New Gainful Employment Language Is Tougher Than Before

Career College Central summary:

  • The next set of negotiations around gainful employment will begin next week and the Department of Education just released its second round of regulatory language. The new proposal is arguably the strongest version of gainful employment in years.
  • In this draft, there are more opportunities for programs to fail, including a chance for immediate eligibility loss. The proposal contains provisions that would almost immediately knock out programs that can’t provide gainful employment because they lack sufficient approvals and accreditations. And for the first time, penalties would go beyond just loss of federal student aid — programs could be on the hook for some loan dollars even before they leave the program.
  • The new proposal requires programs to pass three metrics (not one metric as suggested in the first proposed draft):

    • The previously developed debt-to-earnings ratios – this is unchanged from the first proposed draft.
    • A program cohort default rate metric – uses the same standards as the institutional cohort default rates.
    • A loan portfolio repayment performance – requires payments by all borrowers in repayment (including both completers and non-completers) to exceed the new interest that has accrued.
  • The new proposal also added a "student protection" provision under which a program that could become ineligible at the end of the year, the institution must post letter of credit or agree to set aside a portion of Title IV funds to provide borrower relief to enrolled students if program eventually becomes ineligible.  

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