# Program Integrity: Gainful Employment > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-13703 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** July 1, 2019 - **Citation:** 84 FR 31392 ## Text DEPARTMENT OF EDUCATION 34 CFR Parts 600 and 668 [Docket ID ED-2018-OPE-0042] RIN 1840-AD31 Program Integrity: Gainful Employment AGENCY: Office of Postsecondary Education, Department of Education. ACTION: Final regulations. SUMMARY: The Secretary of the Department of Education (Department) amends the regulations on institutional eligibility under the Higher Education Act of 1965, as amended (HEA), and the Student Assistance General Provisions to rescind the Department's gainful employment (GE) regulations (2014 Rule). DATES: Effective date: These regulations are effective July 1, 2020. Implementation date: For the implementation date of these regulatory changes, see the Implementation Date of These Regulations section of this document. FOR FURTHER INFORMATION CONTACT: Scott Filter, U.S. Department of Education, 400 Maryland Avenue SW, Room 290-42, Washington, DC 20202. Telephone (202) 453-7249. Email: scott.filter@ed.gov. If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free at 1-800-877-8339. SUPPLEMENTARY INFORMATION: Executive Summary Purpose of This Regulatory Action: This regulatory action rescinds the GE regulations and removes and reserves subpart Q of the Student Assistance General Provisions in 34 CFR part 668. This regulatory action also rescinds subpart R of the Student Assistance and General Provisions in 34 CFR part 668. As discussed in the sections below, the Department has determined that the GE regulations rely on a debt-to-earnings (D/E) rates formula that is fundamentally flawed and inconsistent with the requirements of currently available student loan repayment programs, fails to properly account for factors other than institutional or program quality that directly influence student earnings and other outcomes, fails to provide transparency regarding program-level debt and earnings outcomes for all academic programs, and wrongfully targets some academic programs and institutions while ignoring other programs that may result in lesser outcomes and higher student debt. Although the GE regulation applies to less-than-degree programs at non-profit institutions, this represents a very small percentage of academic programs offered by non-profit institutions. Table 1-1—Reporting Overview of Gainful Employment Programs School classification GE Programs qualifying for calculation (based on NSLDS reporting) GE programs published Percent of GE programs published (%) GE programs not published Percent of GE programs not published (%) Failing GE programs Failure rate (%) Proprietary 9,838 5,676 57.70 4,162 42.30 727 12.80 Non-profit 18,962 2,956 15.60 16,006 84.40 16 0.50 Foreign 17 5 29.40 12 70.60 0 0.00 Total 28,817 8,637 30.00 20,180 70.00 743 8.60 Data from Federal Student Aid. As table 1-1 shows only 16 percent (2,956) of the 18,962 GE programs at non-profit institutions meet the 30-student cohort size requirement. Therefore, only a small minority of those programs are subject to the D/E rates calculation and certain reporting requirements. On the other hand, all programs at proprietary institutions—including undergraduate, graduate, and professional programs—are considered to be GE programs, and 58 percent (5,676) of programs meet the minimum student threshold to report outcomes to the public. As a result, the GE regulations have a disparate impact on proprietary institutions and the students these institutions serve. The regulations also fail to provide transparency to students enrolled in poorly performing degree programs at non-profit institutions and fail to provide comparison information for students who are considering enrollment options at both non-profit and proprietary institutions. Specifically, the Department's review of research findings published subsequent to the 2014 Rule, our review of the 2015 Final GE rates (published in 2017), 1 and our review of a sample of GE disclosure forms published by proprietary and non-profit institutions, has led the Department to conclude the following: (1) As a cornerstone of the GE regulations, the D/E rates measure 2 is an inaccurate and unreliable proxy for program quality and incorporates factors into the calculation that inflate student debt relative to actual repayment requirements; (2) the D/E rates thresholds, used to differentiate between “passing,” “zone,” and “failing” programs, lack an empirical basis; and (3) the disclosures required by the GE regulations include some data, such as job placement rates, that are highly unreliable and may not provide the information that students and families need to make informed decisions about higher education options. 1 “Gainful Employment Information,” Federal Student Aid, studentaid.ed.gov/sa/about/data-center/school/ge?src=press-release. 2 Note: The term “D/E rates measure” is used in the 2014 Rule. Although the Department views this term as redundant, we use it here for clarity and consistency. In addition, since the Social Security Administration (SSA) has not signed a new Memorandum of Understanding (MOU) with the Department to share earnings data, the Department is currently unable to calculate D/E rates, which serve as the basis of the 2014 Rule's accountability framework. 3 The GE regulations specify that SSA data must be used to calculate D/E rates, meaning that other government data sources cannot be used to calculate those rates. Because the Department was unaware at the time of negotiated rulemaking and publication of the notice of proposed rulemaking (NPRM) (83 FR 40167) that SSA would not renew the MOU, we did not address this issue, nor did we suggest, or seek comment on, the potential use of earnings data from the Internal Revenue Service (IRS) or the Census Bureau to calculate D/E rates. Therefore, switching to IRS or Census Bureau data for the purpose of calculating D/E rates would require additional negotiated rulemaking. However, since the Department has decided to rescind the GE regulations, the data source for calculating D/E rates is moot. 3 “Amended Information Exchange Agreement Between the Department of Education and the Social Security Administration for Aggregate Earnings Data, ED Agreement No. 10012, SSA IEA No. 325,” www.warren.senate.gov/imo/media/doc/ED%20Agreements1.pdf. The 2014 Rule was developed in response to concerns about poor outcomes among GE programs that left students with debt that was outsized, relative to student earnings in the early years of student loan repayment. For example, the Department pointed to cohort default rates (CDRs) that were disproportionately high among students who enrolled at or completed their educational programs at proprietary institutions as an indication that the education provided was of lower quality. 4 4 79 FR 64908. However, research published in 2014—and discussed throughout this document—but not considered during the Department's development of the 2014 Rule, confirms that CDRs are largely influenced by the demographics and socioeconomic status of borrowers, and not necessarily institutional quality. 5 This makes CDRs a poor proxy for institutional quality, and therefore insufficiently justifies the GE regulations. 5 Lance Lochner and Alexander Monge-Naranjo, “Default and Repayment Among Baccalaureate Degree Earners, National Bureau of Economic Research,” NBER working paper 19882, Revised, March 2014, www.nber.org/papers/w19882. The 2014 paper also shows that CDRs disproportionately single-out institutions that serve larger percentages of African-American students or single mothers, since these demographic groups default at higher rates and sooner after entering repayment than other borrowers. 6 The authors of this study point to reduced parental wealth transfers to minority students as the reason that defaults are higher among this group. As a result, institutions that serve larger proportions of minority students will likely have higher CDRs than an institution of equal quality that serves mostly white or more socioeconomically advantaged students. Thus, higher CDRs among minority students may be a strong sign of lingering societal inequities among different racial groups, but not conclusive evidence that an institution is failing its students. The Department now recognizes that a number of studies used to support its earlier rulemaking efforts relied on comparisons between costs and debt levels among students who enrolled at community colleges and those who enrolled at proprietary institutions. However, this is an illegitimate comparison since in 2014, 53 percent of proprietary institutions were four-year institutions, and 63 percent of students enrolled at proprietary institutions were enrolled at four-year institutions. 7 Therefore, with regard to costs and student debt levels, comparisons with four-year institutions are more appropriate. 6 Lance Lochner and Alexander Monge-Naranjo, “Default and Repayment Among Baccalaureate Degree Earners, National Bureau of Economic Research,” NBER working paper 19882, Revised, March 2014, www.nber.org/papers/w19882; see also: Government Accountability Office, “Proprietary Schools: Stronger Department of Education Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid,” August 2009, www.gao.gov/new.items/d09600.pdf. 7 Stephanie Riegg Cellini and Rajeev Davolia, Different degrees of debt: Student borrowing in the for-profit, nonprofit, and public sectors. Brown Center on Education Policy at Brookings. June 2016. Comparisons between students who attend community colleges and those who attend proprietary institutions may be appropriate, especially since both are generally open-enrollment institutions. However, research published by the Brown Center in 2016 shows that there are considerable differences between the characteristics of students who enroll at proprietary institutions and those who enroll at two-year public institutions. 8 Students who enroll at proprietary institutions are far more likely to be financially independent (80 percent vs. 59 percent); part of an underrepresented minority group (52 percent vs. 44 percent); or a single parent (33 percent vs. 18 percent) than students enrolled at community colleges. Students enrolled at proprietary institutions are also slightly less likely to have a parent who completed high school (84 percent vs. 87 percent); and are much less likely to have a parent who completed a bachelor's degree or higher (22 percent vs. 30 percent). These differences in characteristics may explain disparities in student outcomes, including higher borrowing levels and student loan defaults among students who enroll at proprietary institutions. 8 Stephanie Riegg Cellini and Rajeev Davolia, Different degrees of debt: Student borrowing in the for-profit, nonprofit, and public sectors. Brown Center on Education Policy at Brookings. June 2016. Research published in 2015 by Sandy Baum and Martha Johnson pointed to student and family demographics, as well as length of time in school, as key determinants of borrowing. 9 Therefore, research published subsequent to promulgation of the 2014 Rule showed that differences in borrowing levels and student outcomes may well be attributable to student characteristics and may not accurately indicate institutional quality or be influenced by institutional tax status. 9 Sandy Baum and Martha Johnson. Student Debt: Who Borrows Most? What Lies Ahead? Urban Institute, April 2015, www.urban.org/sites/default/files/alfresco/publication-pdfs/2000191-Student-Debt-Who-Borrows-Most-What-Lies-Ahead.pdf. The Department has also come to realize that unlike CDRs that measure borrower behavior in the first three years of repayment, lifecycle loan repayment rates more accurately illustrate the challenges that the majority of students are having in repaying their student loan debt and the need to look beyond one sector of higher education to solve this problem. In 2015, the Department began calculating institution-level student loan repayment rates in order to include those rates in its newly introduced College Scorecard and reported that the majority of borrowers at most institutions were paying down their principal and interest. However, in January 2017, the Department reported that it had discovered a coding error, making the repayment data it had published earlier incorrect. 10 Though the Department's announcement downplayed the magnitude of this error, both Robert Kelchen, assistant professor of higher education at Seton Hall, and Kim Dancy, a New America policy analyst, independently found that the error was significant. 11 10 “Updated Data for College Scorecard and Financial Aid Shopping Sheet,” Published: January 13, 2017, ifap.ed.gov/eannouncements/011317UpdatedDataForCollegeScorecardFinaidShopSheet.html; Dancy, Kim and Ben Barrett, “Fewer Borrowers Are Repaying Their Loans Than Previously Thought,” New America, January 13, 2017, www.newamerica.org/education-policy/edcentral/fewer-borrowers-are-repaying-their-loans-previously-thought/; Kelchen, Robert, “How Much Did A Coding Error Affect Student Loan Repayment Rates?” Personal Blog Post, January 13, 2017, robertkelchen.com/2017/01/13/how-much-did-a-coding-error-affect-student-loan-repayment-rates/. 11 Paul Fain, “College Scorecard Screwup,” Inside Higher Ed, Published: January 16, 2017, www.insidehighered.com/news/2017/01/16/feds-data-error-inflated-loan-repayment-rates-college-scorecard; see also: Robert Kelchen, Higher Education Accountability (Baltimore: John Hopkins University Press, 2018), 54-55. Prior to correcting the error, it was determined that three years into repayment, 61 percent of borrowers were paying down their loans—meaning that these borrowers had reduced their principal by at least one dollar. This reinforced the belief that only a minority of borrowers were struggling to repay debt—such as borrowers who attended proprietary institutions. However, once the error was corrected, it became clear that repayment rates were actually much lower. The corrected data reveals that only 41 percent of borrowers in their third year of repayment were paying down their loan balances by at least one dollar. As noted by Dancy, “the new data reveal that the average institution saw less than half of their former students managing to pay even a dollar toward their principal loan balance three years after leaving school.” 12 12 Dancy and Barrett, www.newamerica.org/education-policy/edcentral/fewer-borrowers-are-repaying-their-loans-previously-thought/. The 2017 corrected repayment rate data led the Department to conclude that the transparency and accountability frameworks created by the GE regulations were insufficient to address the student borrowing and under-payment problem of this magnitude, as the GE regulations apply to only a small proportion of higher education programs. 13 In order to enable all students to make informed enrollment and borrowing decisions, the Department sought an alternative to the GE regulations that would include all title IV-eligible institutions and programs. 13 www.higheredtoday.org/2018/01/12/increasing-community-college-completion-rates-among-low-income-students//. The GE regulations failed to equitably hold all institutions accountable student outcomes, such as student loan repayment. However, the Department could not simply expand the GE regulations to include all title IV programs since the term “gainful employment” is found only in section 102 of the HEA. This section extends title IV eligibility to non-degree programs at non-profit and institutions and all programs at proprietary institutions, and at the same time restricts the application of the GE regulations to those same programs and institutions. Therefore, without a statutory change, there was no way to expand the GE regulations to apply to all institutions. As a result, the Department engaged in negotiated rulemaking to evaluate the accuracy and usefulness of the GE regulations and to explore the possibility of creating a “GE-like” regulation that could be applied to all institutions and programs. The Department sought to develop a new transparency and accountability framework that would apply to all institutions and programs, likely through the Program Participation Agreement (PPA). Unfortunately, negotiations ended having failed to reach consensus on how to improve the accuracy, validity, and reliability of the GE regulations, and having failed to develop a valid GE-like standard that could serve as the basis for an appropriate and useful accountability and transparency framework for all title IV-participating programs. In 2018, the Department's office of Federal Student Aid (FSA) determined that the student loan repayment situation was more dire than we originally thought. Analysis of 2018 third quarter data showed that only 24 percent of loans, or $298 billion, are being reduced by at least one dollar of principal plus interest, and that 43 percent of all outstanding loans, or $505 billion, are in distress, meaning they are at risk, either through negatively amortizing Income-Driven Repayment (IDR) plans, 30 plus days delinquent, or in default. 14 These data reinforce the need for an accountability and transparency framework that applies to all title IV programs and institutions. 14 “U.S. Secretary of Education Betsy DeVos Warns of Looming Crisis in Higher Education,” Published: November 27, 2018, www.ed.gov/news/press-releases/us-secretary-education-betsy-devos-warns-looming-crisis-higher-education; Analysis of FSA Loan portfolio with NSLDS Q12018, Federal Reserve Economic Data (Credit card delinquencies average for all commercial banks). Failing to have reached consensus during negotiations, the Department determined that the best way to improve transparency and inform students and parents was through the development of a comprehensive, market-based, accountability framework that provides program-level debt and earnings data for title IV programs. The College Scorecard was selected as the tool for delivering those data, and by expanding the Scorecard to include program-level data, all students could make informed enrollment and borrowing decisions. Given the Department's general authority to collect and report data related to the performance of title IV programs, the Department is not required to engage in rulemaking to modify the College Scorecard. However, to address concerns that by rescinding the 2014 Rule some students would be more likely to make poor educational investments, the Department describes in this document our preliminary plans for the expansion of the College Scorecard. As outlined in President Trump's Executive Order on Improving Free Inquiry, Transparency, and Accountability at Colleges and Universities, 15 the Department plans to expand the College Scorecard to include the following program-level data: (1) Program size; (2) the median Federal student loan debt and the monthly payment associated with that debt based on a standard repayment period; (3) the median Graduate PLUS loan debt and the monthly payment associated with that debt based on a standard repayment period; (4) the median Parent PLUS loan debt and the monthly payment associated with that debt based on a standard repayment period; and (5) student loan default and repayment rates. 15 www.whitehouse.gov/presidential-actions/executive-order-improving-free-inquiry-transparency-accountability-colleges-universities/ In addition to the information above, College Scorecard will continue to include institution-level data, such as admissions selectivity, student demographics, and student socioeconomic status. This information will provide important context to help students compare outcomes among institutions that serve demographically matched populations or that support similar educational missions. The College Scorecard ensures that accurate and comparable information is disclosed about all programs and institutions. It provides a centralized access point that enables students to compare outcomes easily without visiting multiple institution or program websites and with the certainty that the data they are reviewing were produced by a Federal agency. This eliminates the potential for institutions to manipulate or exaggerate data, which is possible when data are self-reported by institutions. As a result of these changes, students and parents will have access to comparable information about program outcomes at all types of title IV-participating institutions, thus expanding higher education transparency. Students will be able to make enrollment choices informed by debt and earnings data, thus enabling a market-based accountability system to function. These changes will also help taxpayers understand where their investments have generated the highest and lowest returns. Summary of the Major Provisions of This Regulatory Action: The Department rescinds 34 CFR part 668, subpart Q—Gainful Employment Programs. 16 The term “gainful employment” was added to the HEA in 1968 to describe training programs that gained eligibility to participate in title IV, HEA programs. The 2014 Rule defined “gainful employment” based on economic circumstances rather than educational goals, created a new D/E rates measure to distinguish between passing and failing programs, and established other reporting, disclosure, and certification requirements applicable only to GE programs. 16 Note: Agencies “obviously” have broad discretion when reconsidering a regulation. Clean Air Council v. Pruitt, 862 F.3d 1, 8 (D.C. Cir. 2017). As the Supreme Court has noted: “An initial agency interpretation is not instantly carved in stone,” rather an agency “must consider varying interpretations and the wisdom of its policy on a continuing basis.” Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837, 864-865 (1984). Significantly, this is still true in cases where the agency's review is undertaken in response to a change in administrations. National Cable & Telecommunications Ass'n. v. Brand X Internet Services, 545 U.S. 967, 981 (2005). By rescinding subpart Q, the Department is eliminating the D/E rates measure, which is an inaccurate and unreliable proxy for quality, including the use of the 8 percent debt-to-earnings threshold and the 20 percent debt-to-discretionary-income threshold as the requirement for continued eligibility of GE programs. By rescinding subpart Q, we also eliminate the requirement for institutions to issue warnings, including hand-delivered notifications, in any year in which a program is at risk of losing title IV eligibility based on the next year's D/E rates. Rescinding the GE regulations also eliminates the need for institutions to report certain data elements to the Department in order to facilitate the calculation of D/E rates. It also eliminates requirements for GE programs to publish disclosures that include the following: Program length; program enrollment; loan repayment rates; total program costs; job placement rates; percentage of enrolled students who received a title IV or private loan; median loan debt of those who completed and those who withdrew from the program; program-level cohort default rates; annual earnings; whether or not the program meets the educational prerequisites for professional licensure or certification in each State within the institution's metropolitan service area or for any State for which the institution has determined that the program does not meet those requirements; whether the program is programmatically accredited and the name of the accrediting agency; and a link to the College Navigator website. The table in Appendix A compares the information that was made available to students and parents through the 2017 GE disclosure template with the information that will be provided through the expanded College Scorecard or other consumer information tools, such as College Navigator. Disclosure requirements are also being included in other rulemaking efforts, including Borrower Defense regulations and Accreditation and Innovation regulations. In addition, by rescinding subpart Q, the Department is also eliminating requirements regarding alternate earnings appeals, reviewing and correcting program completer lists, and providing certification by the institution's most senior executive officer that the programs meet the prerequisite education requirements for State licensure or certification. Finally, the Department rescinds 34 CFR part 668, subpart R—Program Cohort Default Rate, including instructions for calculating those rates and disputing or appealing incorrect rates provided by the Secretary. As the Department only contemplated calculating those rates as part of the disclosures under the GE regulations, we can find no compelling reason to maintain subpart R and did not identify public comments to this aspect of the proposed regulations. We note that the HEA requires the Department to calculate institutional cohort default rates, and regulations regarding the calculation of those rates are in 34 CFR 668.202. Authority for this Regulatory Action: Section 410 of the General Education Provisions Act provides the Secretary with authority to make, promulgate, issue, rescind, and amend rules and regulations governing the manner of operations of, and governing the applicable programs administered by, the Department. 20 U.S.C. 1221e-3. Furthermore, under section 414 of the Department of Education Organization Act, the Secretary is authorized to prescribe such rules and regulations as the Secretary determines necessary or appropriate to administer and manage the functions of the Secretary or the Department. 20 U.S.C. 3474. These authorities, together with the provisions in the HEA, permit the Secretary to disclose information about title IV, HEA programs to students, prospective students, and their families, the public, taxpayers, and the Government, and institutions. Further, section 431 of the Department of Education Organization Act provides authority to the Secretary, in relevant part, to inform the public about federally supported education programs and collect data and information on applicable programs for the purpose of obtaining objective measurements of the effectiveness of such programs in achieving the intended purposes of such programs. 20 U.S.C. 1231a. For the reasons described in the NPRM and below, the Department believes that the GE regulations do not align with the authority granted by section 431 of the Department of Education Organization Act since the D/E rates measure that underpins the GE regulations does not provide an objective measure of the effectiveness of such programs. Costs and Benefits: The Department believes that the benefits of these final regulations outweigh the costs. There will be one primary cost and several outweighing benefits associated with rescinding the GE regulations. The primary cost is that some programs that may have failed the D/E rates measure, and as a result lose title IV eligibility, will continue to participate in title IV, HEA programs. In instances in which the program failed because it truly was a low-quality program, there is a cost associated with continuing to provide title IV support to such a program, especially if doing so burdens students with debt they cannot repay or an educational credential that does not improve their employability. However, there are numerous benefits associated with eliminating the GE regulations, including: (1) Programs producing poor earnings outcomes will not escape notice simply because taxpayer subsidies make the program less costly to students; (2) programs that prepare students for high-demand careers will be less likely to lose title IV eligibility just because those high-demand careers do not pay high wages; (3) students will not inadvertently select a non-GE program with less favorable student outcomes than a comparable GE program simply because non-GE programs are not subject to the GE regulations; (4) institutions will save considerable time and money by eliminating burdensome reporting and disclosure requirements; (5) all students will retain the right to enroll in the program of their choice, rather than allowing government to decide which programs are worth of a student's time and financial investment; and (6) by providing debt and earnings data for all title IV programs through the College Scorecard, all students will be able to identify programs with better outcomes or limit borrowing based on what they are likely to be able to repay. The Department believes that the benefits outweigh the costs since all students will benefit from choice and transparency. Implementation Date of These Regulations: These regulations are effective on July 1, 2020. Section 482(c) of the HEA requires that regulations affecting programs under title IV of the HEA be published in final form by November 1, prior to the start of the award year (July 1) to which they apply. However, that section also permits the Secretary to designate any regulation as one that an entity subject to the regulations may choose to implement earlier, as well as the conditions for early implementation. The Secretary is exercising her authority under section 482(c) of the HEA to designate the regulatory changes to subpart Q and subpart R of the Student Assistance General Provisions at title 34, part 668, of the Code of Federal Regulations, included in this document, for early implementation beginning on July 1, 2019, at the discretion of each institution. Public Comment: In response to our invitation in the NPRM, 13,921 parties submitted comments on the proposed regulations. In this preamble, we respond to those comments, which we have grouped by subject. Generally, we do not address technical or other minor changes. Analysis of Public Comments: An analysis of the public comments received follows. Scope and Purpose Comments: Many commenters indicated they supported rescinding the GE regulations because defining “gainful employment” using a bright-line debt-to-earnings standard is complicated and does not accurately differentiate between high-quality and low-quality programs, or programs that do and do not meet their learning objectives. A number of commenters also supported the Department's decision to rescind the GE regulations because they believe the regulations discriminate against career and technical education (CTE) programs and the students who enroll in them. Some suggested that the GE regulations signal to students that CTE is less valuable than traditional liberal arts education since the Department, as a result of the GE regulations, was holding traditional degree programs to a lower standard. Other commenters expressed concern that the GE regulations discriminate against institutions based on their tax status. Several commenters stated that the GE regulations threaten to limit access to necessary workforce development programs at community colleges and at proprietary schools, as a result of the increased accountability for CTE programs as compared to liberal arts and humanities programs. Another commenter expressed concern that the D/E rates measure ignores or exempts a significant number of programs with the worst outcomes, simply because those programs are offered by public and non-profit institutions or receive taxpayer subsidies in the form of direct appropriations rather than or in addition to Pell grants and title IV loans. Multiple commenters supported the rescission of the GE regulations because, in their opinion, the GE regulations would otherwise force the closure of programs and potentially entire institutions that serve minority, low-income, adult, and veteran students. One commenter highlighted the lack of guidance from Congress on the meaning of “gainful employment,” and asserted that in the absence of that guidance, the Department contrived a complicated regulation that has yielded “a patchwork of complicated and inconsistent rules that have left schools buried in paperwork with no real measure of whether students have benefited.” Some commenters suggested that any institution could ensure that they will pass the D/E rates measure by lowering tuition. Several commenters submitted a joint comment opposing the rescission of the 2014 Rule. They argued that the rescission is arbitrary and capricious because it ignores both the benefits of the 2014 Rule and the data analysis supporting the 2014 Rule. The commenters noted that Congress had reason to require that for-profit programs be subject to increased supervision. They cited a post on the Federal Reserve Bank of New York's blog that states that attending a four-year private for-profit college is the strongest predictor of default, even more so than dropping out. 17 They cited evidence that students who attend for-profit institutions are 50 percent more likely to default on a student loan than students who attend community colleges. 18 The commenters also argued that a rise in enrollment in the for-profit sector corresponded with reports of fraud, low earnings, high debt, and a disproportionate amount of student loan defaults. They claimed that of the 10 percent of institutions with the lowest repayment rates, 70 percent were for-profit institutions. They argued that because poor outcomes are concentrated in for-profit programs, the 2014 Rule is justified. 17 Rajashri Chakrabarti, Nicole Gorton, Michelle Jiang, and Wilbert van der Klaauw, “Who is Likely to Default on Student Loans?” Liberty Street Economics, November 20, 2017, libertystreeteconomics.newyorkfed.org/2017/11/who-is-more-likely-to-default-on-student-loans.html. 18 Scott-Clayton, Judith (2018). “What accounts for gaps in student loan default, and what happens after.” Brookings Evidence Speaks Reports, 2(57). Commenters also noted that students enrolled in programs that close generally re-enroll in nearby non-profit or public institutions and that shifting aid to better performing institutions will result in positive impacts for students. They also cited evidence 19 that, after enrollment in for-profit programs declined in California, local community colleges increased their capacity. They argued that in light of these examples, the 2014 Rule would not reduce college access for students but would rather direct them into programs that are more beneficial in the long term. 19 Cellini, Stephanie Riegg (2010). “Financial Aid and For-Profit Colleges: Does Aid Encourage Entry?” Journal of Policy Analysis and Management. 29(3): 526-52. One commenter disagreed with the Department for citing the Bureau of Labor Statistics (BLS) Job Openings and Labor Turnover Survey as evidence that certain jobs are “unfilled due to the lack of qualified workers.” 20 The commenter also stated that there is no evidence that the job openings in the BLS survey relate in any way to GE programs. Another commenter stated that the Department should withdraw its claim based on this study because the BLS press release did not note any relation to gainful employment. 20 U.S. Department of Labor. July 2018. “Job Openings and Labor Turnover Summary.” www.bls.gov/news.release/jolts.nr0.htm. Discussion: The Department appreciates the support received from many commenters who agreed that the D/E rates measure is a fundamentally flawed and unreliable quality indicator and that the limited applicability of the 2014 Rule to some, but not all, higher education programs makes it an inadequate solution for informing consumer choice and addressing loan default issues. Further, the Department agrees that the formula for deriving D/E rates is complicated and that it may be difficult for students and parents to understand how it was calculated and how to apply it to their own situation to determine what their likely debt and earnings outcomes will be. The Department shares the concern of commenters who predicted that the GE regulations would result in reduced access to certain CTE focused programs. However, since no programs have lost eligibility as of yet, it is impossible to know for certain what longer-term impacts the GE regulations would have had. That said, some commenters have pointed to programs like Harvard's graduate certificate program in theater, 21 which was discontinued in part because the university knew that the program would not pass the D/E rates measure, and large closures among art and design or culinary schools as evidence that some schools voluntarily discontinued programs in order to avoid sanctions under the GE regulations. 21 https://www.nytimes.com/2017/07/17/theater/harvard-graduate-theater-art-paulus.html. The Department agrees with commenters that the D/E rates measure does not accurately differentiate between high- and low-quality programs or eliminate programs that produce the worst outcomes, since programs that generate much lower earnings can pass the D/E rates measure simply because taxpayers rather than students pay some of the cost of the education provided, thus reducing the price students pay. For example, a Colorado public community college's massage therapy program passed the D/E rates measure despite having mean annual earnings of $9,516, whereas a comparable program at a Colorado proprietary institution that resulted in earnings of $15,929 failed the D/E rates measure. The Department understands that high student loan debt can be burdensome to students, especially to those who earn low wages. However, it is difficult to argue that the program yielding earnings of $9,516 is higher quality than one that yields earnings of $15,929. As is the case with four-year public and private institutions, tuition is higher at institutions that receive fewer public subsidies. To provide another example, consider that in Ohio, a medical assistant program at a community college passed the D/E rates measure even though its graduates had median annual earnings of $14,742. Meanwhile, a medical assistant program at a proprietary institution in Ohio failed the D/E rates measure even though its graduates posted median earnings of $21,737. In Arizona, two proprietary institutions' interior design programs failed the D/E rates measure, despite having significantly higher median annual earnings ($31,844 and $32,046) than a nearby community college program ($19,493). As stated by Cooper and Delisle with regard to the D/E rates measure, “the danger here is that a program at a public institution may provide a low return on investment from a societal perspective, but pass the GE rule anyway because a large portion of the cost of providing it is not taken into account.” 22 Cooper and Delisle state that this creates a distortion effect that may render student choices as rational for themselves, but disadvantageous to society. 23 In other words, while taxpayer subsidies to public institutions ensure that they pass the D/E rates measure, that may hide from students and taxpayers the amount of funding that is being used to administer ineffective programs and may fool students into enrolling in a program that has passing D/E rates without realizing that the earnings generated by the program do not justify the direct, indirect, or opportunity costs of obtaining that education. Although there are low-performing programs in all sectors, students have received only limited information about them because the GE regulations do not apply to programs in all sectors. 22 Cooper, Preston and Jason D. Delisle, “Measuring Quality or Subsidy? How State Appropriations Rig the Federal Gainful Employment Test,” American Enterprise Institute, March 2017, www.luminafoundation.org/files/resources/measuring-quality-or-subsidy.pdf. 23 Ibid. Note: The authors also suggest that the application of the 2014 Rule to public institutions would also be insufficient. Since public institutions still benefit from direct appropriations, the uneven playing field would still exist and disadvantage some institutions over others. As is the case among all private institutions, the absence of State and local taxpayer subsidies means that students bear a larger portion of the cost of education, which generally means that tuition and fees are higher than at public institutions. Even at public institutions, students who are from outside of the State or the country pay tuition and fees that more closely resemble those of private institutions, thus demonstrating the impact of direct appropriations on subsidizing tuition costs for State residents. Yet title IV programs do not limit financial aid to students who select a public institution or the lowest cost institution available. Instead, title IV programs provide additional sources of aid, including additional funding programs (such as campus-based aid programs), to ensure that low-income students can pick the college of their choice, even if doing so means that the student needs more taxpayer-funded grants and loans. Congress created the campus-based aid programs, in part, so that low-income students would not be limited to public institutions. 24 The campus-based aid programs provide the largest allocations to private, non-profit institutions that have been long-term participants in the program. Creating a system of sanctions that penalizes private institutions for charging more than public institutions is contrary to the foundation of the title IV programs, which were designed to promote freedom of institutional choice. Prices will vary among institutions, as will debt levels among students based on the socioeconomic status and demographics of students served. 25 But those variances do not, themselves, serve as accurate indicators or program quality. 24 NASFAA Issue Brief, “Campus-Based Aid Allocation Formula,” January 2019, www.nasfaa.org/issue_brief_campus-based_aid. 25 Sandy Baum and Martha Johnson. Student Debt: Who Borrows More? What Lies Ahead? Urban Institute, April 2015. Students make decisions about where to attend college based on many different factors, and they do so understanding that costs vary from one institution to the next. Students also make independent decisions about borrowing, and those decisions are influenced by any number of factors, including family socioeconomic status, cost of attendance, and the degree to which the student is required to support himself or herself and his or her family while enrolled in school. The Department believes that it is important to help inform those decisions so that students understand the impact of their decisions on their longer-term financial status. The Department recognizes that over-borrowing for a low-value education that does not improve earnings is a serious challenge that could have long-term negative consequences for individual students, and it urges institutions to rein in escalating costs. However, it is unreasonable to sanction institutions simply because they serve students who take advantage of Federal Student Aid programs that Congress has made available to them, or because they operate without generous direct contributions from taxpayers. 26 26 Note: This is not to suggest that institutions have no role to play in establishing reasonable tuition and fee costs. Even so, many public institutions have tuition and fees dictated to them by State legislators and many private institutions establish tuition and fees based on the actual cost of providing the education as well as the many amenities today's consumers demand. Students have the right to know what the cost of attendance is at any institution they are considering, which is already required by law. The Department agrees with commenters who expressed concern that the GE regulations established policies that unfairly target career and technical education programs. For example, under the GE regulations, student loan debt is calculated using an amortization term that assumes these borrowers, unlike others, are required to repay their loans in 10 years if they earned an associate's degree or less, 15 years if they earned a baccalaureate or master's degree, and 20 years if they earned a doctoral or professional degree. However, the law provides for students enrolled in both GE and non-GE programs to have as many as 20 or 25 years to repay their loans, and receive loan forgiveness for the balance, if any, that remains at the end of the repayment period. The amortization terms used to calculate D/E rates are in direct conflict with the amortization terms made available by Congress, and the Department in the case of the Revised Pay As You Earn (REPAYE) repayment plan, to all borrowers. Therefore, for students, especially those sufficiently distressed to provide low repayment, the GE regulations create an inconsistent standard that suggests students who enroll in GE programs should be expected to repay their student loan debts more rapidly than students who enroll in non-GE programs. Therefore, the Department agrees with commenters who expressed concern that the GE regulations send a strong message that those pursing career and technical education are less worthy of taxpayer investment, or that they have greater, or at least faster, repayment obligations than students who enroll in other kinds of programs. This contradicts the purpose of title IV, HEA programs, which were developed to expand opportunity to low-income students. These students are served disproportionately by institutions offering CTE programs. The Administration does not believe that students who enroll at proprietary institutions are unaware that other options are available, and the assertion that they are unsophisticated is condescending and based on false stereotypes. According to analysis provided by Federal Student Aid, in 2018, 42.2 percent of students currently enrolled at proprietary institutions had enrolled at a non-profit institution during a prior enrollment, 27 which suggests that these students are well aware that other, lower cost options exist. Perhaps better access to programs of choice, more flexible scheduling, more convenient locations, or a more personalized college experience compels students to pay more for their education. This is not unlike wealthier students who select an elite private institution over a public institution that offers the same programs at lower cost. 27 Federal Student Aid, 2018. The Department believes it is important to provide earnings information to all students for as many title IV participating programs as possible so that no student or family—regardless of their socioeconomic status—is misled about likely earnings after completion. A program that yields low earnings is no less a problem for low- or middle-income students enrolled in a general studies or an arts and humanities program than it is for a low-or middle-income student enrolled in a CTE-focused program. While the goals of programs may differ, nearly all students who go to college today do so with the expectation of increasing their economic opportunity, and all students, regardless of institution type, are expected to repay their loans. The Department's review of student loan repayment rates makes it clear that the problem of students borrowing more than they can repay through a standard repayment period is a problem that is not limited to students who attend proprietary institutions or who participate in CTE. Regardless of institutional type or institutional tax status, colleges that serve large numbers and proportions of low-income students, minority students, and adult learners are likely to have outcomes that are not as strong as those of institutions that serve a more advantaged student population. Therefore, any effort to place sanctions on institutions that does not also take into account the socioeconomic status and demographics of students served unfairly targets those institutions that are expanding access and opportunity to students who are not served by more selective institutions. While the 2014 Rule emphasized that low-income and minority students who go to more elite institutions have better outcomes, it is difficult to know if that is because the institution has done something remarkable or unique, or because the selective admissions process already culls students who are less likely to succeed. Wealthy institutions that enroll small numbers of high-need students also have the ability to have devote significantly more resources to those students than an open-enrollment institution that serves large numbers of high-need students. There are many reasons why a student might elect to attend a proprietary institution. For example, it is very possible that the insightful student selects a proprietary institution because of the more personalized learning experience and higher graduation rates than might be found at many public, open-enrollment institutions. 28 Proprietary institutions are more likely to offer accelerated programs, pre-established course sequences, more flexible class schedules and delivery models, and more personalized student services. 29 The Department is also aware of recent studies that conclude proprietary institutions are more responsive to labor market changes in comparison to community colleges, which may lead students to choose proprietary institutions over their local, public, two-year counterparts. 30 28 Cellini and Davolia, “Different degrees of debt: Student borrowing in the for-profit, nonprofit and public sectors. Brown Center on Education Policy at Brookings.”; Gilpin, G. A., Saunders, J., & Stoddard, C., “Why has for-profit colleges' share of higher education expanded so rapidly? Estimating the responsiveness to labor market changes,” Economics of Education Review 45, 2015, scholarworks.montana.edu/xmlui/bitstream/handle/1/9186/Gilpin_EER_2015_A1b.pdf;sequence=1. 29 Cellini and Turner; Note: (pg. 5): “For-profit schools may have better counseling compared to community colleges . . . the for-profit sector has been quicker to adopt online learning technologies for undergraduate education compared to less selective public colleges.” 30 Gregory Gilpin, et al., “Why has for-profit colleges' share of higher education expanded so rapidly? Estimating the responsiveness to labor market changes,” Economics of Education Review 45 (April 2015): 53-63; See also: Grant McQueen, “Closing Doors: The Gainful Employment Rule as Over-Regulation of For-Profit Higher Education That Will Restrict Access to Higher Education for America's Poor,” Georgetown Journal on Poverty Law & Policy, Volume XIX, Number 2, Spring 2012: “The for-profit higher education industry has filled a rapidly expanding demand for higher education in American society that public and non-profit institutions of higher education have not been able to meet.” (pg. 330) The GE regulations also unfairly target proprietary institutions, as explained in the NPRM, because if the D/E rates measure considered the total cost of education relative to graduate earnings, a number of GE programs offered by public institutions would fail the measure. 31 31 Ibid.; also see: Schneider, Mark, “Are Graduates from Public Universities Gainfully Employed? Analyzing Student Loan Debt and Gainful Employment,” American Enterprise Institute, 2014, www.aei.org/publication/are-graduates-from-public-universities-gainfully-employed-analyzing-student-loan-debt-and-gainful-employment/. The low price of public, two-year colleges may mean that fewer students need to borrow to enroll at those schools, but lower borrowing rates may also be due to the fact that a lower proportion of community college students are Pell eligible, or financially independent students, as compared to students at proprietary institutions. 32 Despite assertions that community colleges and proprietary institutions serve the same students, as stated above, the data reveal that proprietary institutions serve a much larger population of low-income, older, and minority students. 33 It is important to consider that despite lower proportions of student borrowers, given the total size of many public institutions, those institutions leave many more borrowers with debt and pose a higher aggregate loan burden and non-repayment risk to students and taxpayers. For example, a public college with 30,000 students and a 17 percent borrowing rate will produce 5,100 borrowers whereas a proprietary institution that serves 500 students and has a 90 percent borrowing rate will produce 450 borrowers. The same is true for small private, non-profit colleges that may have a higher percentage of students who need to borrow to pay tuition, but based on a small total student population, produce fewer total borrowers than public institutions that serve large numbers of students. 32 Jennifer Ma and Sandy Baum, Trends in Community Colleges: Enrollment, Prices, Student Debt, and Completion. College Board Research Brief, April 2016. 33 Cellini, Stephanie and Nicholas Turner, “Gainfully Employed? Assessing the Employment and Earnings for For-Profit College Students Using Administrative Data,” National Bureau of Economic Research, January 2018, www.nber.org/papers/w22287. Unaffordable student loan debt is an issue across all sectors, including public institutions. The 2015 follow-up to the 1995-96 and 2003-04 Beginning Postsecondary Survey showed that despite the lower percentage of students who borrow at community colleges, among those who do borrow, their debts may be debilitating. For example, among borrowers who enrolled at community colleges in the 2003-04 cohort, twelve years later not only did they have a larger outstanding debt ($21,000) than students who enrolled at proprietary institutions ($14,600), but the level of debt held represented 90 percent of the original loan balance for students who enrolled at community colleges and 82 percent for those who enrolled at proprietary institutions. 34 Therefore, it is as important for students at non-GE institutions or who are enrolled in non-GE programs to understand their likely earning outcomes so that they can borrow at a level that will not leave them struggling for decades after graduation. 34 nces.ed.gov/pubs2018/2018410.pdf. Also, the Department is concerned that some community colleges do not participate in the Federal Student Loan programs because of concerns that high default rates would end the institution's participation in the Pell grant program. 35 According to data from FSA, 38 community colleges do not participate in the loan programs. While this may be beneficial to students, it may also have a number of unintended consequences, including necessitating students to use more expensive forms of credit—such as credit cards and payday loans—to pay their tuition and fees. Or it may prevent low-income students from having access to higher education at lower cost institutions. An institution that elects to prevent students from taking Federal student loans will automatically pass the D/E rates measure, even if there are no earnings benefits associated with program completion. In some instances, the student may be better off in the long run by borrowing to attend a program he or she is more likely to complete, or that provides a more personalized experience, or that leads to a higher paying job. Despite the Department's interest in reducing student debt levels, it is noteworthy that a recent study showed that increased borrowing among community colleges may have a positive impact on completion and transfer to four-year institutions. 36 35 www.jamesgmartin.center/2017/06/colleges-allowed-limit-students-federal-loans/; www.washingtonpost.com/news/grade-point/wp/2016/07/01/the-surprising-number-of-community-college-students-without-access-to-federal-student-loans/?noredirect=on&utm_term=.cd4dd8528001. 36 www.higheredtoday.org/2018/01/12/increasing-community-college-completion-rates-among-low-income-students/. Student enrollment and borrowing decisions are as complex as the decisions that graduates make about where they want to work, what they want to do for a living, and how many hours a week they want to work. Until the Department has more sophisticated analytical tools that take into account the many variables other than institutional quality that impact both cost and outcomes, it is inappropriate to develop a scheme that imposes high-stakes sanctions without understanding the longer term impact of those sanctions on students and the production of ample workers for occupations that may pay lower wages but are in high demand (such as cosmetology, culinary arts, allied health, social work, and early childhood education). While some commenters suggested that any institution could ensure that they will pass the D/E rates measure by lowering tuition, such a view oversimplifies college financing realities. In addition to the lack of direct taxpayer subsidies, proprietary institutions may have a higher per-student delivery cost since CTE-focused education can be four or five times more expensive to administer than liberal arts or general studies education. 37 During times of high enrollment pressure or constrained resources, community colleges tend to reduce the number of vocational programs offered so that they can serve a large number of students in lower-cost general studies and liberal arts programs. 38 In addition, as noted by Shulock, Lewis, and Tan, comprehensive institutions have the added benefit of cross-subsidizing higher cost CTE programs with low-cost general studies programs that typically enroll larger numbers of students. 39 Since proprietary institutions are, for the most part, not permitted to offer lower cost general studies programs, the full cost of providing CTE is paid by the student without the benefit of cross-subsidizations from other students enrolled in lower-cost programs. 37 Shulock, Nancy, Jodi Lewis, and Connie Tan, “Workforce Investments: State Strategies to Preserve Higher-Cost Career Education Programs in Community and Technical Colleges,” Institute for Higher Education Leadership and Policy, California State University, Sacramento, August 2013, eric.ed.gov/?id=ED574441. 38 Ibid. 39 Ibid. Therefore, the Department agrees with the commenter who stated that by focusing on GE programs, the Department has ignored worse outcomes generated by other programs. For example, as explained in the NPRM under “Covered Institutions and Programs,” numerous researchers have emphasized the importance of picking the right major in order to optimize earnings. 40 According to Holzer and Baum's 2017 publication, community college liberal arts and general studies degrees have no market value for the majority of students who earn them, but the students will never transfer to a four-year institution. 41 Nonetheless, these programs, and more at the baccalaureate level, were not covered by the GE regulations. 40 Carnevale, Anthony, et al., “Learning While Earning: The New Normal,” Center on Education and the Workforce, Georgetown University, 2015, 1gyhoq479ufd3yna29x7ubjn-wpengine.netdna-ssl.com/wp-content/uploads/Working-Learners-Report.pdf; see also: Holzer, Harry J. and Sandy Baum, Making College Work: Pathways to Success for Disadvantaged Students (Washington, DC: Brookings Institution Press, 2017). 41 Holzer and Baum. According to a 2018 Q3 breakdown of FSA's federally serviced portfolio, 24 percent of the dollars in the portfolio, or $272 billion, are in IDR plans that are current, but negatively amortizing. This substantial percentage of borrowers whose loans are growing rather than shrinking due to their enrollment in an IDR plan are of serious concern. 42 This is a problem of a magnitude and importance that any action the Department takes must include all borrowers at all title IV participating institutions. Of course, participation in an IDR plan may not be a sign that a student's program was of low quality but could instead be a sign that the student borrowed recklessly or made lifestyle decisions that result in lower earnings. 42 Analysis of FSA Loan portfolio with NSLDS Q12018, Federal Reserve Economic Data (Credit card delinquencies average for all commercial banks). Since the REPAYE program eliminates the income hardship test and allows any borrower to sign up for a student loan payment that is 10 percent of his or her income, it cannot be said that a borrower in an IDR plan is one who has been harmed by his or her program or institution. In some instances, borrowers may elect to pursue a lower paying job in order to benefit from IDR-derived loan forgiveness. Nonetheless, since so many students are enrolled in IDR programs, the Department believes that any transparency and accountability framework must apply to all title IV programs, which it plans to do through the expanded College Scorecard. A Department review of the 2015 D/E rates shows that cosmetology and medical assisting programs were disproportionately represented among the programs that failed the D/E rates measure in the first year that D/E rates were calculated under the GE regulations. 43 Yet both of these occupations are considered by the U.S. Department of Labor to be “bright outlook” occupations, 44 suggesting that it is possible that GE-related program closures could reduce availability of CTE-focused programs needed to fill high-demand occupations. The Department agrees with the commenter who discussed the complicated patchwork of regulations that the Department has created, without any direction to do so by Congress. The 2015 Senate Task Force on Higher Education Regulation Report reinforces that point, and highlights the GE regulations as an example of the Department's “us[ing] the regulatory process to set its own policy agenda in the absence of any direction from Congress, and in the face of clear opposition to that policy from one house of Congress.” 45 By rescinding the GE regulations, we begin to correct that problem. 43 Federal Student Aid, “Gainful Employment Information,” studentaid.ed.gov/sa/about/data-center/school/ge?src=press-release. 44 ONet OnLine, “Bright Outlook Occupations,” www.onetonline.org/help/bright/. Note: “Bright Outlook” Occupations are defined as matching at least one of the following criteria: (1) Projected to grow faster than average (employment increase of 10 percent or more) over the period 2016-2026; or (2) projected to have 100,000 or more job openings over the period 2016-2026. 45 Task Force Report at 14. The Department disagrees that the BLS Job Openings and Labor Turnover Survey does not provide sufficient evidence to support the Department's assertion that many good jobs are currently unfilled, including jobs for which individuals could, in some cases, prepare for by completing a GE program. The Department pointed to the BLS survey to illustrate that the Department cannot predict the long-term impact of removing programs from title IV, including potential workforce shortages that could be caused by eliminating high-quality programs that fail the D/E rates measure for reasons beyond the control of the institution. The Department disagrees with the commenters who said that the rescission of the GE regulations is arbitrary and capricious. Under the Administrative Procedure Act (APA), an agency “must show that there are good reasons for the new policy.” 46 However, “it need not demonstrate to a court's satisfaction that the reasons for the new policy are better than the reasons for the old one; it suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better.” 47 (emphasis in original) Additionally, the Department provided ample evidence that any transparency and accountability framework must be expanded to include all title IV programs since student loan repayment rates are unacceptably low across all sectors of higher education and because a student may unknowingly select a non-GE program with poor outcomes because no data are available. If we want students to make informed decisions, then we need to provide information about all of the available options. Since the GE regulations cannot be expanded to include all institutions, and since negotiators could not come to consensus on a GE-like accountability and transparency framework that was substantiated by research and applicable to all title IV programs, the Department decided to take another approach. 46 FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). 47 Id. The Department acknowledges evidence that students enrolled at proprietary institutions may be at higher risk for default and that, on average, students who attended a proprietary institution are more likely to default on their loans than students who enrolled at a community colleges. However, the Department provided ample data in the NPRM and in this document that higher defaults among students who enrolled a proprietary institution could be the result of these institutions serving higher risk students. A much higher proportion of students enrolled at proprietary colleges exhibit many more risk factors—such as being over 25, being a single parent, working full-time while being enrolled, being financially independent, and being Pell eligible—than students enrolled at other institutions, including community colleges. 48 48 Deming, David, Claudia Goldin, and Lawrence Katz, “For-Profit Colleges,” The Future of Children, Vol. 23, No 1, Spring 2013, scholar.harvard.edu/files/lkatz/files/foc_dgk_spring_2013.pdf. The Department agrees that during the Great Recession, proprietary institutions likely grew too rapidly, and some have been accused of committing fraud, but the most rapid growth in the sector was by online institutions, where relatively few programs failed the D/E rates measure. During the Great Recession, many students sought relief by enrolling in college, and the Department does not deny that some institutions took advantage of that. However, there are other mechanisms, such state attorneys general, consumer protection agencies, civil legal proceedings, internal resolution arrangements, and borrower defense to repayment regulations that enable students to take action against institutions that have committed fraud. However, a failing outcome under the D/E rates measure in no way signals, demonstrates, or proves that the institutions committed fraud. The Department is aware of research demonstrating that as enrollments in California proprietary institutions went down, there was a commensurate increase in enrollments at local community colleges. 49 California is a State rich with community colleges, so it is not surprising that students were able to find alternatives to proprietary institutions. However, not all States and regions have as many options as those in California. In addition, a student who does not have the opportunity to attend a proprietary institution may be limited to a general studies program at a community college, which may disadvantage the student. Since, on average, graduation rates at proprietary institutions are higher than those at community colleges, a student may not be served if the lower-cost institution reduces the student's chances of completing his or her credential. 49 Cellini, Stephanie Riegg (2010). “Financial Aid and For-Profit Colleges: Does Aid Encourage Entry?” Journal of Policy Analysis and Management. 29(3): 526-52. The Department agrees that some proprietary institutions serve students poorly and produce unimpressive results. However, there are institutions among all sectors that serve students poorly and produce unimpressive results, and yet the GE regulations do nothing to expose those programs or institutions or protect students from enrolling in them since the GE regulations are limited in their coverage. The point is not to ignore the legitimate challenges among institutions in the proprietary sector but is instead to expand the reach of a new accountability and transparency system to ensure that all students, regardless of institutional sector, can obtain information to inform their enrollment and borrowing decisions. Changes: None. Is there a need to define gainful employment? Comments: One commenter stated that the Department must establish a definition for the term “gainful employment in a recognized occupation,” rather than leaving the term undefined. Other commenters stated that the Department is violating the law by failing to differentiate between institutions that do and do not prepare students for gainful employment, and that by eliminating the GE regulations, the Department is no longer following the requirements of the HEA in differentiating between GE programs and non-GE programs. Discussion: The Department does not agree that it needs to define the term “gainful employment” beyond what appears in statute. Since it was added to the HEA in 1968, the term “gainful employment” has been widely understood to be a descriptive term that differentiates between programs that prepare students for named occupations and those that educate students more generally in the liberal arts and humanities, including all degree programs offered by public and private, non-profit institutions. Congress reaffirmed this interpretation when it added a provision to the 2008 Higher Education Opportunity Act (HEOA) that allowed a small number of proprietary institutions to offer baccalaureate degrees in liberal arts. 50 Had Congress intended the term “gainful employment” to mean something other than a limitation on HEA section 102 institutions from offering programs that are not CTE-focused, it would not have needed to create a statutory exception to allow some HEA section 102 institutions to offer liberal arts programs. 50 20 U.S.C 1002(b). Therefore, contrary to suggestions by commenters that the Department needs to develop a new definition in order to enforce the law or differentiate between GE and non-GE programs, the Department confirms that it, in fact, is enforcing the law as written and as intended, because it disallows proprietary institutions, other than those exempted by the above-mentioned provision of the HEOA, to offer general studies, liberal arts, humanities, or other programs not intended to prepare students for a named occupation. The Department will continue to enforce the law in this regard—in the same way it enforced it between 1968 and 2011. In promulgating the 2014 Rule, the Department cited Senate debate in the 1960s as evidence that the GE regulations are consistent with congressional intent. The Senate Report accompanying the National Vocational Student Loan Insurance Act (NVSLI), Public Law 89-287, captured testimony delivered by University of Iowa professor Kenneth B. Hoyt that supported the “concept” of making loans available to students pursuing vocational training. He described findings from a sample of students whose earnings data were collected two years after completing their training, and based on those data, he concluded that “in terms of this sample of students, sufficient numbers were working for sufficient wages so as to make the concept of student loans to be [repaid] following graduation a reasonable approach to take.” 51 51 “Gainful Employment,” 79 FR 65035, October 31, 2014. The Senate report made no mention of how quickly the student would need to repay his or her loan, and it referred to the “concept” of student loan repayment rather than a particular repayment amortization term or a particular debt-to-earnings threshold. Moreover, the Senate report was focused on legislation other than the HEA and the conversation had a very different focus when Congress was contemplating the inclusion of proprietary institutions in all HEA programs. What the Department neglected to include in its recounting of the early history of student loans, is that in 1972 when the National Vocational Student Loan Insurance Act (NVSLIA) was passed, Congress decided to incorporate vocational education programs into the HEA, by allowing their participation in the Educational Opportunity Grants as well as the student loan programs. Here the House conference report is clear that the new legislation “not only extends existing programs but creates exciting and long needed (sic) new ones. For the first time, the bill commits the Federal Government to the principle that every qualified high school student graduate, regardless of his family income, is entitled to higher education, whether in community colleges, vocational institutes or the traditional 4-year college or university.” 52 Vocational institutions in this context included proprietary colleges that would, for the first time ever, be eligible to participate in title IV grants as well as loans. The inclusion of proprietary schools in the HEA was an important step toward achieving the goals of providing equitable access to postsecondary education, for all students, regardless of whether their interests were in the traditional trades or vocations, or in typical degree programs. 52 www.govinfo.gov/content/pkg/GPO-CRECB-1972-pt16/pdf/GPO-CRECB-1972-pt16-2-2.pdf. The Department points out that Congress intends for all Federal student loan borrowers to repay their loans, not just those who borrow to attend “vocational training” programs. However, Congress has elected to address concerns about unmanageable student loan debt by providing numerous extended repayment and income-driven repayment programs that reduce monthly and annual payments and provide loan forgiveness if, after 20 (or in some cases 25) years of income-driven repayment, an outstanding loan balance remains. While the Department agrees that some of these repayment programs lead to undesirable outcomes for borrowers and taxpayers, in that they allow students to accumulate more debt (through negative amortization) rather than paying down their original student loan balances, the intent of Congress is clear. In fact, in introducing the Income Dependent Educational Assistance (IDEA) Act, which ultimately became the income-based repayment (IBR) program in the College Cost Reduction and Access Act of 2007 (CCRAA), Congressman Tom Petri (R-WI) stated: Unfortunately, little has been done by way of providing more flexible repayment options for borrowers after graduation. Traditionally it has been expected that the borrower will pay the amortized loan over a standard period, usually 10 years, with the same repayment amount on day one as on the last day. However, this model of repayment fails to take into account that students often face periods of significant unemployment or underemployment during the first years after leaving college . . . I believe the IDEA Act does just that. This legislation would allow any Stafford loan borrower the ability to consolidate into a direct IDEA loan with a repayment schedule that corresponds to the borrower's income once in repayment. This new schedule requires regular payments; however, it ensures that such payments reflect the borrowers' capacity to repay under their current income status. This feature would be particularly useful for those pursuing lower-income, public-service careers. It also would help relieve some of the stress that borrowers face during periods of unemployment or underemployment following graduation. 53 53 153 Cong. Rec. 13777 (2007). Support for income-driven repayment during the 2007 HEA reauthorization was bipartisan, with Congressman George Miller (D-CA) stating that IBR was created because “knowing that they will face a mountain of debt after graduation, some students feel compelled to major in areas that will lead to a high-paying career. The hope is that income-based repayment will encourage students to pursue their real interests, even if careers in the major of their choice don't provide a high income.” 54 54 Chen, Grace, “The College Cost Reduction and Access Act of 2007,” Community College Review, August 7, 2018, www.communitycollegereview.com/blog/the-college-cost-reduction-and-access-act-of-2007. Congressional support for IBR in the CCRAA in 2007, and for the Pay As You Earn (PAYE) income-driven repayment program in 2012, makes it clear that Congress does not wish for a student to feel compelled to select the highest paying major or job, to select the lowest cost educational opportunity, or to abandon his or her interests in lower-paying careers, such as public service careers, in order to meet student loan repayment obligations under the standard, 10-year repayment plan. Therefore, the Department's original determination the GE regulations are based upon or align with congressional intent was based on an incomplete review of the legislative record. It should have been clear to the Department that the GE regulations did not comport with congressional intent when a bipartisan group of 113 Members of the House of Representatives, led by Congressman Alcee Hastings (D-FL), sent a letter in 2011 to President Obama asking him to withdraw the GE regulations. 55 Further, the Department should have noted that the House of Representatives passed House Amendment 94 to House Resolution 1, the Disaster Relief Appropriations Bill of 2013, with a vote of 289 to 136. 56 This amendment would have prohibited the Department from implementing the 2011 GE rule. Although the amendment was not included in the final bill, the amendment should have given the Department pause before claiming that the GE regulations were consistent with Congress' intent. 55 Alcee L. Hastings, “Over 100 Members Send Bipartisan Letter to President Obama Urging Withdrawal of `Gainful Employment' Regulation,” April 26, 2011, alceehastings.house.gov/news/documentsingle.aspx?DocumentID=327789. 56 Amendment 241 to H.R. 1 ( www.congress.gov/amendment/112th-congress/house-amendment/94 ), was offered by Chairman John Kline (R-MN2) in 2011, and passed by the full House of Representatives. Amendment 241 was not included in the final Consolidated Appropriations Act ( www.congress.gov/bill/112th-congress/house-bill/2055/amendments ), www.congress.gov/amendment/112th-congress/house-amendment/94 ). Despite numerous reauthorizations of the HEA between 1964 and 2008, Congress never attempted to define “gainful employment” based on a mathematical formula nor did it attempt to define the term using threshold debt-to-earnings ratios. Congress never attempted to prohibit students who attended GE programs from participating in IDR programs. In addition, the GE regulations were also identified in 2015 by the bipartisan Senate Task Force on Higher Education Regulation as a glaring example of the Department's “increasing appetite” for regulation. 57 57 Senate Task Force on Higher Education Regulations, “Recalibrating Regulation of Colleges and Universities,” www.help.senate.gov/imo/media/Regulations_Task_Force_Report_2015_FINAL.pdf, pg. 13. Despite previous assertions, the Department now recognizes that it had incorrectly described congressional intent and engaged in regulatory overreach, as discussed throughout these final regulations, and for those reasons, and the others described in the NPRM and these final regulations, it is rescinding the GE regulations. Changes: None. Protecting Students Comments: A number of commenters disagreed with the Department's decision to rescind the GE regulations, arguing that minority, low-income, adult, and veteran students are particularly vulnerable and, therefore, need additional protections from unscrupulous institutions and from programs with inferior outcomes, as well as to eliminate waste, fraud, and abuse. Discussion: The Department shares the concern of commenters who highlighted the need to protect low-income students and taxpayers from programs with poor outcomes, and from waste, fraud, and abuse. However, we do not believe the GE regulations are an effective tool for either of those purposes. First, the GE regulations do not accurately identify programs with poor outcomes. Many programs that had poor earnings outcomes passed the D/E rates measure due to large public subsidies that reduce the cost of enrollment to students. At the same time, programs that resulted in much higher earnings failed the D/E rates measure since the lack of public subsidies required the students to pay the full cost. 58 The Department believes that the best way to protect all students is to acknowledge that they select their college and major based on a variety of factors, but provide clear and accurate information about debt and earnings to enable them to compare likely outcomes among the institutions and programs they are considering. 58 Cooper and Delisle, www.luminafoundation.org/files/resources/measuring-quality-or-subsidy.pdf. Second, although the Department acknowledges that it plays an important financial stewardship role, and has the responsibility of reducing waste, fraud, and abuse, the GE regulations did not support that goal. Many programs are not subject to the GE regulations, so the regulation would play no role in preventing waste, fraud, and abuse among those programs. The Department does not agree that by charging students for the full cost of their education, rather than accepting direct appropriations and other taxpayer subsidies, is an act of waste, fraud, or abuse. Were that the case, then the Department would need to apply the D/E rates measure to all private institutions, including private, non-profit institutions, since those institutions generally have the highest annual tuition, including for programs that result in modest earnings. The Department is committed to ensuring that students are provided with accurate outcomes data. All students should be able to view accurate and unbiased outcomes data from a reliable source. The Department seeks to make it much more difficult for institutions to mislead students by making reliable data readily available to all students about the institutions they are considering attending or are attending. There are many instances of fraud that would never be detected by the GE regulations, either because the programs or institutions are not subject to the GE regulations or student earnings are sufficient to mask misrepresentation that took place. Therefore, complacency based on the mistaken belief that the GE regulations will obviate the need for other efforts to detect and eliminate waste, fraud, and abuse could have serious consequences. The Department acknowledges that it plays an important financial stewardship role, and has the responsibility of reducing waste, fraud, and abuse. However, the GE regulations did not support that goal. Moreover, the GE regulations do not necessarily identify instances of fraud or abuse since programs designed to prepare, for example, teachers, community health workers, and allied health professionals may result in low wages simply because the prevailing wages in those fields are low. Therefore, a program could fail the D/E rates measure not because of fraudulent or abusive practices on the part of institutions, but because a number of high-demand occupations pay low wages, especially in the early years of employment, or because in some occupations there is an induction period of several years before a graduate can be fully licensed or be paid at the level of experienced professionals. There are ample examples of institutions that committed acts of fraud that would never be detected by the D/E rates measure. For example, the Nebraska Attorney General alleges that Bellevue University misrepresented the truth about the accreditation of its nursing program, 59 City Colleges of Chicago inflated their graduation rates, 60 Maricopa Community College was found guilty of falsifying student volunteer hours to allow students to receive an education award through the Americorps program, 61 and a number of law schools admitted to inflating job placement rates 62 in order to attract more students. Yet the GE regulations would identify none of these acts of misrepresentation. 59 Paul Fain, “Nebraska AG Sues Bellevue Over Nursing Program,” Inside Higher Ed, February 28, 2019, www.insidehighered.com/quicktakes/2019/02/28/nebraska-ag-sues-bellevue-over-nursing-program. 60 David Kidwell, “The Graduates*,” Better Government Association, November 1, 2017, projects.bettergov.org/the-graduates/. 61 Office of Public Affairs, “Maricopa County Community College District Agrees to Pay $4 Million for Alleged False Claims Related to Award of AmeriCorps Education Awards,” Office of Public Affairs, December 1, 2014, www.justice.gov/opa/pr/maricopa-county-community-college-district-agrees-pay-4-million-alleged-false-claims-related. 62 Paul Campos, “Served,” The New Republic, April 25, 2011, newrepublic.com/article/87251/law-school-employment-harvard-yale-georgetown. The Department will continue to employ its usual fraud prevention mechanisms, such as program reviews, to identify institutions that are not abiding by title IV rules and regulations. In addition, it will continue to rely on States to execute their consumer protection functions and accrediting agencies to evaluate program quality so that the regulatory triad will retain its importance and shared responsibility in the oversight of institutions of higher education. Finally, the Department seeks to make it much more difficult for institutions to mislead students by ensuring that all students are able to view accurate and unbiased outcomes data from a reliable source, and the Department will continue to work with accreditors to try to identify and stop institutions that are reporting false outcomes data. Changes: None. Accountability Comments: Some commenters disagreed with the Department's proposal to rescind the GE regulations, arguing that the GE regulations provide the only standard by which programs might be held accountable for outcomes. Another commenter stated that by eliminating the GE regulations, proprietary institutions would be held to a lower standard than non-GE institutions. One commenter acknowledged that CDRs currently serve as an accountability standard for all institutions of higher education, but expressed concern that defaults are not an accurate indicator of program quality or an accurate measure of a student's or taxpayer's return on investment. Another commenter stated that research shows that income increases with the level of degree earned. For example, the research found that students with an associate's degree saw their quarterly incomes increase by more than $2,300 for women and nearly $1,500 for men, while those with a short-term certificate saw an increase of only around $300 per quarter. The commenter also cited a study finding that among certificate holders, workers in female-dominated occupations (healthcare and education) earned less than those in male dominated occupations (technology-based). 63 63 Institute for Women's Policy Research, “Fact Sheet: The Gender Wage Gap by Occupation 2017 and by Race and Ethnicity,” April 2018, iwpr.org/wp-content/uploads/2018/04/C467_2018-Occupational-Wage-Gap.pdf. Discussion: The Department strongly disagrees with the commenter who suggested that by eliminating the GE regulations, there will be no more program-level accountability measures. It is the role of accreditors and States, not the Department, to evaluate program quality, and, in some instances, specialized or programmatic accreditors establish quality assurance measures, enrollment caps, and licensure pass rates that determine whether or not specific programs will continue to be accredited. The Department will continue to rely on accreditors and State authorizing agencies to evaluate program quality. The Department also does not agree with the commenters who argued that by eliminating the GE regulations, proprietary institutions would be held to a lower standard than non-GE institutions. In addition to meeting CDR requirements like all institutions and financial responsibility standards like all non-public institutions, proprietary institutions must also meet requirements that limit title IV revenue to 90 percent of total revenue (the 90-10 Rule). The requirements regarding annual audits and the types of jobs Federal Work Study students can be placed in are also stricter for proprietary institutions. So, they remain subject to additional regulatory requirements. As pointed out by at least one commenter, CDRs are one of the metrics that Congress has established to determine continuing eligibility for an institution, including proprietary institutions, to participate in title IV programs. We agree that CDRs are misleading indicators of program quality or the current status and risk associated with the outstanding Federal student loan portfolio. As noted earlier in this document, updated repayment rate data revealed, in January 2017, that less than half of all borrowers were paying down a dollar of principal by their third year of repayment, and more recent portfolio analysis has revealed that of the nearly $1.2 trillion in outstanding student loans, only 24 percent, or $298 billion, are in a positive repayment status, meaning that interest and principal are being paid down. The remaining loans are in post-enrollment grace, default, forbearance, deferment, or negative amortization due to income-driven repayment, and 43 percent, or $505 billion, are in distress, as previously mentioned. 64 Despite these grim statistics, it is noteworthy that the most recent CDR is only 10.8 percent (the 2018 three-year CDR for the 2015 cohort). 65 Accordingly, although the Department will continue to enforce the law by restricting title IV eligibility to those institutions, including proprietary institutions, that pass the CDR test, it also seeks to expand transparency and market-based accountability through the College Scorecard. 64 Stirgus, Eric, “Rising Student Loan Debt a `crisis,' DeVos Says,” Atlanta Journal-Constitution, November 27, 2018, www.ajc.com/news/local-education/rising-student-loan-debt-crisis-devos-says/kgGX56hb11yhIpOyQURlSJ/; Analysis of FSA Loan portfolio with NSLDS Q12018, Federal Reserve Economic Data (Credit card delinquencies average for all commercial banks). 65 Federal Student Aid, “Official Cohort Default Rates for Schools,” www2.ed.gov/offices/OSFAP/defaultmanagement/index.html. Regarding the comment about credential inflation, the 768 programs that failed the D/E rates measure based on the 2015 D/E rates published in 2017, more than 100 were medical assisting or similar programs and more than 90 were cosmetology/barbering programs. This suggests that these occupations may not pay a wage that is commensurate with the educational requirements for licensure or certification, but institutions do not determine or set those requirements. States and occupational licensing boards or credentialing organizations establish those requirements. The Department agrees that the financial rewards associated with a postsecondary credential, in general, increase as the credential level increases. However, there are bachelor's, master's, and doctoral degree programs that result in relatively low earnings and that require borrowers to rely on income-driven repayment. In fact, some researchers have pointed out that it is recipients of graduate degrees who are in greatest need of, and who will benefit most from, these programs. 66 Therefore, the Department continues to believe that the best way to expand transparency and accountability to all students is to expand the College Scorecard to the program-level for all categories (GE and non-GE) of title IV programs. 66 Delisle, Jason, “Costs and Risks in the Federal Student Loan Program,” American Enterprise Institute, January 30, 2018, www.help.senate.gov/imo/media/doc/Delisle.pdf. Changes: None. Which institutions should be included? Comments: A number of commenters stated that they fully support the original intent of the GE regulations and that schools must be held accountable to provide equitable value to their students. However, others asserted that given the limited reach of the GE regulations, students may not have had sufficient information to accurately compare the outcomes of a GE program to a non-GE program that was not subject to the regulations. These commenters agreed with the Department that the 2014 Rule should be rescinded. Other commenters noted that they supported the GE regulations, but indicated that all schools and programs, including proprietary institutions and non-profit institutions, should be held to the same standards and requirements. Those commenters were split on whether the Department should expand the regulations to include all institutions or rescind the regulations. Several commenters took the position that any new regulations, whether they require a specific outcome threshold, additional disclosures, or overall transparency, should apply equally to all institutions. Of those commenters who favored uniform application of new regulations, some voiced support for a disclosure-only protocol that would provide students with program-level data about all participating institutions regardless of the type of control. Discussion: The Department agrees that the same standards and reporting requirements should apply to all institutions, regardless of tax status. However, the Department could not simply expand the GE regulations to include all title IV programs since the term “gainful employment” is found only in section 102 of the HEA, which refers to vocational institutions and programs (meaning non-degree programs at non-profit and public institutions and all programs at proprietary institutions). Therefore, there was no way to expand the GE regulations to apply to all institutions. Moreover, although the negotiating committee considered adopting a “GE-like” solution that could be applied to all institutions, the negotiators were unable to reach consensus on an accurate, valid, and reliable outcomes standard that could serve as the basis for an appropriate and useful accountability and transparency framework for all title IV participating programs. The Department agrees with the commenters that stated that the most effective method to increase accountability and transparency, under current law, for all programs is through a disclosure-only protocol, and it plans to do so using the College Scorecard to make program-level data readily available and in a format that enables easy comparative analysis. Only when students can consider comparable information about all of the institutions and programs they are considering, and that are available to them, can students begin to make data-driven decisions. Part of our goal is to end information asymmetry between institutions and students. Changes: None. Location Matters Comments: One commenter noted that while the Department correctly cites research showing that most students do, in fact, stay close to home for college, the commenter disagrees with the assertion made in the NPRM that eliminating a failing GE program could eliminate the opportunity for a student to gain a credential if a passing program is located farther away. The commenter suggested that this research should not be used as a justification for eliminating the 2014 Rule, but rather to support keeping the GE regulations in effect in order to protect consumers. Discussion: The Department does not believe that the NPRM mischaracterizes these research findings. The Department continues to believe that since location is important in influencing student enrollment decisions, a less expensive option may be of no benefit for a student who would need to travel too far from home to enroll in it. In addition, the 2015 GE data provides numerous examples of programs that pass the D/E rates measure because they are heavily taxpayer subsidized, even though they result in earnings that are substantially less than the earnings associated with programs provided by proprietary institutions that charge students the full price of educational delivery. The Department stands by its original point, which is that location matters and that the elimination of a program that fails the D/E rates measure may not result in better long-term outcomes for students if another option doesn't exist in that place. On the other hand, a student who has only one option may decide, when better informed about debt and earnings, that it is best to forfeit that option and find a different workforce preparation pathway. The Department believes that all institutions should provide high-quality educational options to students, but without public subsidies, some of those options could result in higher tuition and fees and increased borrowing. Regardless of whether information about program outcomes encourages program improvements, encourages institutional selectivity, or encourages students to pursue other kinds of career preparation, the Department believes that, especially when a student has very limited institutional or programmatic options, he or she needs access to data about all available options to better inform enrollment and borrowing decisions. We are aware that the researcher who wrote the paper about the role of location in student enrollment decisions disagrees with our position on the GE regulations, and does not wish his research to be used to support our conclusions. However, we did not misrepresent his research findings and still believe that they are relevant in explaining that students with limited options in their local geographic area could be better off attending a program that results in debt but also elevates wages, as opposed to attending no postsecondary program at all. We continue to believe that if the program in which a student is interested in enrolling loses title IV eligibility under the D/E rates measure, and there are no other options to enroll in that program within a reasonable commuting distance, the student may not be well served by the elimination of the program, even if the student would have required more than 10 years to repay their student loan debt. Changes: None. Proprietary Institution Outcomes Comments: Commenters cited a number of studies on outcomes at proprietary institutions, in support of their position that the GE regulations should not be rescinded. One commenter provided an appendix with research citations believed to be relevant to the GE regulations. The commenter referenced research by Cellini and Turner that found that students who attend proprietary certificate programs experience small, statistically insignificant gains in annual earnings. 67 Chou, Looney, and Watson found that proprietary schools have relatively poor cohort loan repayment rates, with almost no schools in that sector having a repayment rate above 20 percent. 68 Looney and Yannelis found that between 2000 and 2011 there was substantial growth in both proprietary college enrollment and student loan default rates. 69 Armona et al. found that those who enroll in for-profit four-year institutions have the worst outcomes, including more educational debt, worse labor market outcomes, and higher default rates than students attending similarly selective public institutions. 70 67 Cellini, Stephanie and Nicholas Turner, “Gainfully Employed? Assessing the Employment and Earnings for For-Profit College Students Using Administrative Data,” National Bureau of Economic Research, January, 2018, www.nber.org/papers/w22287. 68 Chou, Tiffany, Adam Looney, and Tara Watson, “Measuring Loan Outcomes at Postsecondary Institutions: Cohort Repayment Rates as an Indicator of Student Success and Institutional Accountability,'' National Bureau of Economic Research, February, 2017, www.nber.org/papers/w23118. 69 Looney, Adam and Constantine Yannelis, “A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults,” Brookings Papers on Economic Activity, Fall 2015, www.brookings.edu/wp-content/uploads/2016/07/PDFLooneyTextFallBPEA.pdf. 70 Armona, Luis, Rajashri Chakrabarti, and Michael F. Lovenheim, “How Does For-Profit College Attendance Affect Student Loans, Default, and Labor Market Outcomes?” Federal Reserve Bank of New York Staff Report No. 811, September 2018, www.newyorkfed.org/medialibrary/media/research/staff_reports/sr811.pdf?la=en. Research citations in the appendix also included work by Darolia et al. who found that employers were less likely to hire applicants with degrees from proprietary institutions, even compared to those with no degrees. 71 Chakrabarti and Jiang found that attending a proprietary college yields earnings that are 17 percent lower that earnings of those who attend private, not-for-profit four-year colleges. 72 71 Darolia, Rajeev, et al., “Do Employers Prefer Workers Who Attend For-Profit Colleges? Evidence from a Field Experiment,” RAND Corporation, 2014, onlinelibrary.wiley.com/doi/pdf/10.1002/pam.21863. 72 Chakrabarti, Rajashri and Michelle Jiang, “Education's Role in Earnings Employment and Economic Mobility,” Liberty Street Economic Blog, Federal Reserve Bank of New York, September 5, 2018, libertystreeteconomics.newyorkfed.org/2018/09/educations-role-in-earnings-employment-and-economic-mobility.html. Commenters stated that in the 2014 Rule, the Department showed that in 27 percent of GE programs, the average graduate had an income lower than a full-time worker making the Federal minimum wage. The commenters also noted a study demonstrating that since 2014, 350,000 students graduated from certain GE programs with nearly $7.5 billion in student debt. Discussion: The Department appreciates the bibliography provided by the commenter and agrees that these papers conclude that students who attend proprietary institutions, in many instances, have outcomes that are inferior to students who attend other institutions. However, the Department believes that our analysis of the outstanding student loan portfolio demonstrates that poor outcomes are not limited to these institutions or the small number, relative to total postsecondary enrollment, of students who attend them. For this reason, the Department believes that it must implement a transparency and accountability system that applies equally to all title IV programs, and that enables all students to make informed enrollment and borrowing decisions. The Department is aware of the survey results showing that many employers “do not prefer” graduates of proprietary institutions, 73 or may be less likely to interview a candidate who completed an online degree at one of the well-known, large, online proprietary institutions. 74 However, the “do not prefer” study shows that employers similarly did not prefer to hire community college graduates over proprietary school graduates. And while employers may have been less likely to interview a candidate who attended one of the large, online, proprietary institutions, there was not an observed bias against graduates of smaller, ground-based proprietary institutions. It is difficult to know if employers were skeptical of large, online proprietary institutions because of negative experiences with prior employees, or because of negative media coverage of, and political opposition to, well-known proprietary schools. 73 www.goodcall.com/news/employers-dont-prefer-for-profit-over-community-college-graduates-reveals-new-study-04948. 74 www.usnews.com/news/articles/2014/10/17/employers-shy-away-from-online-for-profit-graduates. The Department also believes that many of the studies cited have serious limitations that, in some cases, reduce the validity and reliability of their conclusions. For example, a Cellini study found that proprietary institutions are more expensive than community colleges, when tuition as well as opportunity cost is considered. 75 However, Cellini assumed in this study that it takes students the same amount of time to complete programs at proprietary institutions and community colleges, even though in subsequent publications she cites research showing that students at proprietary institutions tend to complete at higher rates and more quickly than students at community colleges. Since opportunity cost could reasonably be seen as a considerable part of the expense of attending college for adult learners who must leave the workforce or reduce the number of hours worked in order to attend college, the ability to accelerate completion could generate substantial savings compared to a lower cost program that takes longer to complete. 75 Cellini and Turner, www.nber.org/papers/w22287. In her more recent work to compare pre- and post-earnings of community college and proprietary certificate programs, Cellini admits that the Great Recession could have introduced bias into her research results, and that the kinds of certificates offered by community colleges and proprietary institutions differ. 76 In other words, she was comparing what employees earn in fields that may pay very different prevailing wages. She also admits that her methodology for creating demographically matched comparison groups relied on the use of zip codes and birthdates, but every one of the same age in the same zip code is not otherwise socioeconomically and demographically matched. Moreover, she relied on a data set made available exclusively to her, meaning that it is not available for full peer review. Without the advantages of peer review and the ability of other researchers to replicate or challenge her findings, it is difficult to know how credible they are. That said, she concluded in her report that when it came to cosmetology certificates, it appeared that those who completed those certificates at proprietary institutions had higher earnings gains than those who completed those certificates at community colleges, which she attributes to the number of proprietary cosmetology colleges that are affiliated with high-end salons and channel graduates to jobs at those salons. 76 Cellini, S.R. and Turner, N. (January 2018). `2018 Gainfully Employed? Assessing the Employment and Earnings of For-Profit College Students Using Administrative Data' National Bureau of Economic Research working paper series. Available at: www.nber.org/papers/w22287. What her study fails to show, however, are earnings gains realized by students who are unable to enroll in the career and technical education program of their choice at a public institution, and instead enroll in a general studies program. Importantly, her study compared the outcomes of students who enrolled in CTE programs at public and proprietary institutions, but the study did not consider the outcomes of students who are unable to enroll in the career and technical education programs of their choice at a public institution, and instead enroll in a general studies program. What matters to a student may not be how the earnings compare between a CTE program offered by a public and private institution, but instead how the earnings compare between the CTE program available at the private institution, and the general studies program available at the public institution. We believe that the best way to inform student choice is by providing comparable information about all of the choices a student might have. This is another reason why we are rescinding the GE regulations and proposing to expand the College Scorecard. The Department agrees with the commenter that the GE regulations could have the unintended consequence of creating workforce shortages in occupations of high societal value. For example, according to the Department of Labor's ONET database, there were 634,000 medical assistants employed in the United States in 2016, with the projected need of almost 95,000 additional workers in this field by 2026. This makes medical assisting a “bright outlook” occupation, meaning that it will experience fast growth in the coming decade. Unfortunately, medical assisting is also a field that had a median pay of $33,610 per year in 2018. 77 Yet, medical assistant program costs are rising, possibly because only medical assistants who complete a program accredited by the Accrediting Board of Health Education Schools (ABHES) or the Commission on Accreditation of Allied Health Education Programs (CAAHEP) are eligible to sit for the Certified Medical Assisting exam. Thus, programmatic accreditation may be the driver of escalating program costs given the requirements that accreditors impose on educational institutions. 77 www.bls.gov/ooh/healthcare/medical-assistants.htm. It is unclear whether the relatively large number of medical assisting programs that failed the D/E rates measure did so because they are low-quality programs, they are overly expensive, high workforce demand in general results in a larger number of these programs (thus the higher failure rate is proportional to the larger number of programs offered) or if the educational requirements for entry to the field are disproportionately high relative to the wages employers pay. The medical assisting programs that failed the D/E rates measure may be overly expensive or of low quality. However, medical assistant programs prepare students to work in a field necessary to keep our healthcare system working and where employment opportunities are readily available, although they generate low wages. While the Department agrees that a student could benefit from having access to a low-cost medical assisting program, such as by attending a program at a community college, or apprenticeships, National Center for Educational Statistics (NCES) data show that of the 103,589 medical assistants who completed programs in 2013, 84,463 or 82 percent completed programs at proprietary institutions. 78 78 nces.ed.gov/surveys/ctes/xls/P155_2013.xls. In response to the commenters who raised concerns about the 350,000 students who graduated from career education programs with $7.5 billion in debt, the Department shares the concern that many students take on too much debt. However, by dividing the total debt by the number of students, the average debt for each of the 350,000 students in that group would be $21,429, which is actually lower than the average loan debt for the Class of 2017 ($39,400) 79 and the Class of 2016 ($37,172). 80 Because proprietary institutions confer associate, baccalaureate, graduate, and professional degrees, comparisons of student debt levels must include not just community colleges, but also four-year and graduate institutions. 79 “A Look at the Shocking Student Loan Debt Statistics for 2018,” Published May 1, 2018, studentloanhero.com/student-loan-debt-statistics/. 80 Zach Friedman, “Student Loan Debt Statistics in 2018: A $1.5 Trillion Crisis,” Published June 13, 2018, www.forbes.com/sites/zackfriedman/2018/06/13/student-loan-debt-statistics-2018/#53efceb77310. In response to the comment citing the Department's statistic from the 2014 Rule that 27 percent of GE programs resulted in lower earnings than those of a full-time worker who earns the Federal minimum wage, the Department has further considered this statistic and determined that it was based on an invalid comparison. In calculating annual earnings for minimum-wage workers, the Department assumed that minimum wage workers all work forty hours per week, fifty-two weeks per year. However, employment statistics for low-skilled workers show that unemployment is higher among this group than others, making the full-time, year-round employment assumption overly generous. This calculation did not include part-time workers or unemployed workers in proportion to actual employment rates, but instead considered only the wage that would be earned by those who work full time. Consider that in 2017, the real median earnings for males was $44,408 and for females was $31,610, and the real median earnings for males working full time, year-round, was $52,146 and for females was $41,977. These data make clear the impact of part-time work on wages, and do not include individuals who are not in the workforce, either by choice or not. On the other hand, the D/E rates calculation includes, not only full-time workers, but also part-time workers and those who are not in the workforce, perhaps by choice in order to raise children or care for an elderly family member. Among the 10,727,000 married couples with children under the age of 6, there are 3,811,000 in which the husband works but the wife does not but only 339,000 in which the wife works but the husband does not. 81 This demonstrates the significant impact that age and gender have on workforce participation. 82 81 www.census.gov/library/publications/2018/demo/p60-263.html. 82 www.census.gov/data/tables/time-series/demo/families/families.html, table MC-1. Additionally, as pointed out by Witteveen and Attwell in their 2017 analysis of Beginning Postsecondary Survey (BPS) data, institutional selectivity and college major, as well as student gender and socioeconomic status, have a significant impact on earnings outcomes. 83 83 Dirk Wittenveen and Paul Attewell, The Earnings Payoff from Attending a Selective College, Social Science Research 66 (2017), 154-169. If the D/E rates measure, like the projected earnings of minimum wage workers, included only full-time workers, it is likely that the comparison would have yielded very different outcomes. Changes: None. D/E Rates Thresholds and Sanctions Comments: A number of commenters supported the Department's proposal to rescind the GE regulations due to a lack of evidence that an 8 percent debt-to-income ratio sufficiently differentiates between high-quality and low-quality, or between effective and ineffective, programs. These commenters agreed that the lack of an empirical basis for the 8 percent threshold makes it inappropriate to use in determining whether or not a program should be allowed to continue participating in title IV programs. One commenter stated that currently there is not enough data to identify appropriate sanctions for any institution and that this was evident when the 2014 Rule was being negotiated. Other commenters agreed with the Department that the GE regulations have several shortcomings, including the D/E rates thresholds, but argued that there are aspects of the GE regulatory framework that provide a reasonable and simple methodology for determining whether a program is preparing students for gainful employment. The commenter offered alternative D/E rates and thresholds for consideration, including using a 10% debt-to-income threshold with a 10-year repayment term or a 15% or 20% debt-to-income thresholds. Several commenters recommended that the Department revise the GE regulations rather than eliminate them. Another commenter asserted that sanctions should not apply only to proprietary institutions. One commenter argued that while there is no justification for eliminating the rule, changes should be made to the measures and thresholds, with the Secretary given discretion to provide relief to programs experiencing the effects of lasting economic trends that might distort the measure or limit its reliability. Several commenters stated that they thought efforts to reduce an institution's regulatory burden should be made, while also maintaining sanctions for poorly performing programs or, conversely, while maintaining the GE regulations. One commenter acknowledged the challenges associated with the GE regulations, but argued that these challenges are not insurmountable and that low-performing GE programs should be identified through some means and be subject to sanctions. One commenter stated that while they understood the validity of the D/E rates measure was questionable, without it in place, low-income students would continue to be able to enroll in programs that are at high risk of not providing the students the education they deserve. At least two commenters stated that the Department only addresses its concerns with the annual D/E rates metric but did not provide any justification for rescinding the discretionary D/E rates measure. A few commenters were strongly in favor of retaining sanctions, including the loss of title IV program eligibility, for those programs with failing D/E rates. One of these commenters stressed that taxpayers should not pay for educational programs that “don't work well when there are plenty of programs that do work well,” and that it is the government's job to “provide regulations that put the right incentives in place to protect consumers.” Another commenter writing in favor of retaining an accountability framework inclusive of program sanctions recommended that the Department leave the 2014 Rule in place as currently written. The commenter offered that students enrolled at proprietary institutions and in other GE programs have lower employment and earnings gains than students in similar programs in other sectors and are saddled with greater debt for these high-cost programs that they cannot reasonably be expected to repay. Several commenters pointed to studies that control for student demographics, and still find that students in for-profit GE programs have lower employment and earnings outcomes than students in similar programs in other sectors. Many commenters pointed to a blog post written by Sandy Baum as evidence that the Department mischaracterized research that she and Schwartz published as evidence that the 8 percent D/E rates threshold was an inappropriate or invalid threshold to use in establishing student borrowing limits. Discussion: The Department appreciates support from the many commenters who agreed that the 8 percent threshold lacks sufficient accuracy and validity to serve as a high-stakes standard that determines whether or not a program may continue to participate in title IV programs. The Department continues to believe that our more careful recent review of the Baum and Schwartz paper confirms that the 8 percent D/E rates threshold is not appropriate to use in determining a program's continuing eligibility in title IV programs. The Department appreciates Dr. Baum's confirmation that the Department accurately reported the findings of her 2006 paper, including the recommendation that the 8 percent debt-to-income standard is a mortgage standard and one that “has no particular merit or justification” for use in establishing student borrowing limits. 84 The Department understands that Dr. Baum does not wish her paper to be used to support the Department's decision to rescind the GE regulations; however, the Department has never asserted that Dr. Baum supports our decision. Instead, the Department has pointed out that the source it referenced to justify the 8 percent threshold in 2010 and in 2014 is her paper, which states explicitly that 8 percent “has no particular merit or justification” for establishing student borrowing limits. Therefore, the Department has no empirical basis for the 8 percent threshold and will, therefore, no longer use it to determine title IV program eligibility. The Department also recognizes that in its 2011 GE regulation, it used a different set of thresholds that included 12 percent as the passing rate rather than 8 percent. This further demonstrates the absence of a reasoned methodology for distinguishing between passing and failing programs. 84 Baum, Sandy and Saul Schwartz, “How Much Debt is Too Much? Defining Benchmarks for Manageable Student Debt,” The College Board, 2006, files.eric.ed.gov/fulltext/ED562688.pdf. In the 2014 Rule, the Department failed to provide a sufficient, objective, and reliable basis for the 20 percent threshold [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2019-13703. Public record. Not legal advice.