Final Gainful Employment Rule Drops Loan Default Rate

After years of debate, revision, and litigation, the Obama administration today will release the final version of its long-awaited gainful employment rule. The controversial regulation seeks to cut off federal financial aid to career-oriented programs whose graduates have high student-loan debt relative to their incomes.

In 2012, a federal judge struck down parts of the proposed rule. The proposal was then taken up by a negotiated rulemaking panel, which ended in deadlock. The department published draft rules in March, which were subject to public comment.

The final regulation, to be published in tomorrow's Federal Register, closely resembles the previously released versions with some minor and one glaring exception – one of the two metrics for judging vocational programs was dropped. Under the revised rule, programs will no longer be held accountable for their cohort default rates, which describe the percentage of borrowers who are defaulting on their student loans. Instead, the programs will be evaluated based solely on their graduates' debt-to-earnings ratios.

The change is a win for community colleges, which had urged the department to scrap the default rate metric, according to The Chronicle of Higher Education. Student and consumer advocates, on the other hand, argue that the change weakens the rule, allowing programs to saddle some students with unmanageable debt. Association of Private Sector Colleges and Universities, the for-profit sector's main lobbying group, said that the move does nothing to fix a proposal they say is "fundamentally flawed."

The elimination of the default measure is expected to spare 500 programs, most of them at for-profit institutions. Even so, the Education Department estimates that 1,400 academic programs that enroll 840,000 students would fail to meet the standards with their current performance. Fully 99 percent of those programs are at for-profits.

Department officials said they dropped the loan default standard to create more "streamlined" regulations. They said feedback from the public, which included 95,000 comments, led to the move, reported Inside Higher Ed.


Related Links

The U.S. Department of Education Press Release:

The Chronicle of Higher Education

Inside Higher Ed