The Catholic University of America

TOPIC:

U.S. DEPARTMENT OF EDUCATION PROGRAM INTEGRITY RULES – PART III Gainful Employment Programs – Definition, Disclosure, Reporting, New Programs, Metrics, and Sanctions

 

INTRODUCTION:

This NACUANOTE is Part III of a three-part series on the U.S. Department of Education’s (“ED”) final regulations on the integrity of federal student financial aid programs under Title IV of the Higher Education Act of 1965, as amended (“HEA”).  [1] Although largely directed toward for-profit postsecondary education institutions, [2] these “program integrity rules” have significant implications for nonprofit and public higher education institutions as well.

Part I of the series addressed the new rules regarding state authorization, incentive payments, and misrepresentation. [3] Part II of the series discussed the definition of “credit hour” and disclosure and reporting obligations. [4] This Note, Part III of the series, will address new requirements relating to “gainful employment” – the definition of “gainful employment programs,” a reprise of disclosure and reporting requirements relating to such programs, procedures for addition of gainful employment programs, metrics for determining whether a program prepares students for “gainful employment in a recognized occupation,” and sanctions for noncompliance with the gainful employment metrics. [5] The regulations on the first four gainful employment topics went into effect on July 1, 2011. [6] The regulations specifying the metrics for gainful employment programs will go into effect on July 1, 2012. [7]

 

DISCUSSION:

General Background

Do the gainful employment requirements apply to nonprofit and public institutions?

Yes, the gainful employment requirements apply to all institutions that participate in the federal student financial aid programs under Title IV of the Higher Education Act of 1965, as amended. The requirements apply only to certain programs at nonprofit and public institutions, whereas they apply to all programs at for-profit institutions, with limited exceptions. [8]

Do the gainful employment requirements apply to foreign institutions?

Yes, the requirements apply to foreign institutions. With respect to foreign public and non-profit institutions, programs that are gainful employment programs (“GE Programs”) are the same programs that are GE Programs when offered by domestic non-profit and public institutions. With respect to for-profit foreign institutions, only degree programs in medicine, nursing, and veterinary science are GE Programs subject to gainful employment requirements. [9]


Definition of “Gainful Employment Programs”

Nondegree programs at public or nonprofit institutions must lead to gainful employment in a recognized occupation to be Title IV eligible. [10] With limited exceptions, all degree and nondegree programs at proprietary institutions must lead to gainful employment in a recognized occupation to be eligible for Title IV aid. [11] For purposes of calculating the metrics for a program, ED will identify a gainful employment program with a combination of the institution’s six-digit Office of Postsecondary Education identification number, the program’s six-digit CIP code,[12] and the program’s credential level. [13]

What types of nondegree programs at nonprofit and public institutions are gainful employment programs?

The two types of nondegree programs at public institutions and nonprofit institutions that are subject to ED’s gainful employment requirements are: (1) programs that are at least one academic year in length and lead to a certificate or other non-degree recognized credential; and (2) programs that are less than one academic year in length and meet one of the following ED requirements applicable to vocational programs:

  • Programs that provide at least 600 clock hours, 16 semester or trimester hours, or 24 quarter hours of undergraduate instruction offered during a minimum of 15 weeks of instruction. The program may admit only persons who have not completed the equivalent of an associate degree.
  • Programs that provide at least 200 clock hours, 8 semester or trimester hours, or 12 quarter hours of instruction offered during a minimum of 10 weeks of instruction. The program must be a graduate or professional program and must admit only persons who have completed the equivalent of an associate degree.
  • Programs that provide at least 300 but less than 600 clock hours of undergraduate instruction offered during a minimum of 10 weeks of instruction. The program must admit some persons who have not completed the equivalent of an associate degree. Additional rules apply to such short-term programs. [14]

Are there other programs that are GE Programs when offered by a nonprofit or public institution?

ED-approved “comprehensive transition programs” for students with intellectual disabilities are also GE Programs. [15]

Such programs are degree, certificate, nondegree, or noncertificate programs that are offered by an institution and are designed to support students with intellectual disabilities who are seeking to continue academic, career and technical, and independent living education at an institution in order to prepare for gainful employment. [16]

Are non-Title IV-eligible programs GE Programs?

Non-Title IV-eligible programs are not GE Programs, and therefore are not subject to the gainful employment requirements. [17]

Are teacher certification programs GE Programs?

A teacher certification program that results in a certificate awarded by the institution is a GE Program, assuming the program is otherwise a Title IV-eligible program. A teacher certification program that does not result in a certificate awarded by the institution itself but which consists of a collection of course work that is necessary for the student to receive a state professional teaching credential or certification is not a GE Program. [18] The distinction is based on the fact that the former must meet Title IV program eligibility requirements in order for students in the program to receive federal student financial aid, while the latter are not Title IV-eligible programs and, thus are not GE Programs. [19] Students enrolled in the latter type of teacher certification program are able to receive federal student financial aid based on Title IV regulations related to student eligibility, which contain no requirement that the program lead to gainful employment in a recognized occupation. [20]

What other types of programs are not GE Programs when offered by a non-profit or public institution?

In addition to teacher certification programs that result in no certificate awarded by the institution, three other types of programs are not GE Programs when offered by a nonprofit or public institution: (1) degree programs; (2) programs that are at least two academic years in length and are fully transferable to a bachelor’s degree program; and (3) preparatory courses of study that provide course work that is necessary for enrollment in a Title IV-eligible program. Types (1) and (2) are not GE Programs because the HEA and ED’s program eligibility requirements do not require such programs to lead to gainful employment in a recognized occupation in order to be Title IV-eligible. [21] The third type of program is similar to teacher certification programs that result in no certificate being awarded by the institution, because such programs do not meet Title IV program eligibility criteria but students are nevertheless able to receive Title IV aid for such programs under Title IV student eligibility requirements. [22]

Can an institution end a program’s status as a gainful employment program?

An institution can end a program’s status as a gainful employment program by ending the program’s Title IV eligibility. An institution may do so through the Electronic Application for Approval to Participate in the Federal Student Financial Aid Programs (“E-App”) and must supply a Title IV eligibility end date and certain other information. If the end date is on or after July 1, 2011, the institution must provide required gainful employment disclosures from July 1, 2011 until at least the program’s Title IV eligibility end date. With respect to the October 1, 2011 deadline for institutions to report certain information to ED, if the end date is on or after October 1, the institution is required to report the information. [23]


Gainful Employment Disclosure Requirements

The program integrity regulations require institutions to disclose to prospective students by July 1, 2011, certain information with respect to their gainful employment programs.

What information concerning gainful employment programs must an institution disclose to prospective students?

An institution must provide the following information for each program that leads to gainful employment:

  • The occupations (by names and SOC codes) that the program prepares students to enter, along with a link to the occupational profiles on O*NET or its successor site;
  • The on-time graduation rate for students entering the program (calculated using a new formula introduced in the final rule that compares the number of students who completed the program within “normal time” to the total number of students who completed the program during the most recently completed award year [24]);
  • The cost of the program, including tuition and fees, books and supplies, and room and board;
  • The placement rate for students completing the program. This rate will be determined under a methodology to be developed by the National Center for Education Statistics, but, until that method is developed, an institution must disclose its placement rate only if its accreditor or state authorizing agency requires it to calculate such a rate; and
  • The median loan debt incurred by students who completed the program as provided by the Secretary (disaggregating median loan debt from (1) federal education loans, (2) private education loans, and (3) institutional financing plans) [25].

ED has provided guidance concerning a number of these elements in its Gainful Employment Frequently Asked Questions. [26]

How are institutions to disclose this information?

The institution must display this information prominently on certain pages of its website and in its promotional materials. [27] ED is developing a disclosure form that institutions will be required to use when it becomes available. [28]

By when must institutions make such disclosures to prospective students?

An institution must make such disclosures by July 1, 2011, for the most recently completed award year. ED has explained that institutions may use information from the 2009-2010 award year for the disclosures that are required by that date. The institution must update such information within a reasonable period of time after the 2010-2011 information becomes available. Institutions must follow the same approach for future award years. [29]


Gainful Employment Reporting Requirements

The program integrity regulations require institutions to report to ED by November 15, 2011, certain information with respect to their gainful employment programs.

What information concerning gainful employment programs must an institution report to ED?

Each year, an institution must submit the following information to ED:

  • For each student enrolled in a program that leads to gainful employment:
    • Identifying information about each student enrolled in the program;
    • If the student began the program during the award year, the ED Classification of Instructional Program (“CIP”) code of that program;
    • If the student completed the program during the award year, the name and CIP code of that program; the date the student completed the program; the amount that the student borrowed through private educational loans; [30] the amount owed under institutional financing plans as of the date of completion; and information on whether the student matriculated to a higher credentialed program at the institution or transferred to a higher credentialed program at another institution.
  • For each applicable program, by name and CIP code, the total number of students enrolled in the program at the end of each award year and identifying information about each student. [31]

When and how often must institutions report gainful employment information to ED?

Institutions must report information related to award year 2010-2011 (the most recently completed award year) by November 15, 2011. [32]

Information for prior award years (2006-07 through 2009-2010) is technically due by October 1, 2011, but ED has indicated that it will continue to accept information for prior award years until November 15, 2011, as well. [33] Institutions must report information for subsequent award years no earlier than September 30 of the calendar year in which the award year ends (e.g. September 30, 2012 for the award year July 1, 2011 to June 30, 2012) but no later than the date established by ED through notice in the Federal Register. [34] If an institution is unable to supply all or some required information, it must provide an explanation to ED. [35]

How does an institution report the information to ED?

Institutions must use the existing Enrollment Reporting Process, which is the system currently used by institutions to report student enrollment information to the National Student Loan Data System (“NSLDS”). ED will soon release the NSLDS Gainful Employment Submittal Template and instructions. [36] This notice will allow institutions to begin the process of preparing spreadsheets that can be uploaded to NSLDS on September 26, 2011. [37] As of August 4, 2011, ED has also issued an updated NSLDS Gainful Employment User Guide to help institutions to prepare their systems to submit required information, including step-by-step instructions. [38] If the individual responsible for reporting gainful employment data to ED needs an online user ID, the institution can request a user ID at www.fsawebenroll.ed.gov. [39] If an institution has technical questions about the reporting process, it can direct the inquiries to NSLDSGE@ed.gov. [40]


Addition of New Gainful Employment Programs

The program integrity regulations require institutions to notify ED, and in some cases obtain approval from ED, in order to provide Title IV funds to students enrolled in new educational programs that prepare students for gainful employment in a recognized occupation. [41]

What is a “new” gainful employment program?

ED defines a “new” gainful employment program as:

  • A program with a CIP code different from any other program offered by the institution;
  • A program that has the same CIP code as another program offered by the institution, but leads to a different degree or certificate; or
  • A program that the institution’s accrediting agency determines to be a new educational program. [42]

When must institutions notify ED of new gainful employment programs?

This requirement became effective on July 1, 2011. [43] For a gainful employment program for which the first day of class will begin on or after July 1, 2011, and before October 1, 2011, an institution must have provided notice to ED no later than July 1, 2011. [44] If an institution intends to provide Title IV aid to students enrolled in a gainful employment program where the first day of classes will begin on or after October 1, 2011, the institution must notify ED of that intent at least 90 days before the first day of class of the proposed program. [45]

What information must the notice contain?

The institution must include sufficient information to demonstrate that the program meets the requirements for an eligible program. [46] In addition, the institution must provide information to support its determination of the need for the program. [47] At a minimum, the institution must:

  • Describe in the notice how the institution determined the need for the program and how the program was designed to meet local market needs, or for an online program, regional or national market needs. This description must contain any wage analysis the institution may have performed, including any consideration of Bureau of Labor Statistics data related to the program;
  • Describe in the notice how the program was reviewed or approved by, or developed in conjunction with, business advisory committees, program integrity boards, public or private oversight or regulatory agencies, and businesses that would likely employ graduates of the program;
  • Submit documentation that the program has been approved by its accrediting agency or is otherwise included in the institution’s accreditation by its accrediting agency; [48]
  • Provide the date of the first day of class of the new program. [49]

How does the institution submit the notice?

The institution submits the notice through the E-App, with supporting documentation by mail. [50]

Does the institution have to wait for ED approval to award Title IV aid to students in the new program?

The institution may offer Title IV aid for the program described in its notice unless ED advises the institution at least 30 days before the first day of class that the program must be approved. [51]

How does ED respond to the notice?

Based on the notice that the institution supplies, ED may require the institution to obtain ED approval for the new program. [52] If approval is required, ED will take the following considerations into account:

  • The institution’s demonstrated financial responsibility and administrative capability in operating its existing programs;
  • Whether the additional educational program is one of several new programs that will replace similar programs currently provided by the institution, as opposed to supplementing or expanding the current programs provided by the institution;
  • Whether the number of additional programs being added is inconsistent with the institution’s historic program offerings, growth, and operations; and
  • Whether the process and determination by the institution to offer an additional gainful employment program is sufficient. [53]

If ED disapproves the new gainful employment program, the denial will be based on bullet points 2-4, and ED will explain how the institution failed to demonstrate that the program is likely to lead to gainful employment in a recognized occupation. [54] The institution may respond to those reasons and request reconsideration. [55]

What happens if my institution fails to comply with the rules for new gainful employment programs?

If the institution does not provide timely notice to ED, the institution must wait for ED approval before disbursing Title IV funds to students in the program and must inform students that the program has not been ED-approved to be eligible for federal student financial aid. [56] If the institution fails to obtain required ED approval to provide Title IV aid for a new gainful employment program or incorrectly determines that a new gainful employment program is eligible for Title IV assistance, the institution must repay to ED all Title IV funds received by the institution for the educational program and all the Title IV aid received by or on behalf of students enrolled in that program. [57]


Metrics for Gainful Employment Programs

The program integrity regulations impose for the first time measures for determining whether a program leads to gainful employment in a recognized occupation for Title IV purposes. [58]

What are the metrics that ED will use to determine whether a program leads to gainful employment in a recognized occupation?

ED will utilize three metrics for determining whether a program leads to gainful employment in a recognized occupation: (1) an annual loan repayment rate; (2) a ratio that measures debt in relation to discretionary income; and (3) a ratio that measures debt in relation to annual earnings. [59] Metrics (2) and (3) are independent measures of gainful employment, but are often collectively referred to as the debt-to-income ratios.

What are the minimum standards that a gainful employment program must meet in order to be deemed a program that leads to gainful employment in a recognized occupation and therefore Title IV-eligible?

A gainful employment program will be Title IV-eligible if, starting with the measures calculated for federal fiscal year ("FY") 2012, it has a loan repayment rate of 35% or more, a debt-to-earnings ratio of 12% or less, or a debt-to-discretionary-income ratio of 30% or less. The program must meet only one of these three criteria in order to “pass” the gainful employment test. [60]

What will be the time period and student cohort measured?

Starting in 2012, ED will calculate the metrics for each gainful employment program for each federal fiscal year. The federal fiscal year runs from October 1 to September 30. [61] For most programs, ED will calculate the metrics based on the cohort of students who entered repayment or completed the program in the third and fourth FYs prior to the most recently completed FY. ED labels this a “two year period” (“2YP”). [62] For programs that require medical internships or residencies, as defined by ED, ED will calculate the metrics based on the cohort of students who entered repayment or completed the program in the sixth and seventh FYs (“2YP-R”) prior to the most recently completed FY. [63]

During FYs 2012 through 2014 only, ED will calculate a program’s loan repayment rate using data from the first and second years prior to the most recently completed FY (“2YP-A”) in addition to the 2YP or 2YP-R. [64] ED will use the better score to encourage programs to improve performance quickly and to reward those programs that do. [65]

How is the loan repayment rate calculated?

The loan repayment rate measures whether students who borrowed federal student loans to attend the program (regardless of whether they finished) are satisfactorily repaying those loans. ED will calculate the rate by dividing total original federal student loan amounts for loans that are repaid or that are in the process of being repaid by the total original amount of federal student loans borrowed. [66] The metric is expressed as follows:

 

OOPB of LPF + OOPB of PML

Loan Repayment Rate    =   

------------------------------------------

 

OOPB


OOPB is “Original Outstanding Principal Balance.” OOPB equals the total amount of the outstanding balance (including capitalized interest) on Federal Family Education Loans Program (“FFELP”) loans or Direct Loan Program loans that was owed by students for attendan