The U.S. Department of Education on Friday proposed an ambitious approach aimed at ensuring that vocational programs and most offerings at for-profit colleges do not take advantage of students. Under the draft regulation, a vocational degree program whose graduates’ annual debt repayment loads exceeded 8 percent of the average incomes in the field in question would risk losing eligibility to award federal financial aid.
The suggested rule, one of 14 released by the department as part of a package of changes designed to prevent the abuse of the federal financial aid program, comes in advance of the start next Monday of the third (and, as of now, final) round of negotiated rule making. At the session, college officials, student advocates and aid administrators will try to reach consensus among themselves and with the department on final regulatory language that would go into effect later this year.
Unchanged from the previous draft, this version still eliminates all 12 clarifying "safe harbors" to a 1992 law banning "incentive compensation" for admissions and aid officers that were added to it in 2002. It does, however, leave room for new clarifications, as yet unreleased, from a caucus led by Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, who represents college presidents on the rule-making panel.
The rules include a detailed definition of a credit hour for the purposes of awarding Title IV aid, just as the department’s inspector general investigates how accreditors assign credit hours to nontraditional courses. The department also introduced revisions to its rules on "misrepresentation" of information that take aim at institutions that are perceived as misleading potential students and others on their employment opportunities after completing a certificate or degree.
But perhaps the most significant proposal is the department’s regulatory language linking debt and income for all programs and institutions that are eligible for Title IV funds because they “prepare students for gainful employment in a recognized occupation.” The department opted to embrace that approach rather than propose regulatory language that would have tied tuition costs at such programs to the expected earnings of recent graduates. Though both were discussed during December’s second round of rule making and criticized by some panelists as “price controls,” the debt approach seems to be less objectionable heading into next week’s deliberations.
The result of implementing a debt-to-income limit could be to weed out (or at least cut tuition at) vocational programs and institutions that don’t yield their recent graduates in-field jobs that pay well enough for them to repay their student loan debt on a 10-year schedule.
Under the proposal, the average debt repayment for a program’s graduates could be no more than 8 percent of the expected earnings of someone working in the occupation for which the program prepared students. The ratio would be calculated by dividing the median debt load of a program’s last three years of graduates by Bureau of Labor Statistics data’s 25th percentile of annual earnings for people in occupations for which the program prepared students.
Programs that exceed the 8 percent level could still be eligible for Title IV funds in one of three ways: by proving that its graduates’ annual earnings were higher than the BLS’s and keep the debt-income ratio below 8 percent; by showing that students have at least a 75 percent repayment rate; or by demonstrating a program completion rate of at least 70 percent and an in-field employment rate of at least 70 percent.
Reaction to the proposal will have to wait until next week — negotiators are barred from discussing regulations with the news media.