A full 13 percent of programs subject to the Education Department’s latest “gainful employment” proposal would fail its two-part test, putting them at risk of losing access to federal student aid, according to an analysis released by the department late Wednesday.
That’s significantly higher than the 6 percent of programs that were expected to fail the department’s 2011 rule or its original 2013 proposal.
An additional 7 percent of programs would fall into the danger zone, three percentage points fewer than were projected to be in that category under the original 2013 proposal.
Under the department’s revised rule, also released on Wednesday, programs would be evaluated based on their graduates’ debt-to-income and debt-to-discretionary-income ratios and their borrowers’ cohort default rates.
Programs that failed both debt-to-income tests in two out of three years or the cohort-default-rate benchmark in three consecutive years would become ineligible to award federal student aid, as would programs that failed to pass either debt-to-income measure for four years.
Failing programs would also face enrollment caps, and both failing programs and those in the danger zone would have to warn students when they were at risk of losing eligibility at the end of the year.
Other Changes
The latest rule would eliminate a third measure, added in a draft the department proposed in November, that would have also required programs to show that all their borrowers were paying interest on their debt. It’s not clear why the department dropped the “loan repayment” metric, though for-profit colleges had called for its removal.
Meanwhile, the department added language sought by for-profit colleges that would allow failing programs to temporarily avoid penalties by reducing their students’ debt burdens through scholarships to a level that would pass the department’s debt-to-income tests.
The department also agreed to limit the debt it considers to what students borrow for tuition and fees—a change that would benefit community colleges. Representatives of the colleges on the panel had complained that they would be unfairly punished when their students borrowed beyond the cost of attendance because colleges are not allowed to limit borrowing on a programwide basis.
A rule-making committee that has already met several times this fall was supposed to end its deliberations last month, but it extended negotiations into December at the request of its members, who wanted to see an analysis of the rule’s impact. The panelists will meet one last time, this Friday, to try to reach consensus on a final rule.
