Colleges Oppose Biden Admin’s Proposed Gainful Employment Rules

• Negotiators used the gainful employment rules approved in 2014 as a baseline.
• They built off of this by including a minimum wage threshold for graduates of GE programs.
• Even without consensus, the Department of Education is likely to move forward with the rules close to as is.

Negotiators convened by the Department of Education (ED) failed to reach consensus on new gainful employment rules after the representatives for public, private, and for-profit institutions dissented to the ED's proposal to reestablish the rules.

The Department of Education has been working with a group of negotiators from various institutional and student interest groups since January to craft new gainful employment (GE) regulations through a process called negotiated rulemaking.

GE rules are meant to force institutions to prove the value of their degrees and ensure that students aren't being saddled with unmanageable debt or placed in low-earning careers. The rules apply to all degrees and certificates at for-profit institutions and all non-degree programs at nonprofit institutions.

The Biden administration is set on reestablishing GE regulations and enforcement after former President Donald Trump rescinded Obama-era regulations.

Programs that fail GE standards would no longer be able to secure Title IV federal financial aid.

Negotiators, however, failed to reach consensus on ED's proposed language Wednesday, with six voting against the measure. Without consensus, ED will now be able to modify and/or draft new GE rules before filing the rule in the Federal Register for public comment. The language of those rules will likely remain similar to the draft that negotiators rejected this week.

Proposed Changes Irk Public, Private, and For-Profit Colleges

The six dissenting votes came from negotiators representing:

• Financial aid administrators at postsecondary institutions
• Four-year public institutions
• Minority-serving institutions
• Private, nonprofit institutions
• Proprietary (for-profit) institutions
• Two-year public institutions

Most negotiators raised concerns throughout the process, but Bradley Adams, who represented for-profit colleges and universities, led the charge. He said the regulations unfairly target for-profit institutions and leave out too many programs from public universities and private nonprofit schools.

"All rulemaking around GE has been an absolute disaster," he said. "I think the administration is just forcing through GE as fast as possible."

Other institutional representatives shared concerns about the scope of these rules being too broad, the process being too rushed, and the lack of a clearly defined appeals process for programs that fail to meet the rules.

For the most part, ED's proposed language for GE rules mirrored those approved in 2014.

Most notably, programs will need to hit the same debt-to-earnings rates in order to pass the GE rules. A program passed the requirement if its graduates left school with an annual loan payment less than 8% of their annual salary or that payment makes up less than 20% of their discretionary income.

“For a program to pass GE rules, graduates need to leave school with an annual loan payment less than 8% of their annual salary.”

However, one difference from the 2014 rules was that ED's latest proposal did not include a "warning zone." In the past, a program would be placed under "warning" status if loan payments were between 8-12% of annual salary or between 20% and 30% of discretionary income, but now those ranges count as failing.

Adams took issue with the elimination of the warning zone, but ED's lead negotiator Gregory Martin defended the omission on Tuesday.

"The rates will be more effective and more timely in addressing those programs where students' earnings don't allow those students to repay the debt they've taken on for those programs," Martin said. "There is a desire here for the effect of the rates to be timely and the elimination of the zone accomplishes that."

New Earnings Threshold Divides Negotiators

The most notable difference between ED's latest proposal and the 2014 GE rules was the addition of an earnings threshold.

A program that passes the debt-to-earnings thresholds could still fail GE rules if its graduates' median earnings are less than the median earnings of working adults aged 25-34 who hold only a high school diploma or GED certificate. The earnings threshold would be calculated on a state-by-state basis.

Rachel Fishman, deputy director for higher education research at New America, previously told BestColleges that negotiators representing consumer and student advocacy groups pushed for this threshold.

It's designed to ensure that students are spending money on a degree that actually increases their earnings beyond a high school diploma.

It was unclear prior to this week, however, if ED would add this language. It ultimately did, which suggests any finalized GE rules will also include an earnings threshold for GE programs.

A Clash With For-Profit Colleges

While for-profit institutions aren't the only ones targeted in GE rules, these schools were still the center of discussion.

The reasons date back to the short-lived implementation of the 2014 guidelines. ED evaluated 8,632 programs using the 2014 rules and released data in 2017 that showed 8% of those programs failed the GE test. Out of the 703 programs that failed, 98% were at for-profit institutions.

According to a new analysis of GE rules provided to negotiators by the Department of Education, the new earnings threshold would possibly cause even more for-profit schools to fail the GE measures.

The ED's analysis covers certificate programs at private for-profits, private nonprofits, and public schools. Under the proposed rules, 51.1% of those certificate programs at for-profit schools would fail with the addition of the earnings threshold. Another 23.5% of certificate programs at private nonprofits and 2.9% of programs at public institutions would fail.

“Out of the 703 programs that failed to meet the 2014 GE rules, 98% were at for-profit institutions.”

Adams said these rules would unfairly target programs that enroll predominantly women or people of color, who suffer from wage discrimination in the workforce.

He cited cosmetology schools as a specific area of concern. These programs predominantly graduate women, but these proposed GE metrics would fail about half of these programs.

"Doesn't that concern anyone but me?" he asked negotiators. "Are we just shutting down all cosmetology schools are in the country? What's Plan B for the labor market?"

Barmak Nassirian, representing veteran and service member advocacy groups, responded that just because a regulation would have a significant impact on certain institutions or programs, it does not inherently mean the regulation is bad.