New Gainful Employment Proposal Pushed to Spring 2023

The Biden Administration has extended its timeline for implementing new gainful employment rules, frustrating some student advocates.

This month, the Department of Education (ED) revealed in a public notice that it does not plan to release the next draft of its gainful employment (GE) rule — as well as several other oversight rules — until April 2023. That means the earliest the GE rule could go into effect, according to Nathan Arnold of the Education Counsel, is July 2024.

GE describes the government oversight system designed to ensure programs don’t saddle students with unmanageable student loan debt. It also looks to ensure their degree or certificate leads to larger salaries.

The department met with higher education stakeholders from January to March to discuss reimplementing the rule, which President Donald Trump’s administration rescinded in July 2019. Representatives from institutions blocked consensus on a proposal that would have reinstated the Obama-era GE rule and added an earnings threshold that requires recent graduates to make more than the average worker with just a high school diploma.

Without consensus, ED has the power to amend its proposal.

Carolyn Fast, senior fellow at the Century Foundation and a negotiator during this year’s negotiated rulemaking for the GE rule, was disappointed in the time ED will take in getting a final rule proposed for public comment.

“We were expecting that it would be issued this spring. That was sort of the original idea,” she told BestColleges. “The longer this is delayed, the more students will be harmed in the meantime.”

The department also pushed other issues discussed during the latest negotiated rulemaking sessions into April 2023, including:

The next step in rulemaking to close the 90/10 loophole and institute new regulations for when a for-profit college changes ownership or control will move forward in July, according to ED notices.

The reason why advocates who hoped to reinstate a new GE rule are disappointed, Fast said, is that the delay means colleges and universities have more time to overburden students with debt without oversight.

Under the proposed GE rule in March, a program passed the GE 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. It also created an income threshold where a program could fail GE rules if its graduates’ median earnings are less than the median earnings of working adults in their state aged 25-34 who hold only a high school diploma or GED certificate.

The discretionary income metric mirrors Obama-era rules implemented in 2014, while the earnings threshold was a new addition proposed during negotiations this year.

Fast said the delay means any GE rule won’t go into effect until the 2024 academic school year. Additionally, a program isn’t liable to lose Title IV federal funds unless it fails the GE metric over 2-3 years. That means schools may not lose access to these funds until 2026 or 2027, Michael Itzkowitz of ThirdWay said.

“We were disappointed that it was delayed in this way, because it just means that more students will continue enrolling in bad programs,” Fast told BestColleges.

The GE rule mainly impacted for-profit colleges and universities when it was in place. Career Education Colleges and Universities (CECU), which represents the for-profit industry, applauded ED’s decision to take more time to craft the next GE draft.

“CECU is pleased that [ED] is taking the time necessary to reconsider their ill-conceived plans to propose an accountability measure that exempts the vast majority of institutions of higher education,” CECU President and CEO Jason Altmire said in a statement. “We look forward to working with the department in the months ahead to craft a meaningful and fair rule that applies to all institutions in all sectors, as the department is authorized to do under Section 454 of the Higher Education Act.”

The representative for ED stated multiple times during negotiated rulemaking that the department does not intend to expand what programs fall under GE oversight. The latest proposal would include all programs at for-profit colleges and credential programs at public and private institutions.

Fast said she doesn’t think the delay means ED is planning a massive overhaul of what negotiators voted on in March.

“I wouldn’t necessarily read anything into the delay,” she said.

Instead, it’s likely a symptom of ED taking on many issues over the past year. The department discussed seven issues during rulemaking from January to March, as well as 12 issues from October to December. Most of the 2021 rulemaking issues have also not been released for public comment, but notices from the Office of Information and Regulatory Affairs show the department expects to do so in July and April.

“[ED] may have just run into the situation where they were trying to do too many important things and they couldn’t get it out all at once,” Fast said.

The department may overhaul the regulations to appeal to the institutional representatives who voted against consensus, but she thinks this is unlikely.

Fast added that she does not think these delays, potentially due to bureaucracy, should dissuade Joe Biden’s administration from continuing to use negotiated rulemaking to craft regulations. She would rather the administration continue to meet with higher education stakeholders to develop workable and useful regulations.