Department on Track to Implement Gainful Employment Regulations; New Schedule Provides Additional Time to Consider Extensive Public Input

The Department of Education today announced that it is on schedule to implement new regulations of the for-profit education sector dealing with gainful employment and 13 other issues to protect students and taxpayers. The regulations will be released in two phases.

Final regulations to ensure program integrity in federal financial aid programs are scheduled for publication on or around November 1, 2010, and will go into effect on July 1, 2011. These regulations will address sections of our gainful employment proposal as well as 13 other issues in an effort to protect students from aggressive or misleading recruiting practices and to provide consumers with better information about the effectiveness of career college and training programs.

The Department plans to publish final regulations in early 2011 on the remaining portions of our gainful employment proposals dealing with a program's eligibility to receive federal student aid. These regulations were originally scheduled to be published Nov. 1, 2010. We are taking additional time to consider the comments we received and to host several meetings and public hearings in the coming weeks. These meetings will allow interested parties to clarify the comments they've submitted and respond to questions from Department officials while allowing for the regulations to go into effect on or around July 1, 2012, as planned.

Education Secretary Arne Duncan said, "Let me be clear: we're moving forward on gainful employment regulations. While a majority of career colleges play a vital role in training our workforce to be globally competitive, some bad actors are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use."

"These schools and their investors benefit from billions of dollars in taxpayers subsidies, and in return, taxpayers have a right to know that all of these programs are providing solid preparation for a job," Duncan continued. "We want to be as thoughtful as possible as we move forward. We're taking additional time to analyze all the feedback we've received to help us strike the right balance between holding these programs accountable to protect students and taxpayers from abuse and making sure we keep whole those programs that are doing a good job."

Additional information on the Department's planned public sessions will be released in the coming weeks.

Below is a summary of the Department's proposed regulations, as published in the notice of proposed rulemaking, to ensure program integrity in higher education. These proposed regulations are on schedule to be published on or around November 1, 2010, and are subject to modification prior to publication.

Holding Programs Accountable for Preparing Students for Gainful Employment

• Graduation Rate and Job Placement Disclosures: As proposed, this rule would require proprietary institutions of higher education and postsecondary vocational institutions to provide prospective students with each eligible program's graduation and job placement rates, and that colleges provide the Department with information that will allow determination of student debt levels and incomes after program completion.

• Approval of Additional Programs: As proposed, this rule would require institutions to provide: 5 year enrollment projections; documentation from employers not affiliated with the institution that the program's curriculum aligns with recognized occupations at those employers' businesses; and that there are projected job vacancies or expected demand for those occupations at those businesses before new programs can become eligible to participate in federal student aid.

Ensuring that only eligible students receive federal funds. Generally students are eligible for aid only if they have a high school diploma or pass an "ability to benefit" test, and only if their academic standing is satisfactory. As proposed, the regulations would make the following clarifications:

• High School Diploma: The proliferation of high school diploma mills has called the validity of some secondary school credentials into question. As proposed, this rule would require institutions to develop and follow procedures to evaluate the validity of a student's high school diploma if the institution or the Secretary has reason to believe that the diploma is not valid or was not obtained from an entity that provides secondary school education.

• College Credits: As proposed, this rule would extend eligibility for federal student aid to students without high school diplomas after they successfully complete six credits of college work. This implements a provision that was included in the Higher Education Opportunity Act of 2008.

• Ability to Benefit: The Department is responsible for approving test materials developed by testing companies. The Government Accountability Office recommended a number of ways that the Department could improve its oversight of how ATB tests are approved and administered. As proposed, this rule would follow up on those recommendations.

• Satisfactory Academic Progress: Every institution is required to have satisfactory academic progress policies. Audits and institutional program reviews have uncovered policies that meet the current regulatory standards but permit students to receive funds even though they may not be meeting the institution's progress standards. As proposed, this rule would require a structured and consistent approach to evaluating a student's academic work, while continuing to provide flexibility to institutions in establishing their policies.

• Verification: Each year, a number of students are required to confirm the information on their Free Application for Federal Student Aid (FAFSA). Due to changes in the law and a new data retrieval process with the Internal Revenue Service, as proposed, this rule would, in many cases, reduce the amount of information students would have to provide to institutions.

Protecting consumers from misleading or overly aggressive recruiting practices, and clarifying State oversight responsibilities. As proposed, the regulations will strengthen three current rules that are designed to protect students and taxpayers:

• Misrepresentation: During public hearings and negotiated rulemaking sessions, the Department heard numerous complaints from students enrolled in programs where they felt misled on what was and was not being offered, the way programs could be paid for, and their job prospects upon completion. To protect consumers, as proposed, this rule would strengthen the Department's authority to take action against institutions engaging in deceptive advertising, marketing, and sales practices.

• Incentive Compensation: The Department heard reports of aggressive recruiting practices resulting in students being encouraged to take out loans they could not afford, or enroll in programs where they were either unqualified or could not succeed. Though current laws prohibit schools from compensating admissions recruiters based solely on success in securing student enrollment, regulations known as "safe harbors" allowed this practice to go on under certain circumstances, which we believe violate the spirit of the law. As proposed, this rule would remove all the "safe harbor" provisions.

• State Authorization: State authorization is required by the Higher Education Act for a postsecondary institution to participate in federal student aid, and other federal funding programs. Some states have failed to establish how they approve and monitor postsecondary programs. As proposed, this rule would clarify this important State responsibility.

Clarifying the courses that are eligible for federal aid, and the amount of aid that is appropriate.

• Credit Hour: Credit hours are the metric used by the Department to measure eligibility for federal funding. Currently there is no standard definition for a credit hour, which has led to reports of institutions awarding more credits (and drawing down more federal funds) than are deserved. To address this issue, the regulations as proposed would define a credit hour and establish procedures for accrediting agencies to determine whether an institution's assignment of a credit hour is acceptable. Recognizing that "seat time" is not the goal, the proposal allows for equivalent measurement of learning outcomes.

• Written Agreements: A postsecondary institution is allowed to deliver a portion of another institution's educational program through a written arrangement. Problems have surfaced when the two institutions are controlled by the same entity or do not meet certain participation requirements. As proposed, this rule would limit the amount of a program that can be provided by a school in an arrangement and prohibit arrangements between ineligible institutions that have had their Federal student aid participation revoked.

• Retaking Coursework: Currently students who repeat coursework cannot have the course they repeat count towards the calculation of a full-time course load. As proposed, this rule would expand the definition of full-time student by allowing such courses to count if the student is in a program that registers by the term or semester.

• Determining When a Student Has Withdrawn: Currently, loopholes complicate the measure of how much federal funding must be paid back if a student drops out of a program. As proposed, this rule would eliminate loopholes and clarify the calculation of returning federal funds to the Department by defining when a student is considered to have withdrawn from a program. It will also clarify the circumstances under which an institution is required to take attendance for the purpose of calculating a return of federal funds.

• Disbursing Federal Student Aid Funds: Under current rules, many students are not receiving their Federal student aid funds in enough time to obtain their books and before the start of school. As proposed, this rule would ensure that the neediest recipients could acquire books and supplies by the seventh day of their payment period.