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On June 15, 2011, the House Committee on Education and the Workforce, chaired by Congressman John Kline (R-MN), approved the Protecting Academic Freedom in Higher Education Act (H.R. 2117) by a bipartisan vote of 27 to 11. H.R. 2117, introduced by the Subcommittee on Higher Education and Workforce Training Chairman Virginia Foxx (R-NC), would repeal the credit hour and state authorization regulations included in the October 29, 2010 final regulations on program integrity. Both sets of regulations would “inject the federal government into areas that have historically been left to the states or institutions of higher education, and could lead to increased regulatory burdens and costs for schools and students.” Congresswoman Foxx described the regulations as “a solution in search of a problem.”
On June 10, 2011, the American Council on Education (ACE) sent a letter to Congresswoman Foxx on behalf of more than 60 higher education associations and accrediting organizations in support of H.R. 2117. The letter stated:
“We support efforts aimed at curbing abuse and bringing greater integrity to the federal student aid programs. However, given the almost total lack of evidence of a problem in the context of credit hour or state authorization, we see no basis for two regulations that so fundamentally alter the relationships between the federal government, states, accreditors and institutions. Ultimately, we believe these regulations invite inappropriate federal interference in campus-based decisions and will limit student access to high-quality education opportunities.”
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On June 2, 2011, House Education and the Workforce Committee Chairman John Kline (R-MN) and Subcommittee on Higher Education and Workforce Training Chairman Virginia Foxx (R-NC) issued a press release condemning the Department of Education’s publication of the gainful employment rules. Chairman Kline said that “at a time when Americans are desperate for jobs and opportunities, it is deeply troubling that the Administration continues to push an initiative that will limit the ability of millions of individuals to gain the skills and training necessary to succeed in the workplace.”
On May 25, 2011, Congressman Kline and Congressman Rob Andrews (D-NJ), along with 27 other Members of Congress, sent a bipartisan letter requesting that a provision to defund gainful employment be included in the Labor, HHS, Education, and Related Agencies Appropriations bill.
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On June 2, 2011, Congressmen Alcee L. Hastings (D-FL), Carolyn McCarthy (D-NY), Donald M. Payne (D-NJ), Edolphus “Ed” Towns (D-NY), Tim Holden (D-PA), and Ted Deutch (D-FL) reacted to the Department of Education’s release of its gainful employment regulations in a press release. According to Congressman Hastings, “[i]t is deeply troubling that an administration supposedly committed to increasing college completion in the United States would propose a regulation that restricts minority access to higher education and limits job opportunities for those who need them most.” Congresswoman Carolyn McCarthy said that “[w]hile improvements have been made to the gainful employment rule, I remain concerned that it could hurt good programs across the country and deny students a choice of educational programs.” Similar sentiments were voiced by the other Democrats.
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On June 2, 2011, Congressmen Danny K. Davis (D- IL), Michael M. Honda (D- CA), Gwen Moore (D-WI ), Maxine Waters (D-CA), Keith Ellison (D-MN), Raul M. Grijalva (D-AZ), Mazie Hirono (D-HI), Ruben Hinojosa (D- TX), John Conyers (D-MI), and Elijah E. Cummings (D-MD) released their press release and “voiced support of the Department of Education for exercising its responsibility to protect students and taxpayers by issuing a rule on Gainful Employment…”
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On June 3, 2011, Senator Mike Enzi (R-WY), Ranking Member on the Senate Health, Education, Labor and Pensions (HELP) Committee, announced in a press release that the Department of Education’s final rule on gainful employment ignores the larger issues affecting the entire postsecondary education sector such as rising student debt and loan defaults. Senator Enzi said that the new rule joins a growing list of burdensome regulations hurting America’s economy. Senator Enzi said that “[t]his entire 436 page rule focuses on the issue of gainful employment, yet this Administration continues to strangle the job creators in this country. The Administration should instead take a closer look at how its burdensome rules and overregulation have hurt our nation’s economy and the millions of unemployed Americans.”
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On June 7, 2011, the Senate Health, Education, Labor and Pensions Committee held a hearing titled “Drowning in Debt: Financial Outcomes of Students at For-Profit Colleges,” chaired by Senator Tom Harkin (D-IA). The theme of the hearing was on the disproportionate use of student loans to finance programs offered by for-profit colleges and the consequences of having these loans for students. In Senator Harkin’s introduction, he detailed the differences in costs between for-profit and non-profit institutions, the management of default rates through the two-year reporting period by for-profit institutions, and the use of private loans with higher than average interest rates.
During the first panel of witnesses, Sandy Baum, Independent Higher Education Analyst and Consultant, suggested that students need better information to make more informed choices. Ms. Baum also stated that the “fiduciary duty for the public companies conflicts with being an advocate for the student.” Wade Henderson, President and CEP of the Leadership Conference on Civil and Human Rights, and Eric Schmitt, a former student of a non-profit college, both supported the new gainful employment rules. The second panel was to have been Secretary of Education Arne Duncan, but due to a back injury, he was replaced by Under Secretary Martha Kanter, who stated that the new rules would provide students with better information and better disclosures to support their decisions. She also described the new guidance regarding trial periods, free sessions that provide students with brief “conditional” experience at a school before making a financial commitment and becoming a regular student (See DCL GEN-11-12). Under Secretary Kanter also announced a new pilot project, which would give institutions new tools to lower student debt and, at the same time, measure access and success. The pilot program would allow some colleges to limit the use of federal student loans by their students. An article in the June 7, 2011 The Chronicle of Higher Education suggested that testing alternative ways of administering student aid could provide relief to for-profit institutions that were in danger of violating the 90/10 rule. (See Press Release of June 7, 2011.)
At the conclusion of the hearing, Senator Harkin said that although legislation directed at for-profit institutions has a slim chance of passing, he believed that such legislation would be the “ultimate remedy to abuses in the industry.”
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On May 31, 2011, Senator Mike Enzi (R-WY), Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, sent a letter to the Chairman of the HELP Committee, Tom Harkin (D-IA), stating that the Committee Republicans would not be attending the June 7, 2011 hearing, which is “motivated in part by a desire to embarrass the institutions you were unable to persuade to participate in previous hearings.”
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On May 24, 2011, Congressman Edophus Towns (D-NY) sent a letter to House Oversight and Government Reform Chairman Darrell Issa (R-CA) and Ranking Member Elijah Cummings (D-MD) requesting an investigation into the process by which senior officials at the Department of Education drafted the proposed gainful employment regulations. Congressman Towns said that “DoE has a special obligation to ensure that its rulemaking regulatory process—where by unelected federal officials are empowered, in effect, to make policy into law—is even-handed, open-minded and transparent in all respects at all times.”
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On June 13, 2011, the final regulations were published in the Federal Register, and are available online. The final gainful employment regulations detail metrics certain programs must meet to show that they are preparing students for gainful employment in a recognized occupation and remain in good standing to be eligible for federal funds. The regulations stipulate that programs would need to meet one of the following three metrics:
- Show that at least 35 percent of former students are in repayment status on their student loans;
- Require that the estimated annual loan payment of a typical graduate does not exceed 30 percent of his or her discretionary income; or
- Require that the estimated annual loan payment of a typical graduate does not exceed 12 percent of his or her annual earnings.
The final regulations also dictate the type of information schools must provide students if they fail to meet the metrics. The first time a program fails to meet the tests, it must disclose to students among other things why the measurement was missed and how the issue will be addressed. After missing the tests for the second time, programs must inform students among other things that their debts may be unaffordable after graduation, that their program is at risk of losing eligibility to participate in Federal student aid programs, and provide information about the students’ existing transfer options. After a third failure in four years, the program loses eligibility to participate in Federal student aid programs and cannot reapply for eligibility for at least three years. The first year a program could become ineligible would be 2015 based on its performance in FY 2012 to FY 2014.
A press release regarding the new regulations was released on June 2, 2011.
Reactions to the final gainful employment regulations have been mixed. Congressman Howard “Buck” McKeon (R-CA) stated: “I have serious concerns with the Administration’s decision to burden many of the colleges aimed at aligning training with workforce needs.” Senate HELP Committee Chair Tom Harkin (D-IA) stated that the new rules are a “modest and [an] important first step.”
The June Washington Insights Extra: Final Regulations on Gainful Employment, a more detailed summary of the final gainful employment regulations issued June 13, 2011, is available here.
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On May 20, 2011, the Department of Education released draft FY 2009 cohort default rates. The draft FY 2009 national cohort default rate is 8.9 percent, which is an increase from the national FY 2008 official cohort default rate of 7.0 percent and the FY 2007 official cohort rate of 6.7 percent.
The rate breakdown by sector is as follows:
| |
Public |
Private |
Proprietary |
Foreign |
FY2008 |
6.0% |
4.0% |
11.6% |
2.2% |
| FY2009 (unofficial) |
7.3% |
4.7% |
15.2% |
5.5% |
The electronic announcement from William Taggart, Chief Operating Officer of Federal Student Aid, said that each February, the Department releases draft cohort default rates for each institution, and these rates are not made public. Schools have the opportunity to review and challenge the calculations. The electronic announcement also provided comparisons between the draft FY 2009 cohort default rates and the prior two official cohort default rates (FY 2007 and FY 2008) and comparisons as well as comparisons between the draft FY 2009 cohort default rates and the prior two official Direct Loan cohort default rates and the prior two official FFELP cohort default rates.
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On May 26, 2011, the White House unveiled further details on its government-wide review of current regulations, releasing 30 individual agency plans designed to reduce regulatory burdens on individuals, small businesses, and state and local governments, while maintaining critical services. President Obama issued Executive Order 13563 in late January ordering a government-wide review of current regulations in an effort to remove outdated regulations that stifle economic growth and job creation. The Department of Education has released its preliminary plan for a retrospective analysis of existing regulations. ED stated in its preliminary plan that it will develop a policy, method, and schedule for identifying certain significant rules that may be outmoded, ineffective, insufficient, or excessively burdensome. The plan also noted that it will look at the FFELP regulations to determine what rules are no longer needed and what changes are needed.
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On May 26, 2011, the Department of Education’s National Center for Education Statistics (NCES) released The Condition of Education 2011. The report concluded that enrollment in undergraduate enrollment has increased in the last 10 years by nearly 5 million and will continue to grow. However, the report noted that enrollment has been growing differentially, with numbers quadrupling in the last decade at private for-profit postsecondary institutions. The report concluded that there has been a shift in postsecondary education. In 2000, private for-profit institutions represented only 3 percent of undergraduate enrollment and 10 years later, private for-profit institutions represent 9 percent of undergraduate enrollment.
The findings include the following:
- From 2000 to 2009, undergraduate enrollment in postsecondary institutions increased from 13 million to 18 million students. Of the increase, 27 percent or 1.2 million students occurred at private for-profit institutions;
- About 30 percent of full-time students age 35 and over attended private for-profit four-year institutions in 2009 compared with 3 percent of full-time students under the age of 25;
- Private for-profit four-year institutions had the highest rate of distance education course-taking (30 percent) among all institutions. Private for-profit four-year institutions also had the highest rate of students taking their entire program through distance education (19 percent); and
- In 2008-2009, nearly half (49 percent) of first-time, full-time students at degree-granting institutions had a student loan with an average loan amount of $7,000.
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A report, titled, The Bottom Line: Ensuring That Students and Parents Understand the Net Price of College, conducted by the Advisory Committee on Student Financial Assistance, was released in June 2011 to advise the Department of Education on the implementation of the Net Price Calculators. In accordance with the Higher Education Opportunity Act of 2008 (HEOA), each institution is required to provide a Net Price Calculator on its website by October 29, 2011, using the Department’s template as guidance.
The report states that “[a]lthough all institutions are required to include caveats and disclaimers as output elements, the flexibility that allows net price calculators to be customized and accurate could potentially make their comparison an extremely complex process for students and parents.” The report found that there were some inaccurate calculations and discrepancies in how institutions choose to display out-of-pocket costs, which shows the amount of money the family can expect to spend, earn, or borrow for the student to attend the institution. While some institutions produced one figure, others produced a range. Expert panelists advising the Advisory Committee found that “closer alignment of components, definitions, and output appears possible,” though not through tighter regulations.
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