After much anticipation and anxiety, The Department of Education has unveiled its new proposal for the gainful employment rule. Its initial ideas for redefining the rule were very controversial and met with much criticism, including some from yours truly, for attempting to define the rule in terms of an average debt to expected earnings metric, with schools exhibiting a ratio exceeding 8% losing eligibility for federal aid. Today, ED reveleaed its latest rule proposal, which appears to be a slightly watered down version that offers a bit more flexibility, rather than a heavy handed backslap across the face to the entire for-profit sector . As Arne Duncan was quoted as saying in the Chronicle,
"The many good actors should be protected from being tainted or tarnished by the small minority that are doing a disservice to the industry"So what does the new rule have to offer? According the ED's press release, it:
would take into consideration whether former students are repaying their federal student loans and the relationship between total student loan debt and average earnings after a postsecondary training programThe public has 45 days to comment on the rule proposal. After reviewing and supposeduly considering all comments, if the rule were to remain unchanged from its currnet form, ED indicated that
Fully eligible programs will either have at least 45% of their former students paying down the principal on their federal loans; or their graduates will have a debt-to-earnings ratio of less than 20% of discretionary income or 8% of total income. The programs would have to disclose their repayment rates and debt-to- earnings ratios unless they pass both these tests.
Ineligible programs will have less than 35% of their former students paying down the principal on their federal loans; and their graduates will have a debt-to-earnings ratio above 30% of discretionary income and 12% of total income. An ineligible program may not offer federal student aid to new students. It can provide one additional year of aid to current students, provided that it warns them about the high debt-to-earnings ratio.
Restricted programs are those that are not fully eligible or ineligible. Restricted programs are subject to limits on enrollment growth, and the institutions must both demonstrate employer support for the program and warn consumers and current students of high debt levels.
The Department's proposal does not lower a program's repayment rate as a result of students who may be in lower-paying public service jobs. Program completers who qualify for Public Service Loan Forgiveness would be counted as "paying down the principal of their federal loans". Borrowers in income-based repayment would be treated as successfully repaying their loans if their incomes are high enough to allow them to pay more than the interest on their loans.
5 percent of all programs would no longer be eligible to offer their students federal student aid and 55 percent of all programs would be required to warn their students about high debt-to-earnings ratiosMy initial reaction to the new rule proposal is that it remains misguided in that it fails to fundamentally change one of the biggest problems in all of higher education today, mainly that prospective students and their parents lack good outcome-focused information that would permit better decision making in the college selection process. Instead, the rule only requires those career schools which are borderline bad actors in risk of losing eligibility to the Title IV gravy train, according to the faulty metric and repayment rates, to warn consumers about high debt levels and default rates.