Biden Administration Set to Bring Back Gainful Employment Rules

The Obama-era rules forcing for-profit colleges to prove the value of their degree programs were rescinded by the Trump administration.
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  • The Trump administration rescinded gainful employment rules in 2019.
  • Biden's Department of Education is working to bring those regulations back.
  • There is some disagreement, however, on whether to expand the rules.

The Biden administration is set to reinstate — and potentially strengthen — rules holding colleges accountable for their degree programs that were overturned by the Trump administration.

The Obama-era "gainful employment" rules forced institutions, especially for-profit colleges, to prove the value of their degree programs. They also sought to ensure students at those schools could secure jobs earning enough money to repay their federal student debt. The Trump administration didn't enforce the rules and then rescinded them in July 2019.

Negotiators representing a mix of higher education and student groups are currently working with the U.S. Department of Education (ED) to draft new Gainful Employment (GE) regulations. Some of those stakeholders, however, aren't just looking to reinstate the Obama-era language, but also strengthen it. Others, including representatives of for-profit colleges, are trying to limit the impact of revived GE rules.

The pushback that occurred in previous negotiated rulemaking sessions has left some experts fearing negotiators may not reach a consensus on new rules. Here's what students need to know in advance of the final round of discussions scheduled to take place the week of March 14.

The History of Gainful Employment

To understand where negotiations are now, it's helpful to understand how they got here.

The Higher Education Act of 1965 requires specific programs — those at for-profit colleges and any non-degree programs at public or private nonprofit institutions — to "prepare students for gainful employment in a recognized occupation" to access Title IV funds.

It wasn't until 2014, however, that GE was concretely defined.

Those rules used two metrics to determine whether a program passed or failed the GE threshold. ED used both an annual debt-to-earnings ratio and a discretionary income ratio to place a program into either the pass, warning, or fail category.

A program passed the debt-to-earnings ratio requirement if its graduates left school with an annual loan payment less than 8% of their annual salary. The program was placed in warning if the rate was between 8% and 12%, and it failed if payments were higher than 12%.

A program passed the discretionary income ratio requirement if graduates had an annual loan payment of less than 20% of their discretionary income. The program was given a warning if payments were between 20% and 30%, and it failed if rates were higher than 30%.

Programs had to fail both metrics to receive a "failing" status.

The Biden administration has pledged to hold for-profit colleges accountable for poor student outcomes, but it announced last May that it cannot legally reinstate the rules that were rescinded by the Trump administration. Instead, it committed to revisit the regulations in the rulemaking committee process that is now underway.

The 2014 metrics are important in the current process because during initial negotiations last January, a majority favored ED using these guidelines as a starting point for future negotiations. That's what ED did last February, at least in terms of what constitutes a passing rate.

ED only evaluated colleges using the GE rules in 2017 when it evaluated 8,632 programs. Only 8% of programs studied failed the GE test. However, of those 703 that failed, 98% were at for-profit institutions.

Strengthening Gainful Employment Rules on the Table

The 2014 rules may be the starting point, but they're not the endpoint for many negotiators.

"It was brought up at that table that the department should start with a baseline of the 2014 regulation[s], and then build upon that," Rachel Fishman, deputy director for higher education research at New America, told BestColleges.

Many of the consumer and student advocacy groups pressed ED to add an earnings threshold in addition to the existing ratio metrics, she said. Negotiators proposed using the average income of Americans with only a high school diploma as an earnings minimum for graduates from programs that fall under GE.

— Rachel Fishman, deputy director for higher education research at New America

Quotation mark

Fishman said some negotiators feel this is necessary because some students graduate with a degree or certificate, but not substantial debt. However, those programs could still fail to prepare them for careers outside of school even if they are debt-free. ED currently has no way of identifying programs like this.

Institutional representatives don't want the earnings threshold added, Fishman said.

"The institutions have been historically wary about GE rules, particularly the for-profit institutions," she said.

ED, meanwhile, did not tip its hand as to whether it might include a threshold in the next draft of rules, she added.

What's Next for Gainful Employment Rules?

ED will propose a third version of the GE regulations to negotiators for final negotiation sessions, which will convene March 14-18.

At some point during the week, negotiators are expected to take a final consensus check on the issue. For the language to pass to the Federal Register for public comment, all negotiators must agree to the language as is.

Fishman said the likelihood of that happening is extremely low. The for-profit representative — and potentially representatives from other institutions — will almost surely vote it down.

If that's the case, ED will be able to make changes to the language on its own without further input from negotiators. Then, ED's final version will go to the Register and eventually solidify.