negative consequences.

Mr. Hartle is representing college presidents in the negotiations.

Some panel members, however, agreed with the department’s proposal. Among them was Margaret Reiter, a lawyer who is representing consumer-advocacy organizations. She said too many schools are offering programs without knowing if students can meet the debt burden.

More Contentious Issues Ahead
The department is expected to further tweak its proposed language and come back with more revisions later in the week.

The panel is supposed to take up another weighty issue on Tuesday: incentive compensation for student recruiters. During last month’s session, the department proposed eliminating the 12 "safe harbors" adopted in 2002 to clarify a ban on incentive compensation for student recruiters. The safe harbors specify types of compensation plans that do not violate the ban.

Most panel members were taken aback by the department’s proposal. As a potential remedy, a smaller group of negotiators formed to discuss the issue further and offer suggestions to the department. Those recommendations are forthcoming.

Other issues to be discussed during the weeklong session include the definition of a high-school diploma, the definition of a credit hour, and the timeliness and method of disbursement of student-aid funds.

The panel is re-examining the rules in a process known as negotiated rule-making. If it does not reach a consensus, the department can draft new regulations without the committee’s input.


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