Key Takeaways

  • Starting January 1, 2017, GE Program Disclosures will require an additional piece of information: the Programmatic Cohort Default Rate (pCDR)
  • Earnings data will be created by the DoE using SSA data and made available to institutions sometime mid-2016
  • Leaders should begin assessing possibilities in 2015 in anticipation of possible sanction activity

The Department of Education published a Notice of Proposed Rulemaking on March 25, 2014. The proposed rule applies to all Gainful Employment (GE) programs, which include non-degree programs at public and private non-profit institutions, and all programs offered by for-profit institutions. The proposed rule was similar to the draft language last discussed at the third negotiated rulemaking committee session in December 2013.

The draft rule established two “accountability metrics” that GE programs must satisfy in order to remain eligible for Title IV federal student aid, specifically debt to earnings (DTE) ratios and programmatic cohort default rate (pCDR) thresholds. Unlike the accountability metrics in the Department of Education’s previous GE rule, the accountability metrics under the Department of Education’s draft proposal operate independently from one another.

Consequently, in order for a GE program to maintain its Title IV eligibility under the proposed rule, it must satisfy both the DTE and pCDR requirements. The proposed rule also required institutions to provide certifications and disclosures regarding a GE program’s satisfaction of programmatic accreditation and state licensure requirements. Additionally, the proposed rule includes requirements for the reporting of student and program data by institutions to the Department of Education, and expands the disclosure requirements that have been in effect since July 1, 2011. The rule further made other conforming and technical revisions to the Title IV program participation agreement and related regulations. The rule closed for public comment on May 25, 2014, and the Department of Education issued a Final Rule on October 31, 2014.

The most significant change reflected by the Final Rule is the application of a single “accountability metric,” rather than two metrics as in the earlier proposed rule. The Final Rule abandons the previously proposed Programmatic Cohort Default Rate (“pCDR”) metric for purposes of a GE program’s Title IV student aid eligibility, instead adding the pCDR to the multitude of required GE program disclosures, and instead will assess continued eligibility of GE programs solely by their performance against the following Debt-to-Earnings (“DTE”) measures:

  • Pass: Programs whose graduates have annual loan payments less than 8% of total earnings, OR less than 20% of discretionary earnings.
  • “Zone”: Programs that do not pass and whose graduates have annual loan payments between 8% and 12% of total earnings, OR between 20% and 30% of discretionary earnings.
  • Fail: Programs whose graduates have annual loan payments greater than 12% of total earnings AND greater than 30% of discretionary earnings.
  • Ineligible: Programs that fail in 2 out of any 3 consecutive years OR have a combination of zone and failing DTE rates for four consecutive years for which DTE rates are calculated.

Earnings are calculated by the Department of Education using Social Security Administration data. Earnings information is then aggregated and made available to institutions. The Department has stated that they will receive SSA earnings data in early 2016 and will release to institutions by mid-2016. Without access to this data institutions cannot predict the impact to individual programs.

If a program fails or is in the zone for draft DTE rates during the transition period, the Department will calculate transitional draft DTE rates using the median loan debt of the students who completed the program during the most recently completed award year (2014-2015) and the earnings used to calculate the draft DTE rates. The final DTE rate for purposes of any sanctions will be the lower of the draft or transitional DTE rate. The transition period is 5 years for programs with durations of 1 year or less, 6 years for programs between 1 and 2 years in length, and 7 years for programs of more than 2 years.

If a GE program could become ineligible in the subsequent award year based on its DTE metrics, the institution is required to inform students and prospective students that the program could lose Title IV eligibility. The warning must state that the program has not passed standards established by the Department, based on amounts students borrow for enrollment in the program and their reported earnings. The warning must also inform students that if the program does not pass the standards in the future, students who are then enrolled may not be able to use federal student grants or loans to pay for the program. The Final Rule also requires institutions to provide certifications regarding a GE program’s satisfaction of programmatic accreditation and state licensure requirements. The final rule expands the currently required disclosures for GE programs.

Beginning January 1, 2017, institutions will be required to provide these disclosures for each GE program through an updated template provided by the Department.

The Final Rule becomes effective July 1, 2015.

Obviously general disclaimer for all institutions: The continuing eligibility of an institutions educational programs for Title IV funding could be at risk due to factors beyond he institution’s control, such as changes in the actual or deemed income level of graduates, changes in student borrowing levels, increases in interest rates, changes in the federal poverty income level relevant for calculating discretionary income, changes in the percentage of our former students who are current in repayment of their student loans, and other factors.