Education Department delays gainful employment proposal until 2023

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Dive Brief:

  • The US Department of Education pushed back the timeline for publishing its proposal for a revised gainful employment rule to next year, meaning the earliest it could go into effect is mid-2024.
  • The gainful employment rule is intended to ensure students who complete career education programs can find work and pay back their student debt. The Biden administration was originally slated to release its gainful employment proposal in July, but it pushed that date to April 2023 in a regulatory agenda released Tuesday.
  • Representatives of the for-profit sector applauded the delay. They’ve previously criticized the Biden administration’s ideas for a gainful employment rule – which looked at students’ debt levels and how their earnings stack up to high school graduates – arguing that they unfairly target the for-profit sector.

Dive Insight:

Because of the delay, the gainful employment regulation will miss a key deadline of Nov. 1 for the rule to take effect next year. The earliest rule can now take effect is July 1, 2024.

Policy experts warned the delay could allow poorly performing colleges to continue receiving federal funding and harming students.

“Ultimately, this can be devastating for students who enroll in these programs,” said Michael Itzkowitz, a senior fellow at Third Way, a left-leaning think tank. “It is important that the Education Department works on implementing this rule as soon as possible.”

Delaying the rule will also likely push back the timeline for when colleges could face penalties. Previous proposals would require colleges to fail the rule’s standards for two out of three years before they risked losing access to federal student aid.

“The Department might not actually require anything to happen or punish schools or make any changes until 2025, 2026,” said Nathan Arnold, a senior policy advisor at EducationCounsel, a consultancy, and a former Ed Department staff member. “Every additional year that bad schools are allowed to operate without corrective action are thousands of additional students who are left worse-off.”

A spokesman for the Ed Department called the gainful employment rule “a cornerstone of our ambitious regulatory agenda,” in an email Wednesday.

“We look forward to publishing notice of proposed rulemaking in Spring 2023 to produce the best, most durable rule possible to protect students and borrowers,” the spokesperson said.

The administration plans to release a slate of other new rule proposals in June 2022, according to the regulatory agenda. That includes an update to borrower defense to repayment, which is intended to forgive the federal loans of students who were defrauded by their institutions.

The gainful employment rule has had a rocky history. The Obama administration originally created the regulation out of concern that students were enrolling in career education programs that did not lead to jobs with high enough earnings to pay off their loans. Under the rule, colleges whose graduates had too high of a debt-to-earnings ratio could be stripped of their federal financial aid funding.

But that version of the gainful employment regulation was short-lived. The Trump administration repealed the rule in 2019 after delaying key parts from taking effect. Then-Education Secretary Betsy DeVos argued that the rule unfairly singled out for-profit collegeswhich accounted for the majority of schools that failed to meet the rule’s debt-to-earnings threshold.

In March, the Biden administration floated a new version of the rule during negotiated rulemaking, a process during which the Ed Department convenes representatives of different contingents of higher ed to discuss proposed regulatory changes. Under that draft, the Ed Department pitched using two metrics to assess career education programs: a debt-to-earnings ratio and a new measure to compare students’ earnings to those of high school graduates in their states.

The rule would cover programs at for-profit colleges as well as nondegree programs at nonprofit institutions.

Under the proposal, almost 44% of for-profit programs subject to the rule would fail the high school earnings threshold, according to a June analysis conducted by The Institute for College Access & Success, a research and advocacy group. That’s compared to 33% of programs at private nonprofits and 18% of programs at public colleges.

However, the Ed Department failed to reach consensus with negotiators on the regulation, with several representatives opposing the agency’s proposal, including those for community colleges, private nonprofits and for-profits. The Ed Department now has broad power to keep or alter the language it proposed during the negotiated rulemaking process.

The Ed Department spokesperson referred to the March proposal as “our vision for creating a strong Gainful Employment rule” in Wednesday’s email.

Career Education Colleges and Universities, which represents for-profit institutions, praised the delay Tuesday.

“CECU is pleased that the Department of Education is taking the time necessary to reconsider their ill-conceived plans to propose an accountability measure that exempts the vast majority of institutions of higher education,” CECU President Jason Altmire said in a statement.

Nicholas Kent, CECU’s chief policy officer, said the organization met with Ed Department officials after the negotiated rulemaking sessions to discuss its issues with the gainful employment proposal. Kent also contended that the Ed Department did not give negotiators enough time to consider how its proposal would affect the higher education sector.

He argued that the gainful employment rule should apply evenly across sectors, though other policy experts say that the Ed Department does not have the authority to make that change without an alteration to federal law.

“We’re hopeful that a good, solid, fair and equitable accountability framework could last beyond administrations,” Kent said.

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