Spotlight for Career Services Professionals
Spotlight for Recruiting Professionals
June 22, 2011
The final regulation identified as the “gainful employment” rule was made effective by the U.S. Department of Education this past week. The regulations are detailed in a document located at the federal register website.
Although the full explication of the rule is quite voluminous (the document is 437 pages in length), there are three major aspects that need to be highlighted.
First, the rule applies to programs that receive federal funds under Title IV of the Higher Education Act of 1965. These are programs designed to train students directly in skills related to specific job functions in which they will be “gainfully employed.” Most of these programs exist at for-profit colleges but can also be found at many private sector, not-for-profit institutions and public universities.
Second, although the effective date of the regulation is listed as July 1, 2012, one provision goes into effect this July. The provision requires a school to report:
- The placement rate for graduates in the programs that fall under the gainful employment rule.
- The median loan debt incurred by students who completed the program identifying separately the median Title IV loan debt and the median debt from private education funding sources and institutional financing plans.
Third, the rule creates metrics that will be used to determine the eligibility of a program to continue to receive Title IV support. There are three such metrics:
- The program must have a loan-repayment rate of at least 35 percent (this includes all debt, not just Title IV debt).
- The program’s annual loan payment has a debt-to-earnings ratio of 12 percent or less of annual earnings.
- The program’s annual loan payment has a debt-to-earnings ratio of 30 percent or less of discretionary income.
The annual earnings and discretionary income standards will be determined by the Department of Education using data on program graduates collected by the Social Security Administration. A program loses eligibility if both its loan repayment rate and its debt-to-earnings ratios fail to meet the standards in three out of four years.