The U.S. Department of Education has released a pre-publication copy ( of the final regulations on the metrics for determining the eligibility for federal student aid for those enrolled in an educational program that leads to “gainful employment” in a recognized occupation. The regulations are expected to be published in the Federal Register soon.   

The metrics are part of the Department’s final Program Integrity regulations scheduled to take effect on July 1.  These regulations provide a broad set of rules that governs the eligibility and use of financial aid grants authorized under Title IV of the federal Higher Education Act (“HEA”). 

The new regulations contain significant changes.  Among them is a ban on incentive compensation in student recruiting and admissions and new notice and reporting requirements for gainful employment programs.  Educational institutions also must begin complying with new state authorization rules and program disclosure rules.  These include publishing median student debt, graduation rates, and employment statistics for certain educational programs. 

The current regulations do not contain a definition of “gainful employment.”  During its negotiated rulemaking session, the Department expressed its intention to provide such a definition in the new regulations.  But initial proposals raised concerns about practical application and some accused the Department of overreaching its authority.  After receiving 90,000 comments, the Department decided to delay publishing final regulations in order to re-examine the issue. 

Under the final regulations, a program is now considered to lead to gainful employment if it has a repayment rate of at least 35 percent or its annual loan payment under the debt-to-earnings ratios is 12 percent or less of annual earnings or 30 percent or less of discretionary income.  The first time a program fails to meet the debt measure it must disclose to students why the measurement was missed and how the issue will be addressed.  After missing the debt measure for the second time in three years, programs must inform students that their debts may be unaffordable after graduation, that the program is at risk of losing eligibility to participate in Federal student aid programs, and what their existing transfer options are.  After a third failure in four years, the program loses eligibility to participate in Federal student aid programs and cannot reapply for eligibility for at least three years.  Under this framework, the first year a program could become ineligible would be 2015, based on its performance in FY 2012-2014.

A key question for proprietary and postsecondary vocational institutions will be whether a program falls within the exemption for baccalaureate degrees in liberal arts as enumerated in the 2008 Higher Education Opportunity Act.  Under this exemption, accredited baccalaureate degrees in liberal arts dating back to January 1, 2009 do not need to report on gainful employment.  Preparatory courses of study that provide coursework necessary for enrollment in an eligible program are also exempt. 

Whether academic programs are subject to the gainful employment disclosure rules may turn on academic purpose and course content.  As a result, it is important for educational institutions to examine the core curriculum and purpose of their program offerings.  Attorneys in the Collegiate and Professional Sports Industry Practice are available to discuss compliance with the new Program Integrity regulations.  For more information, contact Gregg Clifton or Jennifer Harper. 

Useful Links:

IFAP – Gainful Employment Page

Gainful Employment 2011 Electronic Announcements

 U.S. Dept. of Education Dear Colleague Letter GEN 08-12 (December 2008)