[Federal Register Volume 79, Number 57 (Tuesday, March 25, 2014)]
[Proposed Rules]
[Pages 16426-16643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-06000]
[[Page 16425]]
Vol. 79
Tuesday,
No. 57
March 25, 2014
Part II
Department of Education
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34 CFR Parts 600 and 668
Program Integrity: Gainful Employment; Proposed Rule
Federal Register / Vol. 79 , No. 57 / Tuesday, March 25, 2014 /
Proposed Rules
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DEPARTMENT OF EDUCATION
34 CFR Parts 600 and 668
[Docket ID ED-2014-OPE-0039]
RIN 1840-AD15
Program Integrity: Gainful Employment
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Secretary proposes to amend the regulations on
institutional eligibility under the Higher Education Act of 1965, as
amended (HEA), and the Student Assistance General Provisions to
establish measures for determining whether certain postsecondary
educational programs prepare students for gainful employment in a
recognized occupation, and the conditions under which these educational
programs remain eligible under the Federal Student Aid programs
authorized under title IV of the HEA (title IV, HEA programs).
DATES: We must receive your comments on or before May 27, 2014.
ADDRESSES: Submit your comments through the Federal eRulemaking Portal
or via postal mail, commercial delivery, or hand delivery. We will not
accept comments by fax or by email or those submitted after the comment
period. To ensure that we do not receive duplicate copies, please
submit your comments only once. In addition, please include the Docket
ID at the top of your comments.
Federal eRulemaking Portal: Go to www.regulations.gov to
submit your comments electronically. Information on using
Regulations.gov, including instructions for accessing agency documents,
submitting comments, and viewing the docket, is available on the site
under ``Are you new to the site?''
Postal Mail, Commercial Delivery, or Hand Delivery: The
Department strongly encourages commenters to submit their comments
electronically. However, if you mail or deliver your comments about the
proposed regulations, address them to Ashley Higgins, U.S. Department
of Education, 1990 K Street NW., room 8037, Washington, DC 20006-8502.
Privacy Note: The Department's policy is to make all comments
received from members of the public available for public viewing in
their entirety on the Federal eRulemaking Portal at
www.regulations.gov. Therefore, commenters should be careful to include
in their comments only information that they wish to make publicly
available.
FOR FURTHER INFORMATION CONTACT: John Kolotos, U.S. Department of
Education, 1990 K Street NW., Room 8018, Washington, DC 20006-8502.
Telephone: (202) 502-7762 or by email:
[email protected].
If you use a telecommunications device for the deaf (TDD) or a text
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.
SUPPLEMENTARY INFORMATION:
Executive Summary:
Purpose of This Regulatory Action: As discussed in more detail
under ``Sec. 668.401 Scope and purpose,'' the proposed regulations are
intended to address growing concerns about educational programs that,
as a condition of eligibility for title IV, HEA program funds, are
required by statute to provide training that prepares students for
gainful employment in a recognized occupation (GE programs), but
instead are leaving students with unaffordable levels of loan debt in
relation to their earnings, or leading to default. GE programs include
nearly all educational programs at for-profit institutions of higher
education, as well as non-degree programs at public and private non-
profit institutions such as community colleges.
Specifically, the Department is concerned that a number of GE
programs: (1) Do not train students in the skills they need to obtain
and maintain jobs in the occupation for which the program purports to
provide training, (2) provide training for an occupation for which low
wages do not justify program costs, and (3) are experiencing a high
number of withdrawals or ``churn'' because relatively large numbers of
students enroll but few, or none, complete the program, which can often
lead to default. We are also concerned about the growing evidence, from
Federal and State investigations and qui tam lawsuits, that many GE
programs are engaging in aggressive and deceptive marketing and
recruiting practices. As a result of these practices, prospective
students and their families are potentially being pressured and misled
into critical decisions regarding their educational investments that
are against their interests.
For these reasons, through this regulatory action, the Department
seeks to establish: (1) An accountability framework for GE programs
that will define what it means to prepare students for gainful
employment in a recognized occupation by establishing measures by which
the Department would evaluate whether a GE program remains eligible for
title IV, HEA program funds, and (2) a transparency framework that
would increase the quality and availability of information about the
outcomes of students enrolled in GE programs. Better outcomes
information would benefit: students, prospective students, and their
families, as they make critical decisions about their educational
investments; the public, taxpayers, and the Government, by providing
information that would enable better protection of the Federal
investment in these programs; and institutions, by providing them with
meaningful information that they could use to help improve student
outcomes in their programs.
The accountability framework is designed to define what it means to
prepare students for gainful employment by establishing measures that
would assess whether programs provide quality education and training to
their students that lead to earnings that will allow students to pay
back their student loan debts. For programs that perform poorly under
the measures, institutions would need to make improvements in the
initial years of the rule, or lose program eligibility for title IV,
HEA program funds. For programs that are not among the very worst, but
nonetheless do not have outcomes that meet minimum acceptable levels of
performance, institutions would be required to make improvements after
the regulations become effective to avoid losing eligibility, but would
be given a relatively greater amount of time to do so.
The transparency framework is designed to establish reporting and
disclosure requirements that would increase the transparency of student
outcomes of GE programs so that information is disseminated to
students, prospective students, and their families that is accurate and
comparable and could help them make better informed decisions about
where to invest their time and money in pursuit of a postsecondary
degree or credential. Further, this information would provide the
public, taxpayers, and the Government with relevant information to
better safeguard the Federal investment in these programs. Finally, the
transparency framework would provide institutions with meaningful
information that they could use to improve student outcomes in these
programs.
Authority for This Regulatory Action:
To accomplish these two primary goals of accountability and
transparency, the Secretary proposes to amend parts 600 and 668 of
title 34 of the Code of Federal Regulations (CFR).
[[Page 16427]]
The Department's authority for this regulatory action is derived
primarily from three sources, which are discussed in more detail in
``Sec. 668.401 Scope and purpose'' and ``Sec. 668.403 Gainful
employment framework.'' First, sections 101 and 102 of the HEA define
an eligible institution, as pertinent here, as one that provides an
``eligible program of training to prepare students for gainful
employment in a recognized occupation.'' 20 U.S.C. 1001(b)(1),
1002(b)(1)(A)(i), (c)(1)(A). Section 481(b) of the HEA defines
``eligible program'' to include a program that ``provides a program of
training to prepare students for gainful employment in a recognized
profession.'' 20 U.S.C. 1088(b). Briefly, this authority establishes
the requirement that the educational programs that are eligible for
title IV, HEA program funds under these sections must provide training
to prepare students for gainful employment in a recognized occupation--
the requirement that the Department seeks to define through the
proposed regulations.
Second, section 410 of the General Education Provisions Act
provides the Secretary with authority to make, promulgate, issue,
rescind, and amend rules and regulations governing the manner of
operations of, and governing the applicable programs administered by,
the Department. 20 U.S.C. 1221e-3. Furthermore, under section 414 of
the Department of Education Organization Act, the Secretary is
authorized to prescribe such rules and regulations as the Secretary
determines necessary or appropriate to administer and manage the
functions of the Secretary or the Department. 20 U.S.C. 3474. These
authorities thus include promulgating regulations that, in this case:
set measures to determine the eligibility of GE programs for title IV,
HEA program funds; require institutions to report information about the
program to the Secretary; and require the institution to disclose
information about the program to students, prospective students, and
their families, the public, taxpayers, and the Government, and
institutions.
As also explained in more detail in ``Sec. 668.401 Scope and
purpose,'' the Department's authority for the transparency framework is
further supported by section 431 of the Department of Education
Organization Act, which provides authority to the Secretary, in
relevant part, to inform the public regarding federally supported
education programs; and collect data and information on applicable
programs for the purpose of obtaining objective measurements of the
effectiveness of such programs in achieving the intended purposes of
such programs. 20 U.S.C. 1231a.
The Department's authority for the proposed regulations is also
informed by the legislative history of these provisions, as discussed
in ``Sec. 668.403 Gainful employment framework,'' as well as the
rulings of the U.S. District Court for the District of Columbia in
Association of Private Sector Colleges and Universities v. Duncan, 870
F.Supp.2d 133 (D.D.C. 2012), and 930 F.Supp.2d 210 (D.D.C. 2013).
Notably, the court specifically considered the Department's authority
to define what it means to prepare students for gainful employment and
to require institutions to report and disclose relevant information
about their GE programs.
Summary of the Major Provisions of This Regulatory Action:
As discussed under ``Purpose of This Regulatory Action,'' the
proposed regulations would establish an accountability framework and a
transparency framework.
The accountability framework would, among other things, create a
certification process by which an institution would establish a GE
program's eligibility for title IV, HEA program funds, as well as a
process by which the Department would determine whether a program
remains eligible. First, an institution would establish the eligibility
of a GE program by certifying that the program is included in the
institution's accreditation and satisfies any applicable State or
Federal program-level accrediting and licensing requirements for the
occupations for which the program purports to prepare students to
enter. This requirement would serve as a baseline protection against
the harm that students could experience by enrolling in programs that
do not meet all State or Federal accrediting standards and licensing
requirements necessary to secure the jobs associated with the training.
Under the accountability framework, we also propose two
complementary yet independent measures--the debt-to-earnings (D/E)
rates measure and the program cohort default rate (pCDR) measure--that
would be used to determine whether a GE program remains eligible for
title IV, HEA program funds.
The D/E rates measure would evaluate the amount of debt students
who completed a GE program incurred to attend that program in
comparison to those same students' discretionary and annual earnings
after completing the program. The proposed regulations would establish
the standards by which the program would be assessed to determine, for
each year rates are calculated, whether it passes or fails the D/E
rates measure or is ``in the zone.'' Under the proposed regulations, to
pass the D/E rates measure, the GE program must have a discretionary
income rate less than or equal to 20 percent or an annual earnings rate
less than or equal to 8 percent. The proposed regulations would also
establish a zone for GE programs that have a discretionary income rate
between 20 percent and 30 percent or an annual earnings rate between 8
percent and 12 percent. GE programs with a discretionary income rate
over 30 percent and an annual earnings rate over 12 percent would fail
the D/E rates measure. Under the proposed regulations, a GE program
would become ineligible for title IV, HEA program funds, if it fails
the D/E rates measure for two out of three consecutive years, or has a
combination of D/E rates measures that are in the zone or failing for
four consecutive years. We propose the D/E rates measure and the
thresholds, as explained in more detail in ``Sec. 668.403 Gainful
employment framework,'' to assess whether a GE program has indeed
prepared students to earn enough to repay their loans, or was
sufficiently low cost, such that students are not unduly burdened with
debt, and to better safeguard the Federal investment in the program.
In addition to the D/E rates measure, the proposed regulations
would establish a pCDR measure. The pCDR measure would evaluate the
default rate of former students enrolled in a GE program, regardless of
whether they completed the program. Under the proposed regulations, a
program would lose eligibility if its GE program has a pCDR of 30
percent or greater for three consecutive fiscal years. We propose the
pCDR measure and the thresholds, as explained in more detail in ``Sec.
668.403 Gainful employment framework,'' to identify those programs that
may pass, or may not be evaluated by, the D/E rates measure, but whose
students incur debt they cannot repay and ultimately default on their
loans. Unlike the D/E rates measure, the pCDR measure would include
students who did not complete their programs and therefore could
disqualify programs with low completion rates that, regardless of the
earnings of students who complete the program, leave a significant
number of students without credentials and with unmanageable debt.
The proposed regulations would also establish procedures for the
calculation of the D/E rates and pCDR measures, as well as a process
for challenging the information used to calculate the D/E rates and
pCDR measures and appealing
[[Page 16428]]
those determinations. For the D/E rates measure, the proposed
regulations also would establish a transition period for the first four
years of the rule to allow institutions an opportunity to pass the D/E
rates measure by taking immediate steps to improve otherwise failing GE
programs by reducing the loan debt of currently enrolled students.
For a GE program that could become ineligible in an immediately
succeeding year, based on the program's performance in prior years, the
proposed regulations would require the GE program to warn students and
prospective students of the potential loss of eligibility for title IV,
HEA program funds, as well as the implications of such loss.
Specifically, institutions would be required to provide written
warnings to students that describe the options available to continue
their education at the institution, or at another institution, in the
event that the program loses its eligibility and whether the students
will be able to receive a refund of tuition and fees. The proposed
regulations also provide that, for a GE program that loses eligibility
for title IV, HEA program funds, as well as any failing or zone program
that is discontinued by the institution, the loss of eligibility is for
three calendar years.
Through these provisions, we intend to: Ensure that, in the initial
few years after the proposed regulations become effective, institutions
would have a meaningful opportunity and reasonable time to improve
their programs and to ensure that those improvements would be reflected
in the D/E rates; protect students and prospective students and ensure
that they are informed about programs that are failing or could
potentially lose eligibility; and provide institutions and other
interested parties with clarity as to how the calculations would be
made, the opportunities institutions would have to ensure the
information used in the calculations is accurate, and the consequences
of failing a measure and losing eligibility.
In addition to the accountability framework, the proposed
regulations would establish a transparency framework. First, the
proposed regulations would establish reporting requirements, under
which institutions would report information related to their GE
programs to the Secretary. The reporting requirements would both
facilitate the Department's evaluation of the GE programs under the
accountability framework, as well as support the goals of the
transparency framework. Second, the proposed regulations would require
institutions to disclose relevant information and data about the GE
programs through a disclosure template developed by the Secretary. The
proposed disclosure requirements would help ensure students,
prospective students, and their families, the public, taxpayers, and
the Government, and institutions have access to meaningful and
comparable information related to student outcomes and overall
performance of GE programs.
Costs and Benefits:
There would be two primary benefits of the proposed regulations.
Because the proposed regulations would establish an accountability
framework that assesses program performance we would expect students,
prospective students, taxpayers, and the Federal Government to receive
a better return on money spent on education. The proposed regulations
would also establish a transparency framework designed to improve
market information that would assist students, prospective students,
and their families in making critical decisions about their educational
investment and in understanding potential outcomes of that investment.
The public, taxpayers, the Government, and institutions would also gain
relevant and useful information about GE programs, allowing them to
better evaluate their investment in these programs. Institutions would
largely bear the costs of the proposed regulations, which would fall
into two categories: paperwork costs associated with institutions
complying with the proposed regulations, and other costs that could be
incurred by institutions if they attempt to improve their GE programs
and due to changing student enrollment. In addition, if programs that
provided valuable education to students shut down as a result of the
proposed regulations, then the foregone value of that service would be
another cost to society. See ``Discussion of Costs, Benefits, and
Transfers'' in the regulatory impact analysis in Appendix A to this
document for a more complete discussion of the costs and benefits of
the proposed regulations.
Invitation to Comment: We invite you to submit comments regarding
the proposed regulations. To ensure that your comments have maximum
effect in developing the final regulations, we urge you to identify
clearly the specific section or sections of the proposed regulations
that each of your comments addresses, and provide relevant information
and data whenever possible, even when there is no specific solicitation
of data and other supporting materials in the request for comment.
Please do not submit comments outside the scope of the specific
proposals in this notice of proposed rulemaking. We will not respond to
comments that do not specifically relate to the proposed regulations.
See ``ADDRESSES'' for instructions on how to submit comments.
We invite you to assist us in complying with the specific
requirements of Executive Orders 12866 and 13563 and their overall
requirement of reducing regulatory burden that might result from the
proposed regulations. Please let us know of any further ways we could
reduce potential costs or increase potential benefits while preserving
the effective and efficient administration of the Department's programs
and activities.
During and after the comment period, you may inspect all public
comments about the proposed regulations by accessing Regulations.gov.
You may also inspect the comments in person in room 8037, 1990 K Street
NW., Washington, DC, between 8:30 a.m. and 4:00 p.m., Washington, DC
time, Monday through Friday of each week except Federal holidays. If
you want to schedule time to inspect comments, please contact the
person listed under FOR FURTHER INFORMATION CONTACT.
Assistance to Individuals with Disabilities in Reviewing the
Rulemaking Record: On request, we will provide an appropriate
accommodation or auxiliary aid to an individual with a disability who
needs assistance to review the comments or other documents in the
public rulemaking record for the proposed regulations. If you want to
schedule an appointment for this type of accommodation or auxiliary
aid, please contact the person listed under FOR FURTHER INFORMATION
CONTACT.
Background of the Proposed Regulations, Public Participation, and
Negotiated Rulemaking
Background
The Secretary proposes to amend parts 600 and 668 of title 34 of
the CFR. The regulations in 34 CFR part 600 and 668 pertain to
institutional eligibility under the HEA and participation in title IV,
HEA programs. We propose these amendments to establish measures for
determining whether certain postsecondary educational programs prepare
students for gainful employment in a recognized occupation and the
conditions under which these educational programs remain eligible under
the title IV, HEA programs.
Negotiated Rulemaking Requirement
Section 492 of the HEA, 20 U.S.C. 1098a, requires the Secretary,
before
[[Page 16429]]
publishing any proposed regulations for programs authorized by title IV
of the HEA, to obtain public involvement in the development of proposed
regulations. After obtaining advice and recommendations from the
public, including individuals and representatives of groups involved in
the title IV, HEA programs, the Secretary must subject the proposed
regulations to a negotiated rulemaking process. If negotiators reach
consensus on the proposed regulations, the Department agrees to publish
without alteration a defined group of regulations on which the
negotiators reached consensus unless the Secretary reopens the process
or provides a written explanation to the participants stating why the
Secretary has decided to depart from the agreement reached during
negotiations. Further information on the negotiated rulemaking process
can be found at: http://www2.ed.gov/policy/highered/reg/hearulemaking/hea08/neg-reg-faq.html.
Prior Negotiated Rulemaking
Between November 2009 and January 2010, the Department held three
negotiated rulemaking sessions aimed at improving program integrity in
the title IV, HEA programs, and that discussed gainful employment and
13 other program integrity topics. As a result of those discussions,
during which consensus was not reached on issues related to gainful
employment, the Department published three notices of proposed
rulemaking (NPRM) related to the topic of gainful employment. Notably,
those proposed regulations included two debt measures to determine
whether a program provides training that prepares students for gainful
employment in a recognized occupation. One measure was based on the
Federal student loan repayment rates of students enrolled in the
program, and the other measure was based on the debt-to-earnings ratios
of students who completed the program.
On October 29, 2010, and June 13, 2011, the Department published
final regulations on gainful employment: ``Program Integrity:
Reporting/Disclosure Requirements for GE Programs''; ``Program
Integrity: Gainful Employment--New Programs''; and ``Gainful
Employment: Gainful Employment--Debt Measures'' (75 FR 66832; 75 FR
66665; 76 FR 34385). In this document, we refer to those final
regulations, when discussing them collectively, as the ``2011 Final
Rules.'' We did not publish final regulations for the NPRM published on
September 27, 2011, relating to the application and approval process
for new programs that prepare students for gainful employment in a
recognized occupation.
Among other things, with respect to the two debt measures for
determining whether a program provides training that prepares students
for gainful employment in a recognized occupation, the 2011 Final Rules
established a maximum debt-to-earnings ratio of 30 percent of
discretionary income and 12 percent of annual earnings and a minimum
standard of 35 percent for the loan repayment rate.
The chart below summarizes the past NPRMs and 2011 Final Rules.
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Date NPRM Date Final rule
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June 18, 2010..................... Program Integrity Issues Oct. 29, 2010........ Reporting/Disclosure
(75 FR 34806). Requirements for GE
Programs. Effective on
July 1, 2011 (75 FR
66832).
July 26, 2010..................... Gainful Employment (75 FR Oct. 29, 2010........ Gainful Employment--New
43616). Programs (75 FR 66665).
June 13, 2011........ Gainful Employment--Debt
Measures (76 FR 34385).
Sept. 27, 2011.................... Application and Approval ..................... (No final rule
Process for New Programs published).
(76 FR 59864).
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Litigation on the 2011 Final Rules
In July 2011, immediately after the first set of final regulations
for gainful employment took effect, the Association of Private Sector
Colleges and Universities (APSCU), an industry organization
representing for-profit institutions, brought suit against the
Department in the U.S. District Court for the District of Columbia
challenging, among other things, the debt measures, reporting and
disclosure requirements, and new program approval requirements in the
2011 Final Rules. On June 30, 2012, the court struck down most of the
2011 Final Rules, finding that the threshold for the loan repayment
measure lacked a reasoned basis. Association of Private Sector Colleges
and Universities v. Duncan, 870 F.Supp.2d 133 (D.D.C. 2012). We refer
to the case in this document as ``APSCU v. Duncan.'' Although the court
rejected APSCU's argument that the debt-to-earnings measure was not the
product of reasoned decision-making, the court nonetheless found that
the two debt measures and other provisions of the regulations were so
intertwined that the threshold in the loan repayment measure could not
be severed from the debt measures and other parts of the regulations.
For this reason, the court vacated almost all of the 2011 Final Rules.
Notably, however, the disclosure requirements survived and are
still in effect. Under the disclosure requirements, for each GE
program, an institution must disclose the occupation that the program
prepares students to enter; the on-time graduation rate for students
completing the program; the tuition and fees charged; and the placement
rate and median loan debt for students completing the program. The
court held that the disclosure requirements are within the Department's
authority under the HEA and are not arbitrary or capricious.
Additionally, the court noted in its opinion that the Secretary
enjoys broad authority to make, promulgate, issue, rescind, and amend
the rules and regulations governing the applicable programs
administered by the Department and that the Secretary is ``authorized
to prescribe such rules and regulations as the Secretary determines
necessary or appropriate to administer and manage the functions of the
Secretary or the Department.'' APSCU v. Duncan, 870 F.Supp.2d at 141;
see 20 U.S.C. 3474 (2006). Furthermore, in responding to the question
of whether the Department's regulatory effort to define gainful
employment is within the Department's authority, the court agreed with
the Department and concluded that the phrase ``gainful employment in a
recognized occupation'' is ambiguous and that in enacting it Congress
delegated interpretive authority to the Department. Id. at 146.
The Department subsequently filed a motion to alter or amend the
judgment,
[[Page 16430]]
asking the court to reinstate the vacated reporting requirements, as
they were required for the Department to comply with its obligations
under the provisions relating to the disclosure requirements. The court
denied this motion on March 19, 2013.
In its opinion, the court refused to reinstate the reporting
requirements for the reason that they required institutions to report
to the Department information about students enrolled in GE programs
who did not apply for or receive title IV, HEA program funds. The court
concluded that the Department was prohibited under section 134 of the
HEA, 20 U.S.C. 1015c, from maintaining information about those students
in the Department's National Student Loan Data System (NSLDS), as
planned. APSCU v. Duncan, 930 F.Supp.2d 210 (D.D.C. 2013). Neither the
Department nor APSCU appealed the court's rulings.
As a result of APSCU v. Duncan, certain sections of the 2011 Final
Rules were vacated either in whole or in part. For the purpose of this
NPRM, when referencing a section that was vacated in part, we treat the
entire section as vacated. Throughout this document, we refer to the
sections that were vacated or are treated here as vacated as part of
the ``2011 Prior Rule.'' Although the text of these vacated sections
remains in the CFR and we refer to them in this document in the present
tense, these sections are of no effect. Section 668.6(b) of the 2011
Final Rules, relating to disclosure requirements for GE programs, was
not vacated as a result of APSCU v. Duncan. This section remains in
effect, and we refer to this section in this document as the ``2011
Current Rule.'' In discussing the current regulations and proposed
regulations under ``Significant Proposed Regulations,'' we discuss
relevant parts of the 2011 Final Rules, but we distinguish between
sections that are part of the 2011 Prior Rule and sections that are
part of the 2011 Current Rule.
New Negotiated Rulemaking
On May 1, 2012, the Department published a document in the Federal
Register (77 FR 25658) announcing its intent to establish a negotiated
rulemaking committee under section 492 of the HEA, 20 U.S.C. 1098a, to
develop proposed regulations designed to prevent fraud and otherwise
ensure proper use of title IV, HEA program funds. In particular, we
announced our intent to propose regulations to address the use of debit
cards and other banking mechanisms for disbursing title IV, HEA program
funds, and to improve and streamline the campus-based Federal Student
Aid programs. We also announced two public hearings at which interested
parties could comment on the topics suggested by the Department and
suggest additional topics for consideration for action by the
negotiated rulemaking committee. Those hearings were held on May 23,
2012, in Phoenix, Arizona, and on May 31, 2012, in Washington, DC. We
invited parties to comment and submit topics for consideration in
writing, as well.
On April 16, 2013, we published a document in the Federal Register
(78 FR 22467, as corrected at 78 FR 25235), announcing additional
topics for consideration for action by the negotiated rulemaking
committee. Those additional topics for consideration included cash
management of funds provided under the title IV, HEA programs; State
authorization for programs offered through distance education or
correspondence education; State authorization for foreign locations of
institutions located in a State; clock to credit hour conversion;
gainful employment; changes made by the Violence Against Women
Reauthorization Act of 2013, Public Law 113-4, to the campus safety and
security reporting requirements in the HEA; and the definition of
``adverse credit'' for borrowers in the Federal Direct PLUS Loan
Program. We also announced three public hearings at which interested
parties could comment on the new topics suggested by the Department and
suggest additional topics for consideration for action by the
negotiating committee.
On May 13, 2013, we announced in the Federal Register (78 FR 27880)
the addition of a fourth hearing. The four hearings were held in May
2013, in Washington, DC, Minneapolis, Minnesota, and San Francisco,
California; and in June 2013, in Atlanta, Georgia. We also invited
parties unable to attend a public hearing to submit written comments on
the additional topics and to submit other topics for consideration.
Transcripts from all six public hearings are available at http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/index.html. Written
comments submitted in response to the May 1, 2012, and April 16, 2013,
notices may be viewed through the Federal eRulemaking Portal at
www.regulations.gov. Instructions for finding comments are available on
the site under ``How to Use Regulations.gov'' in the Help section.
Individuals can enter docket ID ED-2012-OPE-0008 in the search box to
locate the appropriate docket.
On June 12, 2013, we announced in the Federal Register (78 FR
35179) our intent to establish a negotiated rulemaking committee to
prepare proposed regulations for the title IV, HEA programs. The
proposed regulations would establish measures for programs that prepare
students for gainful employment in a recognized occupation. The notice
requested nominations of individuals for membership on the committee
who could represent the interests of key stakeholder constituencies.
The Department considered nominations submitted between the time of
the publication of the notice on June 12, 2013, and July 12, 2013.
Negotiators were sought to represent constituencies that generally
included students; legal assistance organizations that represent
students; consumer advocacy organizations; financial aid administrators
at postsecondary institutions; State higher education executive
officers; State Attorneys General and other appropriate State
officials; business and industry; institutions of higher education
eligible to receive Federal assistance under title III, parts A, B, and
F and title V of the HEA, which include Historically Black Colleges and
Universities, Hispanic-Serving Institutions, American Indian Tribally
Controlled Colleges and Universities, Alaska Native and Native
Hawaiian-Serving Institutions, Predominantly Black Institutions, and
other institutions with a substantial enrollment of needy students as
defined in title III of the HEA; two-year public institutions of higher
education; four-year public institutions of higher education; private,
non-profit institutions of higher education; private, for-profit
institutions of higher education; and regional accrediting agencies,
national accrediting agencies, and specialized accrediting agencies.
Each constituency selected would have a primary and an alternate
member. On August 2, 2013, the Department published the list of
negotiators who were selected on its Web site.\1\
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\1\ http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/index.html.
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The negotiated rulemaking committee met to develop proposed
regulations on September 9-11 and November 18-20, 2013. The latter
session was rescheduled from October 21-23, due to the shutdown of the
Federal Government from October 1-16, which resulted from a lapse in
appropriations. At the request of the committee, the Department added a
third and final session held on December 13, 2013. These sessions,
unlike the sessions
[[Page 16431]]
involving the 2011 Final Rules, were focused solely on the topic of
gainful employment.
At its first meeting, the committee reached agreement on its
protocols, which generally set out the committee membership, the topics
of discussion and negotiation, and the standards by which the committee
would operate. These protocols provided, among other things, that the
non-Federal negotiators would represent in negotiations the
organizations listed after their names in the protocols. The committee
included the following members:
Rory O'Sullivan, Young Invincibles, and Kalwis Lo (alternate),
United States Students Association, representing students.
Eileen Connor, New York Legal Assistance Group, and Whitney Barkley
(alternate), Mississippi Center for Justice, representing legal
assistance organizations that represent students.
Margaret Reiter, a California-based consumer protection attorney,
and Tom Tarantino (alternate), Veterans of America, representing
consumer advocacy organizations.
Kevin Jensen, College of Western Idaho, and Rhonda Mohr
(alternate), California Community Colleges Chancellor's Office,
representing financial aid administrators.
Jack Warner, South Dakota Board of Regents, and Sandra Kinney
(alternate), Louisiana Community and Technical College System,
representing State higher education executive officers.
Della Justice, Office of the Kentucky Attorney General, and Libby
DeBlasio (alternate), Office of the Colorado Attorney General,
representing State attorneys.
Ted Daywalt, VetJobs, and Thomas Kriger (alternate), AFL-CIO,
representing the business and labor communities.
Helga Greenfield, Spelman College, and Ronnie Higgs (alternate),
California State University at Monterey Bay, representing minority-
serving institutions.
Richard Heath, Anne Arundel Community College, and Glen Gabert
(alternate), Hudson County Community College, representing two-year
public institutions.
Barmak Nassirian, American Association of State College and
Universities, and Barbara Hoblitzell (alternate), University of
California, representing four-year public institutions.
Jenny Rickard, University of Puget Sound, and Thomas Dalton
(alternate), Excelsior College, representing private, non-profit
institutions.
Brian Jones, Strayer University, and Raymond Testa (alternate),
Empire Education Group, representing private, for-profit institutions--
publicly traded.
Marc Jerome, Monroe College, and Justin Berkowitz (alternate),
Daytona College, representing private, for-profit institutions--not
publicly traded.
Belle Wheelan, Southern Association of Colleges and Schools
Commission on Colleges, and Neil Harvison (alternate), American
Occupational Therapy Association, representing accrediting agencies.
John Kolotos, U.S. Department of Education, representing the
Federal Government.
The protocols also provided that, unless agreed to otherwise,
consensus on all issues in the proposed regulations had to be achieved
for consensus to be reached on the entire proposed rule. The protocols
also specified that consensus means that there must be no dissent by
any members.
During each of the committee meetings, the committee reviewed and
discussed the Department's drafts of proposed regulations and the
committee member's alternative proposals and suggestions. At the final
meeting on December 13, 2013, the committee did not reach consensus on
the Department's proposed regulations. For that reason, and according
to the committee's protocols, all parties who participated or were
represented in the negotiated rulemaking, in addition to all members of
the public, may comment freely on the proposed regulations. For more
information on the negotiated rulemaking sessions, please visit: http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html.
Summary of Relevant Data Available
The Gainful Employment Data
After the effective date of the 2011 Final Rules on July 1, 2011,
the Department received, pursuant to the reporting requirements of the
2011 Final Rules, information from institutions on their GE programs
for award years 2006-2007 through 2010-2011 (GE Data). The GE Data
included information on students who received title IV, HEA program
funds, as well as students who did not. After the decisions in APSCU v.
Duncan, the Department removed from NSLDS and destroyed the data on
students who did not receive title IV, HEA program funds.
The 2011 GE Informational Rates
In June 2012, the Department released the ``2011 GE informational
rates.'' \2\ The 2011 GE informational rates include informational
debt-to-earnings rates and dollar-based loan repayment rates for GE
programs. The 2011 informational debt-to-earnings rates were calculated
by program and based on the debt and earnings of students who completed
GE programs between October 1, 2006, and September 30, 2008--the ``07/
08 2011 D/E rates cohort''. The annual loan payment component of the
debt-to-earnings formulas was calculated for each program using
information from the GE Data and NSLDS. For the annual earnings figures
that were used to make the debt-to-earnings calculations, the
Department obtained from the Social Security Administration (SSA) the
2010 annual earnings, by program, of the 07/08 2011 D/E rates cohort.
The 2011 informational dollar-based loan repayment rates were
calculated by program for students who entered repayment between
October 1, 2006, and September 30, 2008--the ``07/08 2011 repayment
rates cohort''--on loans under the Federal Family Education Loan (FFEL)
Program and under the William D. Ford Direct Loan (Direct Loan) Program
for attendance in a GE program. The repayment rate calculations were
made using student loan information for the 07/08 2011 repayment rates
cohort from the GE Data and NSLDS.
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\2\ Available at: http://studentaid.ed.gov/about/data-center/school/ge/data.
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The 2011 GE informational rates had no effect on the eligibility of
GE programs. This information was intended to help institutions
understand how their programs might fare under the 2011 Final Rules
when they became effective.
The Session 1 2012 GE Informational Rates
On August 29, 2013, prior to the first meeting of the negotiated
rulemaking committee for the new negotiated rulemaking, the Department
released the ``Session 1 2012 GE informational rates'' \3\ to inform
the committee's discussion of the Department's proposals. The Session 1
2012 GE informational rates include two sets of informational debt-to-
earnings rates, informational dollar-based repayment rates, and
informational borrower-based
[[Page 16432]]
repayment rates for GE programs. The Department also issued an
explanation of the methodology used to make the Session 1 2012 GE
informational rates calculations.\4\ The first set of Session 1 2012 GE
informational debt-to-earnings rates were calculated by program and
based on the debt and earnings of students receiving title IV, HEA
program funds who completed GE programs between October 1, 2006, and
September 30, 2008--the ``07/08 2012 D/E rates cohort.'' The second set
of Session 1 2012 GE informational debt-to-earnings rates were
calculated by program and based on the debt and earnings of students
receiving title IV, HEA program funds who completed GE programs between
October 1, 2007, and September 30, 2009--the ``08/09 2012 D/E rates
cohort.''
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\3\ Available at: http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/2013-debt-earnings-data.xls and http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/2013-repayment-rate-data.xls; also accessible through http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html.
\4\ Available at: http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/2013-methodology.doc, also accessible through
http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html.
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The annual loan payment component of the debt-to-earnings formula
for both sets of Session 1 2012 GE informational debt-to-earnings rates
were calculated for each program using information from the GE Data and
other information in NSLDS. For the annual earnings figures that were
used in the debt-to-earnings calculations, the Department obtained from
SSA the 2011 annual earnings, by program, of the 07/08 2012 D/E rates
cohort and the 08/09 2012 D/E rates cohort. Both Session 1 2012 GE
informational debt-to-earnings rates were calculated using the
following criteria:
N-size: 10
Amortization schedule: 10 years for all credential levels
Interest rate: 6.8 percent
See ``Sec. 668.404 Calculating D/E rates'' for an explanation of these
criteria. The Session 1 2012 GE informational debt-to-earnings rates
files also include rates calculated using variations of the n-size and
amortization schedule criteria for comparative purposes.
The Session 1 2012 GE informational dollar-based and borrower-based
loan repayment rates were calculated by program for students receiving
title IV, HEA program funds who entered repayment between October 1,
2006, and September 30, 2008--the ``07/08 2012 repayment rates
cohort''--on FFEL and Direct Loans for enrollment in a GE program. The
repayment rate calculations were made using student loan information
for the 07/08 2012 repayment rates cohort from the GE Data and NSLDS.
The Session 1 2012 GE informational rates include information on
the sector and institution type for each program based on NSLDS records
as of August 2013.
The Session 3 2012 GE Informational Rates
Prior to the third rulemaking session in December 2013, the
Department released the ``Session 3 2012 GE informational rates.'' \5\
The Session 3 2012 GE informational rates include a revised version of
one of the Session 1 2012 GE informational debt-to-earnings rates and,
additionally, informational program cohort default rates for GE
programs. The Department also issued an explanation of the methodology
used to make the 2012 Session 3 GE informational rate calculations.\6\
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\5\ Available at: http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/s3-ge-datafile121113.xls, also accessible through
http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html.
\6\ Available at: http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/s3-informational-rates-methodology121113.doc,
also accessible through http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html.
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As described above, one set of the Session 1 2012 GE informational
debt-to-earnings rates is based on the debt and earnings of the 08/09
2012 D/E rates cohort. For Session 3, this set of informational debt-
to-earnings rates was revised to remove a small group of non-GE
programs that were included in the Session 1 2012 GE informational
rates by error and, also, recalculated using an interest rate of 3.37
percent. The Session 3 2012 GE informational rates files also include
debt-to-earnings rates calculated using variations of the n-size and
amortization schedule criteria for comparative purposes.
The Session 3 2012 GE informational program cohort default rates
were calculated by program for students receiving title IV, HEA program
funds who entered repayment between October 1, 2008, and September 30,
2009--the ``09 2012 program cohort default rates cohort''--on FFEL and
Direct Loans for enrollment in a GE program. The program cohort default
rate calculations were made using student loan information for the 09
2012 program cohort default rates cohort from the GE Data and NSLDS.
The Session 3 2012 GE informational rates include information on
the sector and institution type for each program based on NSLDS records
as of August 2013 for programs with D/E rates data. Sector and
institution type for programs with pCDR data but no D/E rates data were
based on NSLDS records as of November 2013.
The 2012 GE Informational Rates
With this NPRM, the Department has released the ``2012 GE
informational rates.'' \7\ The 2012 GE informational rates include a
recalculated version of the Session 3 2012 GE informational debt-to-
earnings rates using the following criteria:
\7\ Available at: http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html.
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N-size: 30
Amortization schedule: 10 years for certificate and associate
degree programs, 15 years for bachelor's and master's degree programs,
and 20 years for doctoral and first professional programs
Interest rate: 5.42 percent
See ``Sec. 668.404 Calculating D/E rates'' for an explanation of these
criteria. The 2012 GE informational debt-to-earnings rates files also
include debt-to-earnings rates calculated using variations of the n-
size and amortization schedule criteria for comparative purposes. In
addition to the 2012 GE informational debt-to-earnings rates, the 2012
GE informational rates also include the same informational program
cohort default rates released as a part of the Session 3 2012 GE
informational rates. The Department's D/E rates analysis and pCDR
analysis in this NPRM are based on the 2012 GE informational rates
unless otherwise specified.
The 2012 GE informational rates include information on the sector
and institution type for each program based on NSLDS records as of
November 2013 for all informational rate programs.
Summary of Proposed Regulations
The proposed regulations would--
Define what it means for a program to provide training
that prepares students for gainful employment in a recognized
occupation.
Create a process by which an institution establishes the
eligibility of a GE program by certifying that the GE program satisfies
applicable accrediting and licensing requirements for the occupations
for which the program purports to prepare students.
Establish an accountability framework, in which two
complementary yet independent measures--the D/E rates measure and the
pCDR measure--would be used to determine whether a GE program remains
eligible for title IV, HEA program funds.
Establish the process by which a GE program would be
evaluated and the
[[Page 16433]]
standards by which the program would be assessed, under the
accountability framework using--
[cir] The D/E rates measure to evaluate the amount of debt students
completing a GE program incurred in the program in comparison to their
discretionary and annual earnings after completing the program.
[cir] The pCDR measure to evaluate the default rate of former
students enrolled in a GE program, regardless of whether they completed
the program.
Require institutions with GE programs that could become
ineligible in an immediately succeeding year to provide a written
warning to students and prospective students of the potential loss of
ineligibility and the implications.
Provide that, for a GE program that loses eligibility for
title IV, HEA program funds, as well as any program that is not passing
the D/E rates measure and the pCDR measure and that is discontinued by
the institution, the loss of eligibility is for three calendar years.
Require institutions to report relevant information
related to its GE programs to the Secretary.
Require an institution to disclose, including to students
and prospective students, relevant information about its GE programs
through a disclosure template developed by the Secretary.
Significant Proposed Regulations
We discuss substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
proposed regulatory changes that are technical or otherwise minor in
effect.
Section 668.401 Scope and Purpose
Current Regulations: There is no equivalent provision in the 2011
Final Rules.
Proposed Regulations: Proposed Sec. 668.401 establishes the scope
and purpose for subpart Q of the proposed regulations. Subpart Q would
establish the rules and procedures under which the Secretary determines
a GE program's eligibility for title IV, HEA program funds; an
institution reports information about the GE program to the Secretary;
and the institution discloses information about the GE program to
students and prospective students.
We note that the terms ``gainful employment program'' or ``GE
program,'' ``student,'' and ``prospective student,'' which are defined
in proposed Sec. 668.402, are first substantively used in proposed
Sec. 668.401 and are therefore explained here. Proposed Sec. 668.402,
as in Sec. 668.7(a)(2) of the 2011 Prior Rule, provides that a
``gainful employment program'' or ``GE program'' is an educational
program offered by an institution under Sec. 668.8(c)(3) or (d) that
is identified by using a combination of the institution's six-digit
Office of Postsecondary Education ID (OPEID) number, the program's six-
digit Classification of instructional program (CIP) code, and
credential level. Proposed Sec. 668.401 defines a GE program, for the
purpose of subpart Q, as an educational program offered by an eligible
institution that prepares students for gainful employment in a
recognized occupation and that meets the title IV, HEA program
eligibility and other requirements in the proposed regulations.
Under the proposed regulations, the term ``student'' would refer to
an individual who received title IV, HEA program funds for enrolling in
the applicable GE program. Although we did not specifically define the
term ``student'' in the 2011 Final Rules, operationally, ``student''
included any individual enrolled in a GE program, regardless of whether
the individual received title IV, HEA program funds. Limiting the term
``student'' to refer to an individual who received title IV, HEA
program funds is a significant difference between the proposed
regulations and the 2011 Final Rules.
The proposed regulations also define the term ``prospective
student'' to refer to an individual who has contacted an eligible
institution for the purpose of requesting information about enrolling
in a GE program or who has been contacted directly by the institution
or indirectly through advertising about enrolling in a GE program. In
the 2011 Final Rules, the definition of ``prospective student'' in
Sec. 668.41(a) was used in connection with the disclosure requirements
in Sec. 668.6(b) and the warning requirements in Sec. 668.7(j). That
definition refers only to individuals who have contacted the
institution requesting institutional admission information.
Reasons:
Scope
Through this rulemaking, the Department seeks to establish
standards for title IV, HEA eligibility of postsecondary educational
programs that prepare students for ``gainful employment'' in a
recognized occupation, which include nearly all educational programs at
for-profit institutions of higher education regardless of program
length or credential level, as well as non-degree programs at public
and private non-profit institutions such as community colleges. Common
GE programs provide training for occupations in cosmetology, business
administration, interior design, graphic design, medical assisting,
dental assisting, nursing, and massage therapy.
Based on information in the Department's databases, we estimate
that there are approximately 50,000 GE programs at postsecondary
institutions around the country. We estimate that about 60 percent of
these programs are at public institutions, 10 percent at private non-
profit institutions, and 30 percent at for-profit institutions. The
Federal investment in students attending these programs is significant.
We estimate that in fiscal year 2010, approximately 4 million students
receiving title IV, HEA program funds were enrolled in GE programs.
These students received approximately $9.7 billion in Federal student
aid grants and approximately $26 billion in loans.
Purpose
The proposed regulations are intended to address growing concerns
about educational programs that, as a condition of eligibility for
title IV, HEA program funds, are required by statute to provide
training that prepares students for gainful employment in a recognized
occupation (GE programs), but instead are leaving students with
unaffordable levels of loan debt in relation to their earnings, or
leading to default. Many GE programs are producing positive student
outcomes. But a disproportionate number are failing to do so.
The Department's primary concerns, which drive both the
accountability and transparency frameworks, are that a number of GE
programs: (1) do not train students in the skills they need to obtain
and maintain jobs in the occupation for which the program purports to
train students, (2) provide training for an occupation for which low
wages do not justify program costs, and (3) are experiencing a high
number of withdrawals or ``churn'' because relatively large numbers of
students enroll but few, or none, complete the program, which can often
lead to default. The causes of these problems for students are
numerous, including excessive costs, low completion rates, a failure to
satisfy requirements that are necessary for students to obtain higher
paying jobs in a field such as licensing, work experience, and
programmatic accreditation, a lack of transparency regarding program
outcomes, and aggressive or deceptive marketing practices.
Our analysis of the D/E rates component of the 2012 GE
informational rates reveals these poor outcomes among some GE programs.
For example, 27 percent of GE programs evaluated produced graduates
with
[[Page 16434]]
average annual earnings below those of a full-time worker earning no
more than the Federal minimum wage ($15,080).8 9 Sixty-four
percent of GE programs evaluated produced graduates with average annual
earnings less than the earnings of individuals who have not obtained a
high school diploma ($24,492).10 11 Of programs with average
earnings below those of a high school dropout, approximately 24 percent
of former students defaulted on their Federal student loans within the
first three years of entering repayment.\12\
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\8\ At the Federal minimum wage of $7.25 per hour (www.dol.gov/whd/minimumwage.htm), an individual working 40 hours per week for 52
weeks per year would have annual earnings of $15,080.
\9\ 2012 GE informational rates. Our analysis by sector shows
the following: Of the 5,539 programs evaluated with earnings data,
30 percent of for-profit programs and 13 percent of public non-
profit programs produced graduates with average annual earnings
below a Federal minimum wage worker.
\10\ Based on a weekly wage of $471 (http://www.bls.gov/emp/ep_chart_001.htm) for 52 weeks.
\11\ 2012 GE informational rates. Our analysis by sector shows
the following: Of the 5,539 programs evaluated with earnings data,
72 percent of for-profit programs and 32 percent of public non-
profit programs produced graduates with average annual earnings less
than the earnings of individuals who have not obtained a high school
degree.
\12\ 2012 GE informational rates.
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As we noted in connection with the 2011 Prior Rule, the outcomes of
students who attend for-profit educational institutions are of
particular concern. 76 FR 34386. There is growing evidence of troubling
practices at many of these institutions, such as some proprietary
institutions overstating job placement rates. There has been growth in
the number of qui tam lawsuits brought by private parties alleging
wrongdoing at these institutions and numerous investigations brought by
other Federal and State oversight agencies. Such activity only
increases the Department's concerns about poor outcomes in GE programs.
For-profit institutions typically charge higher tuitions than do
public postsecondary institutions. 76 FR 34386. Average tuition and
fees at less-than-two-year for-profit institutions are more than double
the average cost at less-than-two-year public institutions.\13\
Attending a two-year for-profit institution costs a student four times
as much as attending a community college.\14\ Not surprisingly then,
students enrolled in for-profit institutions accumulate far greater
debt than students at public institutions. 76 FR 34386. In 2011-2012,
86 percent of students who earned certificates from for-profit
institutions took out student loans compared to 35 percent of
certificate recipients from public two-year institutions.\15\ Of those
who borrowed, the median loan amount borrowed of for-profit certificate
recipients was $11,000 as opposed to $8,000 for certificate recipients
from public two-year institutions.\16\ Eighty-eight percent of
associate degree graduates from for-profit institutions took out
student loans, while only 40 percent of associate degree recipients
from public two-year institutions took out student loans.\17\ Of those
who borrowed, for-profit associate degree recipients had a median loan
amount borrowed of $23,590 in comparison to $10,000 for students who
received their degrees from public two-year institutions.\18\
Approximately 22 percent of borrowers who attended for-profit
institutions default on their Federal student loans within the first
three years of entering repayment as compared to about 13 percent of
borrowers who attended public institutions.\19\
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\13\ IPEDS First Look (July 2013), table 2. Average costs (in
constant 2012-13 dollars) associated with attendance for full-time,
first-time degree/certificate-seeking undergraduates at Title IV
institutions operating on an academic year calendar system, and
percentage change, by level of institution, type of cost, and other
selected characteristics: United States, academic years 2010-11 and
2012-13.
\14\ Id.
\15\ National Postsecondary Student Aid Study 2012.
\16\ Id.
\17\ Id.
\18\ Id.
\19\ Based on the Department's analysis of the three-year cohort
default rates for fiscal year 2010, U.S. Department of Education,
available at www.ed.gov/news/press-releases/default-rates-continue-rise-federal-student-loans.
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Although more expensive, there is growing evidence that many for-
profit programs may not prepare students as well as comparable programs
at public institutions. 75 FR 43618. A 2011 GAO report reviewed results
of licensing exams for 10 occupations that are, by enrollment, among
the largest fields of study.\20\ The GAO report showed that for 9 out
of 10 licensing exams, graduates of for-profit institutions had lower
rates of passing than graduates of public institutions.\21\ Many for-
profit institutions devote greater resources to recruiting and
marketing than they do to instruction or to student support
services.\22\ An investigation by the U.S. Senate Committee on Health,
Education, Labor & Pensions (Senate HELP Committee) of thirty prominent
for-profit institutions found that they spend almost 23 percent of
their revenues on marketing and recruiting, but merely 17 percent on
instruction.\23\ Among the institutions that provided useable data to
the committee, schools employed 35,202 recruiters compared with 3,512
career services staff and 12,452 support services staff.\24\
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\20\ Postsecondary Education: Student Outcomes Vary at For-
Profit, Nonprofit, and Public Schools (GAO-12-143), GAO, December 7,
2011.
\21\ Id.
\22\ For Profit Higher Education: The Failure to Safeguard the
Federal Investment and Ensure Student Success, Senate HELP
Committee, July 30, 2012.
\23\ Id.
\24\ Id.
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Lower rates of completion in many four-year for-profit institutions
are also a cause for concern. 76 FR 34409. The six-year graduation rate
of first-time undergraduate students who began at a four-year degree-
granting institution in 2003-2004 was 34 percent at for-profit
institutions in comparison to 65 percent at public institutions.
However, for first-time undergraduate students who began at a two-year
degree-granting institution in 2003-2004, the six-year graduation rate
was 40 percent at for-profit institutions in comparison to 35 percent
at public institutions.\25\
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\25\ U.S. Department of Education, National Center for Education
Statistics (NCES), 2003-04 Beginning Postsecondary Students
Longitudinal Study, Second Follow-up (BPS:04/09) (cumulative
certificate, associate's degree, and bachelor's degree attainment at
any institution).
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The higher costs of for-profit institutions, and the consequently
greater amounts of debt incurred by their former students, together
with generally lower rates of completion, continue to raise concerns
about whether for-profit programs lead to earnings that justify the
investment made by students. See 75 FR 43617. As we stated in
connection with the 2011 Prior Rule, this ``value proposition'' is what
``distinguishes programs `that lead to gainful employment in a
recognized occupation.' '' 76 FR 34386. Analysis of data collected on
the outcomes of 2003-2004 first-time beginning postsecondary students
as a part of the Beginning Postsecondary Students Longitudinal Study
shows that students who attend for-profit institutions are more likely
to be idle, not working or in school, six years after starting their
programs of study in comparison to students who attend other types of
institutions.\26\ Further, for-profit students no longer enrolled in
school six years after beginning postsecondary education have lower
earnings at the six-year mark than students who attend other types of
institutions.\27\
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\26\ Deming, D., Goldin, C., and Katz, L., The For-Profit
Postsecondary School Sector: Nimble Critters or Agile Predators?,
Journal of Economic Perspectives, vol. 26, no. 1, Winter 2012.
\27\ Id.
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These outcomes are troubling for two reasons. First, some students
will have earnings that will not support the debt
[[Page 16435]]
they incurred to enroll in these GE programs. Second, because students
are limited under the HEA in the amounts of Federal grants and loans
they may receive to support their education, their options to move to
higher-quality and affordable programs are constrained as they may no
longer have access to sufficient student aid. Specifically, Federal law
sets lifetime limits on the amount of grant and subsidized loan
assistance students may receive: Federal Pell Grants may be received
only for the equivalent of 12 semesters of full-time attendance, and
Federal subsidized loans may be received for no longer than 150 percent
of the published program length.\28\ These limitations make it even
more critical that students' initial choices in GE programs prepare
them for employment that provides adequate earnings and do not result
in excessive debt.
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\28\ See section 401(c)(5) of the HEA, 20 U.S.C. 1070a(c)(5),
for Pell Grant limitation; see section 455(q) of the HEA, 20 U.S.C.
1087e(q), for the 150 percent limitation.
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In addition to concerns that some GE programs are not meeting the
gainful employment requirement, the Department remains concerned that
students seeking to enroll in these programs do not have access to
reliable information that will enable them to compare programs in order
to make informed decisions about where to invest their time and limited
educational funding. As we noted in the 2011 Prior Rule, the Government
Accountability Office (GAO) and other investigators have found evidence
of high-pressure and deceptive recruiting practices at some for-profit
institutions. See 76 FR 34386. In 2010, the GAO released results of
undercover testing at 15 for-profit colleges across several States.\29\
Thirteen of the colleges tested gave undercover student applicants
``deceptive or otherwise questionable information'' about graduation
rates, job placement, or expected earnings.\30\ Similarly, a more
recent report by the Senate HELP Committee on the for-profit education
sector found evidence that many of the most prominent for-profit
institutions engage in aggressive sales practices and provide
misleading information to prospective students.\31\ Recruiters
described ``boiler room''-like sales and marketing tactics and internal
institutional documents showed that recruiters are taught to identify
and manipulate emotional vulnerabilities and target non-traditional
students.\32\
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\29\ For-Profit Colleges: Undercover Testing Finds Colleges
Encouraged Fraud and Engaged in Deceptive and Questionable Marketing
Practices (GAO-10-948T), GAO, August 4, 2010 (reissued November 30,
2010).
\30\ Id.
\31\ For Profit Higher Education: The Failure to Safeguard the
Federal Investment and Ensure Student Success, Senate HELP
Committee, July 30, 2012.
\32\ Id.
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More recently, a growing number of State and other Federal law
enforcement authorities have launched investigations into whether the
institutions that offer GE programs are using aggressive or even
deceptive marketing and recruiting practices. Several State Attorneys
General have already sued for-profit institutions to stop these
fraudulent marketing practices and manipulations of job placement
rates. On August 19, 2013, the New York State Attorney General
announced a $10.25 million settlement with Career Education Corporation
(CEC), a private for-profit education company, after its investigation
revealed that CEC significantly inflated its graduates' job placement
rates in disclosures made to students, accreditors, and the State.\33\
The State of Illinois sued Westwood College for misrepresentations and
false promises made to students enrolling in the company's criminal
justice program.\34\ The Commonwealth of Kentucky has filed lawsuits
against several private for-profit institutions, including National
College of Kentucky, Inc., for misrepresenting job placement rates, and
Daymar College, Inc., for misleading students about financial aid and
overcharging for textbooks.\35\ And most recently, early this year, a
group of 13 State Attorneys General issued Civil Investigatory Demands
to Corinthian Colleges, Inc., Education Management Co., ITT Educational
Services, Inc., and CEC, seeking information about student placement
rate data and marketing and student recruitment practices of the
companies. The States participating include Arizona, Arkansas,
Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina,
Oregon, Pennsylvania, Tennessee, and Washington.
---------------------------------------------------------------------------
\33\ ``A.G. Schneiderman Announces Groundbreaking $10.25 Million
Dollar Settlement with For-Profit Education Company That Inflated
Job Placement Rates to Attract Students,'' press release, Aug. 19,
2013. Available at: www.ag.ny.gov/press-release/ag-schneiderman-announces-groundbreaking-1025-million-dollar-settlement-profit.
\34\ ``Attorneys General Take Aim at For-Profit Colleges'
Institutional Loan Programs,'' The Chronicle of Higher Education,
March 20, 2012. Available at: http://chronicle.com/article/Attorneys-General-Take-Aim-at/131254/.
\35\ ``Kentucky Showdown,'' Inside Higher Ed, Nov. 3, 2011.
Available at: www.insidehighered.com/news/2011/11/03/ky-attorney-general-jack-conway-battles-profits.
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A 2012 report released by the Senate HELP Committee found extensive
evidence of aggressive and deceptive recruiting practices, excessive
tuition, and regulatory evasion and manipulation by for-profit colleges
that preyed on service members, veterans, and their families as
``dollar signs in uniform.'' \36\ The Los Angeles Times reported that
recruiters from for-profit colleges have been known to recruit at
Wounded Warriors centers and at veterans hospitals, where injured
soldiers are pressured into enrolling through promises of free
education and more.\37\ Some for-profit colleges lure service members
and veterans through a number of improper practices, including by
offering post-9/11 GI Bill benefits that are intended for living
expenses as ``free money,'' which is difficult for jobless veterans
returning home to turn down.\38\ This results in many veterans
enrolling in online courses to get the monthly benefits even if they
have no intention of completing the coursework.\39\ In addition, some
institutions have recruited veterans with serious brain injuries and
emotional vulnerabilities without providing adequate support and
counseling, engaged in misleading recruiting practices onsite at
military installations, and failed to accurately disclose information
regarding the graduation rates of veterans.\40\ In June 2012, an
investigation in 20 States, led by the Commonwealth of Kentucky's
Attorney General, resulted in a $2.5 million settlement with
QuinStreet, Inc. and the closure of GIBill.com, a Web site that
appeared as if it was an official site of the U.S. Department of
Veterans Affairs, but was in reality a for-profit portal that steered
veterans to 15 colleges, almost all for-profit institutions, including
Kaplan University, the University of Phoenix, Strayer University, DeVry
University, and Westwood College.\41\
---------------------------------------------------------------------------
\36\ ``Dollar Signs in Uniform,'' Los Angeles Times, Nov. 12,
2012. Available at: http://articles.latimes.com/2012/nov/12/opinion/la-oe-shakely-veterans-college-profit-20121112; citing ``Harkin
Report,'' S. Prt. 112-37, For Profit Higher Education: The Failure
to Safeguard the Federal Investment and Ensure Student Success, July
30, 2012.
\37\ Id.
\38\ Id.
\39\ Id.
\40\ ``We Can't Wait: President Obama Takes Action to Stop
Deceptive and Misleading Practices by Educational Institutions that
Target Veterans, Service Members and their Families,'' White House
Press Release, April 26, 2012. Available at: www.whitehouse.gov/the-press-office/2012/04/26/we-can-t-wait-president-obama-takes-action-stop-deceptive-and-misleading.
\41\ ``$2.5M Settlement over `GIBill.com','' Inside Higher Ed,
June 28, 2012. Available at: www.insidehighered.com/news/2012/06/28/attorneys-general-announce-settlement-profit-college-marketer.
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Further, the Consumer Financial Protection Bureau issued Civil
[[Page 16436]]
Investigatory Demands to Corinthian Colleges, Inc. and ITT Educational
Services, Inc. in November, 2013, demanding information about their
marketing, advertising, and lending policies.\42\ The Securities and
Exchange Commission also subpoenaed records from Corinthian Colleges,
Inc. on June 6, 2013, seeking student information in the areas of
recruitment, attendance, completion, placement, and loan defaults.\43\
These inquiries supplement the Department's existing monitoring and
compliance efforts to protect against such abuses.
---------------------------------------------------------------------------
\42\ ``For Profit Colleges Face New Wave of State
Investigations, Bloomberg, Jan. 29, 2014. Available at:
www.bloomberg.com/news/2014-01-29/for-profit-colleges-face-new-wave-of-coordinated-state-probes.html.
\43\ ``Corinthian Colleges Crumbles 14% on SEC probe,'' Fox
Business, June 11, 2013. Available at: www.foxbusiness.com/government/2013/06/11/corinthian-colleges-crumbles-14-on-sec-probe/.
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Simply put, without reliable information, students, prospective
students, and their families are vulnerable to inaccurate or misleading
information when they make critical decisions about their educational
investments and, based on that information, may enroll in poorly
performing programs. Furthermore, without accurate and comparable
information, the public, taxpayers, and the Government are in the dark
as to the performance of these programs and the return on the Federal
investment in these programs. Although we do not seek to impose
requirements through this rulemaking that specifically address all of
these allegations of abuse, the proposed regulations would help ensure,
among other things, that students, prospective students, and their
families and the public, taxpayers, and the Government are provided
with reliable and comparable information about the student outcomes of
GE programs.
We acknowledge that since the prior rulemaking effort in 2011, some
for-profit institutions have made positive changes to their GE
programs. For example, some institutions now offer trial enrollment
periods for students before they require a full financial commitment
and scholarships to students who reach milestones toward completing
their programs.\44\ These steps show that positive change is possible,
but the concerns highlighted here demonstrate that more improvement in
the sector is needed. To encourage institutions to start or continue to
take effective action to reduce debt and increase earnings prospects
for students, by this regulatory action, we propose to define what it
means for a program to provide training that prepares students for
gainful employment in a recognized occupation by establishing measures
a program must meet in order to be eligible for title IV, HEA program
funds, and to better inform students, prospective students, and their
families, as well as the public, taxpayers, and the Government, by
requiring institutions to report and disclose relevant information
about the outcomes of their GE programs.
---------------------------------------------------------------------------
\44\ See, e.g., ``More Selective For-Profits,'' Inside Higher
Ed, Nov. 11, 2011 (Kaplan University and the University of Phoenix
both ``recently began new programs that make it easier for
unprepared students to leave without taking on debt''), available at
www.insidehighered.com/news/2011/11/11/enrollments-tumble-profit-colleges. See also, e.g., DeVry University, Form 10-Q, United States
Securities and Exchange Commission, for the quarterly period ended
Sept. 30, 2013 (``Over the past year DeVry has reduced costs through
staffing adjustments and by lowering costs. Management has made the
decision to close or consolidate certain DeVry University campuses
while balancing the potential impact on enrollment and student
satisfaction. Management is also focused on process redesign and
restructuring in areas such as student finance. . . . Under the
Career Catalyst Scholarship DeVry University has committed more than
$15 million over the next three years to be awarded to qualifying
students who enroll in the September 2013 session), available at
www.sec.gov/Archives/edgar/data/730464/000114420413058782/v357757_10q.htm.
---------------------------------------------------------------------------
Legal Authority
We seek, through this regulatory action, to define a statutory
requirement that applies only to certain educational programs--GE
programs--and which is a condition of eligibility for title IV, HEA
program funds. Title IV, HEA program funds are Federal student aid
funds available to students and parents to assist them in paying for a
postsecondary educational program. These funds include student loans
under the Direct Loan Program, the Federal Perkins Loan (Perkins Loan)
Program, and (until 2010) the FFEL Program; grants under the Federal
Pell Grant Program, the Federal Supplemental Educational Opportunity
Grant Program, the Iraq-Afghanistan Service Grant Program, and the
TEACH Grant Program; and earnings under the Federal Work-Study Program.
Under title IV of the HEA, institutions must establish eligibility
to offer eligible programs in order for their students to receive
Federal student aid funds. In some cases, eligible institutions must
separately establish the eligibility of their programs in order for
students in those programs to receive title IV, HEA assistance. See,
e.g., 20 U.S.C. 1001(a)(3), 34 CFR 668.8(c) (educational program
offered by public or private non-profit institution of higher education
must lead to or be creditable toward recognized credential); 34 CFR
600.20(c) (approval required for institution to increase level of
programs from undergraduate to graduate); 20 U.S.C. 1088(b)(3), 34 CFR
668.8(m) (program offered through telecommunications eligible only if
accredited by agency recognized by the Department to evaluate such
programs).
One type of program for which an institution must establish
program-level title IV, HEA eligibility is ``a program of training to
prepare students for gainful employment in a recognized occupation,''
which is the subject of this rulemaking. 20 U.S.C. 1001(b)(1),
1002(b)(1)(A)(i), (c)(1)(A). Section 481 of the HEA articulates this
same requirement: as pertinent here, it defines an ``eligible program''
as a ``program of training to prepare students for gainful employment
in a recognized profession.'' 20 U.S.C. 1088(b). This statutory
requirement--the ``gainful employment'' requirement--is what the
Department seeks to define here.
The Department's authority for this regulatory action is derived
primarily from these provisions, which establish the gainful employment
requirement, and two additional sources. These authorities, including
relevant legislative history which supports components of the GE
accountability framework, are discussed here and also in more detail in
``Sec. 668.403 Gainful employment framework.'' Specifically, section
410 of the General Education Provisions Act provides the Secretary with
authority to make, promulgate, issue, rescind, and amend rules and
regulations governing the manner of operations of, and governing the
applicable programs administered by, the Department. 20 U.S.C. 1221e-3.
This authority includes the power to promulgate regulations relating to
programs administered by the Department, such as the title IV, HEA
programs that provide Federal loans, grants, and other aid to students.
Furthermore, section 414 of the Department of Education Organization
Act (DEOA) authorizes the Secretary to prescribe those rules and
regulations the Secretary determines necessary or appropriate to
administer and manage the functions of the Department. 20 U.S.C. 3474.
These authorities thus empower the Secretary to promulgate regulations
that, in this case, define the gainful employment requirement in the
HEA by: establishing measures to determine the eligibility of GE
programs for title IV, HEA program funds; requiring institutions to
report information about the programs to the Secretary; and requiring
institutions to
[[Page 16437]]
disclose information about the programs to students, prospective
students, and their families, the public, taxpayers, and the
Government, and institutions.
Section 431 of the DEOA gives the Department added authority to
establish rules to require institutions to make data available to the
public on the performance of their GE programs and about students
enrolled in those programs. That section gives the Secretary the
authority to inform the public about federally supported education
programs, and to collect data and information on applicable programs
for the purpose of obtaining objective measurements of their
effectiveness in achieving their intended purposes. 20 U.S.C. 1231a.
This provision lends additional support for the proposed reporting and
disclosure requirements, which will enable the Secretary to collect
data and information related to GE programs, for the purpose of
evaluating whether they are achieving their intended purpose, and to
inform the public about relevant information related to those federally
supported programs.
As discussed in the ``Background of The Proposed Regulations,
Public Participation, and Negotiated Rulemaking,'' some of these
authorities were subject to scrutiny by the U.S. District Court for the
District of Columbia in Association of Private Sector Colleges and
Universities v. Duncan, 870 F.Supp.2d 133 (D.D.C. 2012), and 930
F.Supp.2d 210 (D.D.C. 2013), a suit brought by APSCU to challenge the
Department's 2011 prior rulemaking efforts to define the gainful
employment requirement. In deciding that challenge, the court reached
several conclusions about the Department's rulemaking authority in this
matter, and its conclusions have informed and framed the Department's
exercise of that authority in proposing these regulations. Notably, the
court agreed with the Department's position that the Secretary enjoys
broad authority to make, promulgate, issue, rescind, and amend the
rules and regulations governing the applicable programs administered by
the Department, such as the title IV, HEA programs, and that the
Secretary is ``authorized to prescribe such rules and regulations as
the Secretary determines necessary or appropriate to administer and
manage the functions of the Secretary or the Department.'' APSCU v.
Duncan, 870 F.Supp.2d at 141; see 20 U.S.C. 3474. Furthermore, in
answering the question whether the Department's regulatory effort to
define the gainful employment requirement fell within its statutory
authority, the court found the exercise within that power.
Specifically, it concluded that the phrase ``gainful employment in a
recognized occupation'' is ambiguous and that in enacting the
requirement that used that phrase, Congress delegated interpretive
authority to the Department. APSCU v. Duncan, 870 F.Supp.2d at 146.
Likewise, the court upheld the Department's disclosure
requirements, which are still in effect, rejecting APSCU's challenge to
this provision and finding that the disclosure requirements ``fall
comfortably within [the Secretary's] regulatory power,'' and are ``not
arbitrary or capricious.'' Id. at 156.
Overview of Accountability and Transparency Frameworks
As stated previously, the Department's goals in the proposed
regulations are twofold: to establish an accountability framework for
GE programs, and to increase the transparency of student outcomes of GE
programs. In addition, we believe a key benefit of this regulatory
action would be to receive suggestions on how to identify programs that
are exceptional performers, and how to share best practices with
institutions interested in improving their programs. Although
recognition of exceptional programs is not expressly addressed in the
proposed regulations, we invite comment on ways in which the best
programs could, consistent with our authority under the HEA, be
identified and rewarded and how best practices could be highlighted and
shared with others.
In service of these goals, we are proposing an accountability
framework based upon program certification requirements and minimum
standards for program outcomes. We are also proposing reporting and
disclosure requirements designed to both support the accountability
framework and to increase transparency so that relevant information
regarding GE programs is disseminated to students, prospective
students, and their families, the public, taxpayers, and the
Government, and institutions.
As part of the accountability framework, to determine whether a
program provides training that prepares students for gainful employment
as required by the HEA, we propose procedures to establish a program's
eligibility and to measure its outcomes on a continuing basis. To
establish a program's eligibility, an institution would be required to
certify that each of its GE programs meets all applicable accreditation
and licensure requirements necessary for a student to obtain employment
in the occupation for which the program provides training. This
certification would be incorporated into the institution's program
participation agreement. For a more detailed discussion of the proposed
certification requirements, see ``Sec. 668.414 Certification
requirements for GE programs.''
To assess the continuing eligibility of a GE program, we propose to
use two measures--one measure that compares the debt incurred by
students completing the program against their earnings (the ``debt-to-
earnings rates'' or ``D/E rates'') and a second measure that examines
the rate at which borrowers who previously enrolled in the program
default on their FFEL or Direct Loans (``program cohort default rate''
or ``pCDR''). The proposed regulations would establish minimum
thresholds for the D/E rates measure and the pCDR measure. The D/E
rates and the pCDR measures would operate independently of each other,
as they are designed to achieve complementary objectives, capturing two
ways a program could fail to meet the gainful employment requirement.
In addition to the accountability framework, the proposed
regulations include institutional reporting and disclosure requirements
designed to increase the transparency of student outcomes for GE
programs. As discussed more fully under ``Sec. 668.411 Reporting
requirements for GE programs,'' we would require institutions to report
information that is necessary to implement aspects of the proposed
regulations that support the Department's two goals of accountability
and transparency. This would include information needed to calculate
the D/E rates and the pCDR, as well as some of the specific required
disclosures. As discussed more fully under ``Sec. 668.412 Disclosure
requirements for GE programs,'' the proposed disclosure requirements
would operate independently of the proposed eligibility requirements
and ensure that relevant information regarding GE programs is made
available to students, prospective students, and their families, the
public, taxpayers, and the Government, and institutions. These
provisions would provide for accountability and transparency throughout
the admissions and enrollment process so that students, prospective
students, and their families can make informed decisions. Specifically,
institutions would be required to make information regarding such items
as cost of attendance, completion, debt, earnings, and student loan
repayment available in a meaningful and easily accessible format.
In the proposed regulations, we use the term ``student'' to refer
specifically
[[Page 16438]]
to individuals who received title IV, HEA program funds for enrolling
in the applicable GE program. The term would not include individuals
who did not receive title IV, HEA program funds to enroll in an
eligible GE program, even if they filed a Free Application for Federal
Student Aid (FAFSA).
We believe that this definition is appropriate for two reasons.
First, this approach is aligned with the court's interpretation in
APSCU v. Duncan of relevant law regarding the Department's authority
to maintain records in its NSLDS. See ``Background of The Proposed
Regulations, Public Participation, and Negotiated Rulemaking'' for a
more complete discussion of APSCU v. Duncan. Second, because the
primary purpose for which we would use the GE measures is to determine
whether a program should continue to be eligible for title IV, HEA
program funds, we believe we can make a sufficient assessment of
whether a program prepares students for gainful employment based only
on the outcomes for students who receive title IV, HEA program funds.
By limiting the GE measures to assess outcomes of only students who
receive title IV, HEA program funds, the Department can effectively
evaluate how the GE program is performing with respect to the students
who received the Federal benefit that we are charged with
administering. We note that this definition of ``student'' would apply
throughout subpart Q.
Some of the negotiators believed that there were instances where
the definition of ``student'' should be defined more broadly.
Negotiators proposed that the term include all students who enrolled in
a program or, in light of APSCU v. Duncan, all students who are in
NSLDS because they applied for title IV, HEA program funds by filing a
FAFSA or because they received title IV, HEA program funds for
attendance in other eligible programs, in both cases irrespective of
whether they received title IV, HEA program funds for the GE program.
The negotiators proposed that the broader definition could be used for
some purposes, such as calculating the completion and withdrawal rates,
or the median loan debt, for a GE program.
We believe that our proposed definition is better aligned with our
goals of evaluating a GE program's performance for the purpose of
continuing eligibility for title IV, HEA program funds. In addition,
this approach is consistent with our goal of providing students and
prospective students who are eligible for title IV, HEA program funds
with relevant information that will help them in considering where to
invest their resources and limited eligibility for title IV, HEA
program funds.
Similarly, we also propose to define the term ``prospective
student'' in subpart Q in order to add clarity to the regulations. Our
proposed definition is broader than the one used in the 2011 Final
Rules. In response to comments we received from a number of the
negotiators, the proposed definition accounts for the various ways that
institutions and prospective students commonly interact. Specifically,
we modified the definition of ``prospective student'' to address
concerns raised by some of the negotiators that the definition of
prospective student in Sec. 668.41(a), which was used in the 2011
Final Rules, is inadequate for the purpose of subpart Q. In particular,
the negotiators noted that this definition only applies where an
individual has initiated contact with an institution for information
and not when the institution contacts the individual. We agree with the
negotiators that this would not capture the common circumstances in
which institutions first contact individuals about enrollment in a GE
program, and that this type of outreach should be captured in the
definition.
Section 668.402 Definitions
Current Regulations: Section 668.7(a)(2) of the 2011 Prior Rule
defines, for use in the 2011 Prior Rule, the terms ``program,'' ``debt
measures,'' ``fiscal year,'' ``two-year period,'' ``four-year period,''
and ``discretionary income.''
Proposed Regulations: Proposed Sec. 668.402 defines a number of
terms that are used in the proposed regulations. The proposed defined
terms and the sections in which they would be first substantively used
are:
Annual earnings rate, Sec. 668.403
Classification of instructional program (CIP) code, Sec.
668.411
Cohort period, Sec. 668.404
Credential level, Sec. 668.411
Debt-to-earnings rates (D/E rates), Sec. 668.403
Discretionary income rate, Sec. 668.403
Four-year cohort period, Sec. 668.404
Gainful employment program (GE program), Sec. 668.401
GE measures, Sec. 668.403
Length of the program, Sec. 668.411
Metropolitan Statistical Area (MSA), Sec. 668.412
Poverty Guideline, Sec. 668.404
Program cohort default rate (pCDR), Sec. 668.403
Prospective student, Sec. 668.401
Student, Sec. 668.401
Title IV loan, Sec. 668.404
Two-year cohort period, Sec. 668.404
Generally, where the 2011 Prior Rule and the proposed regulations are
similar, the relevant defined terms are similar, with clarifications
and changes as needed to reflect any differences.
Reasons: Section 668.402 would provide definitions for significant
terms used in the proposed regulations. Although some of these terms
were not defined in the 2011 Final Rules, uniform usage of the terms
would make it easier for institutions to understand the proposed
standards and requirements for GE programs and for students and
prospective students to understand the information about GE programs
that the proposed regulations would provide. Our reasoning for
proposing each definition is discussed in the section in which the
defined term is first substantively used.
Section 668.403 Gainful Employment Framework
Current Regulations: Under Sec. 668.7(a)(1) of the 2011 Prior
Rule, a program would meet the gainful employment requirement if (1)
the program's annual loan repayment rate is at least 35 percent or (2)
the program's annual loan payment is less than or equal to 30 percent
of discretionary income (``discretionary income rate'') or less than or
equal to 12 percent of annual earnings (``earnings rate''). Under the
2011 Prior Rule, the loan repayment rate, discretionary income rate,
and the earnings rate would be collectively referred to as the ``debt
measures.'' A program would also meet the gainful employment
requirement if the data needed to determine whether the program
satisfies the minimum standards under Sec. 668.7(a)(1) of the 2011
Prior Rule are not available. Further, a program would satisfy the debt
measures under any of the following circumstances: the program did not
have the minimum number of students who completed the program over the
applicable cohort period to calculate the debt-to-earnings ratios; SSA
did not provide the earnings information necessary to calculate the
debt-to-earnings ratios; or the median loan debt for the program is
zero. Under Sec. 668.7(i) of the 2011 Prior Rule, a program would
become ineligible for title IV, HEA program funds if it does not
satisfy any of the debt measures for three out of the four most recent
fiscal years.
Proposed Regulations: Section 668.403 of the proposed regulations
sets forth the accountability framework under which the Department
would
[[Page 16439]]
determine whether programs prepare students for gainful employment in a
recognized occupation and whether those programs are eligible for title
IV, HEA program funds. Under the accountability framework, to establish
a program's eligibility for title IV, HEA program funds, an institution
would be required to satisfy the certification requirements of proposed
Sec. 668.414 for each of its GE programs. To remain eligible for title
IV, HEA program funds, an institution would have to satisfy the D/E
rates measure and the pCDR measure. The D/E rates and the pCDR measures
would operate independently. Results of one measure would not affect
results of the other.
Under the D/E rates measure, we would apply as accountability
metrics the same two debt-to-earnings ratios (referred to in the
proposed regulations as the ``debt-to-earnings rates'' or the ``D/E
rates'')--the annual earnings rate and the discretionary income rate--
as the 2011 Prior Rule. Also consistent with the 2011 Prior Rule, both
D/E rates would evaluate the outcomes of only those students who
completed a program. For an explanation of the methodology that would
be used to calculate the D/E rates, see ``Sec. 668.404 Calculating D/E
rates.''
We do not include in the proposed accountability framework the loan
repayment rate metric of the 2011 Prior Rule. Instead, the proposed
regulations replace the loan repayment rate with a program-level cohort
default rate (pCDR) that measures the percentage of students who
enrolled in a GE program and defaulted on their Direct and FFEL loans.
Like the loan repayment rate in the 2011 Prior Rule, and unlike the D/E
rates which only measure the outcomes of students who completed a
program, the pCDR measure would evaluate the outcomes of students who
enrolled in but did not complete a program in addition to the outcomes
of students who completed the program. For an explanation of the
methodology that would be used to calculate the pCDR measure, see
``Sec. 668.407 Calculating pCDR.''
Certification Requirements
Proposed Sec. Sec. 668.403(a) and 668.414 would require that an
institution certify that each of its GE programs meets applicable
accreditation and State and Federal licensing requirements to be
eligible for title IV, HEA program funds. The 2011 Prior Rule did not
include any similar certification requirements. For a more detailed
discussion of the proposed certification requirements, see ``Sec.
668.414 Certification requirements for GE programs.''
D/E Rates
D/E rates would be calculated each year for an eligible GE program
if at least 30 students completed the program during an applicable
cohort period, as described in ``Sec. 668.404 Calculating D/E rates.''
A GE program would pass the D/E rates measure if its discretionary
income rate is less than or equal to 20 percent or its annual earnings
rate is less than or equal to 8 percent. A program would fail the D/E
rates measure if its discretionary income rate is greater than 30
percent and its annual earnings rate is greater than 12 percent. A
program would be ``in the zone'' under the D/E rates measure if it is
not a passing program and its discretionary income rate is greater than
20 percent but less than or equal to 30 percent or its annual earnings
rate is greater than 8 percent but less than or equal to 12 percent.
See ``Sec. 668.410 Consequences of GE measures'' for an explanation of
the restrictions that would apply to programs with zone or failing D/E
rates.
As under the 2011 Prior Rule, a program would pass both D/E rates
if its median loan debt is zero. A program would fail the discretionary
income rate if the discretionary income is zero or negative. A program
would fail both D/E rates if its mean or median annual earnings are
zero. Although the 2011 Prior Rule did not specifically include the
latter provision, it follows that a program with zero mean or median
annual earnings could not satisfy the debt-to-earnings ratios and would
have been assessed accordingly.
A program would become ineligible under the D/E rates measure in
either of two ways. First, a program would become ineligible if it is a
failing program in two out of any three consecutive award years for
which the program's D/E rates are calculated. Second, a program would
become ineligible if, for four consecutive award years in which the D/E
rates measure is calculated, it is failing or in the zone. It is
important to note that a program could have a mix of zone and failing
D/E rates and still remain eligible over the course of the four-year
period as long as the program's failing results did not occur in two
out of three consecutive award years. But, if a program does not pass
at least once over any four-year period, it would become ineligible.
With respect to the D/E rates, the framework of the proposed
regulations would differ from the 2011 Prior Rule in several ways.
First, the D/E rates would be calculated for award years rather than
fiscal years as they were in the 2011 Prior Rule. See ``Sec. 668.404
Calculating D/E rates'' for an explanation of the differences between
an award year and a fiscal year. Second, the proposed regulations would
establish stricter passing thresholds than the thresholds in the 2011
Prior Rule. The passing threshold for the discretionary income rate
would be 20 percent instead of 30 percent, and the threshold for the
annual earnings rate would be 8 percent instead of 12 percent. Third,
the proposed regulations would add a zone category for programs with a
discretionary income rate greater than 20 percent but less than or
equal to 30 percent or an annual earnings rate greater than 8 percent
but less than or equal to 12 percent. Fourth, the proposed regulations
would allow programs with a mix of D/E rates that are failing and in
the zone up to four years to become passing before losing eligibility.
Finally, a program failing the D/E rates measure would lose eligibility
sooner than under the 2011 Prior Rule. Specifically, a program would
become ineligible after failing the D/E rates measure in two out of any
three consecutive award years instead of in three out of any four
consecutive fiscal years as provided under the 2011 Prior Rule. It is
important to note that, as explained in ``Sec. 668.401 Scope and
purpose'' and ``Sec. 668.404 Calculating D/E rates,'' unlike in the
2011 Prior Rule, which considered all students in its calculation of
the debt measures, the D/E rates would only consider students who
received title IV, HEA program funds for enrolling in the program.
pCDR
An eligible GE program's pCDR would be calculated each year. A GE
program would pass the pCDR measure if its pCDR is less than 30 percent
and would fail the pCDR measure if its pCDR is 30 percent or greater.
See ``Sec. 668.410 Consequences of GE measures'' for an explanation of
the restrictions that would apply to programs that fail the pCDR
measure. A GE program would become ineligible if it fails the pCDR
measure for three consecutive fiscal years.
The following charts illustrate the key components of the proposed
GE measures.
[[Page 16440]]
Overview of Metrics in the Proposed Regulations
------------------------------------------------------------------------
D/E rates Program cohort default rate
------------------------------------------------------------------------
Students
------------------------------------------------------------------------
Students who received title IV, HEA Students who received title IV,
program funds and completed the HEA program funds, whether or
program. not they completed the
program.
------------------------------------------------------------------------
Funds
------------------------------------------------------------------------
Title IV, HEA FFEL or Direct Loans, Title IV FFEL or Direct Loans
Perkins Loans, title IV grants, (Only borrowers would be
private loans, institutional loans or included in calculation.)
credit (Students would be included in
calculation even if they received
grants only but no loans.).
------------------------------------------------------------------------
Measurement period
------------------------------------------------------------------------
Annual loan payment of students who Of borrowers who entered
completed in the 3rd-4th (2-year repayment 3 fiscal years prior
period) or 3rd-6th award years (4-year to the year in which pCDR is
period) prior to the award year for calculated, percentage who
which D/E rates are calculated. defaulted by end of the
Earnings of these students for most subsequent 2 fiscal years.
recently completed calendar year. For example, 2016 pCDR
calculation: Of borrowers who
entered repayment in fiscal
year 2013, percentage who
defaulted by end of fiscal
year 2015.
For example, 2014-2015 D/E rates
calculation: Annual loan payment of
students who completed in award years
2010-2011 and 2011-2012 (2-year
period); earnings for 2014 calendar
year.
------------------------------------------------------------------------
Categories & thresholds
------------------------------------------------------------------------
Pass: annual D/E <= 8% Or discretionary Pass: pCDR < 30%
D/E <= 20%. Fail: pCDR >= 30%
Zone: 8% < annual D/E <= 12% Or 20% <
discretionary D/E <= 30%.
Fail: annual D/E > 12% AND
discretionary D/E > 30%.
------------------------------------------------------------------------
Ineligibility
------------------------------------------------------------------------
A program becomes ineligible for 3 A program becomes ineligible
years if:. for 3 years if it fails for 3
consecutive years.
It fails in any 2 out of 3 consecutive
years.
OR.....................................
Does not pass in any 1 out of 4
consecutive years (can be mix of zone
or failing results, but not 2 fails
out of 3 consecutive years).
------------------------------------------------------------------------
Other consequences
------------------------------------------------------------------------
If a problem could become ineligible If a problem could become
based on its next D/E rates, the ineligible based on its next
institution must issue warnings to pCDR, the institution must
enrolled and prospective students and issue warnings to enrolled and
add warning to disclosure template. prospective students and add
warning to disclosure
template.
------------------------------------------------------------------------
Independence of the D/E Rates and pCDR Measures
To maintain eligibility, a GE program would have to pass either of
the D/E rates--the discretionary income rate or the annual earnings
rate--and would also have to pass the pCDR measure. Unlike the 2011
Prior Rule where a program could become ineligible only if it failed
all of the metrics, under the proposed regulations, a program could
become ineligible if it does not pass the D/E rates measure only, does
not pass the pCDR measure only, or does not pass both the D/E rates and
pCDR measures.
Under Sec. 668.7(d)(2)(i)(A) of the 2011 Prior Rule, if the number
of students reflected in the calculations did not meet the minimum
number of students necessary to calculate either or both of the debt
measures, the debt-to-earnings ratios and the loan repayment rate, then
the program was considered to have satisfied both of the debt measures.
This would be the case even if the minimum number of students necessary
to calculate one of the measures was met and the rate for that measure
was a failing rate.
Under the proposed regulations, a program would receive a pCDR
result that would be used to assess the program regardless of whether
D/E rates could be calculated for the program. If the D/E rates also
could be calculated, then the program would receive results under both
metrics. Further, as stated previously, the results of one metric would
not affect the results of the other. For example, a program could
simultaneously pass the D/E rates measure, but fail the pCDR measure.
Likewise, a program could simultaneously be ``in the zone'' under the
D/E rates measure, but pass the pCDR measure.
Rates Not Calculated
As under the 2011 Prior Rule, under proposed Sec. 668.404(f), D/E
rates would not be calculated for an award year if fewer than 30
students completed the program during an applicable cohort period or if
SSA did not provide earnings information for the program. In such
instances, the program would not receive D/E rates for the award year.
In the 2011 Prior Rule, however, the program would be deemed to have
satisfied the debt measures.
For pCDR, on the other hand, due to the availability of certain
challenge and appeal options, there is no minimum program size that
would prevent the Department from calculating the pCDR. Even a program
with zero borrowers entering repayment would receive an
[[Page 16441]]
official pCDR of 0 percent and pass the measure. See ``Sec. 668.407
Calculating pCDR'' for more information on how pCDRs are calculated.
Reasons:
Background
The components of the proposed accountability framework that a
program must satisfy to meet the gainful employment requirement are
rooted in the legislative history of the predecessors to the statutory
provisions of sections 101(b)(1), 102(b), 102(c), and 481(b) of the HEA
that require institutions to establish the title IV, HEA program
eligibility of gainful employment programs. 20 U.S.C. 1001(b)(1),
1002(b)(1)(A)(i), (c)(1)(A), 1088(b).
The legislative history of the statute preceding the HEA that first
permitted students to obtain federally financed loans to enroll in
programs that prepared them for gainful employment in recognized
occupations demonstrates the conviction that the training offered by
these programs should equip students to earn enough to repay their
loans. APSCU v. Duncan, 870 F.Supp.2d at 139; see also 76 FR 34392.
Allowing these students to borrow was expected to neither unduly burden
the students nor pose ``a poor financial risk'' to taxpayers. 76 FR
34392. Specifically, the Senate Report accompanying the initial
legislation (the National Vocational Student Loan Insurance Act
(NVSLIA), Pub. L. 89-287) quotes extensively from testimony provided by
University of Iowa professor Dr. Kenneth B. Hoyt, who testified on
behalf of the American Personnel and Guidance Association. On this
point, the Senate Report sets out Dr. Hoyt's questions and conclusions:
Would these students be in a position to repay loans following
their training? . . .
If loans were made to these kinds of students, is it likely that
they could repay them following training? Would loan funds pay
dividends in terms of benefits accruing from the training students
received? It would seem that any discussion concerning this bill
must address itself to these questions. . . .
We are currently completing a second-year followup of these
students and expect these reported earnings to be even higher this
year. It seems evident that, in terms of this sample of students,
sufficient numbers were working for sufficient wages so as to make
the concept of student loans to be [repaid] following graduation a
reasonable approach to take. . . . I have found no reason to believe
that such funds are not needed, that their availability would be
unjustified in terms of benefits accruing to both these students and
to society in general, nor that they would represent a poor
financial risk.
Sen. Rep. No. 758, 89th Cong., First Sess. (1965) at 3745, 3748-49
(emphasis added).
Notably, both debt burden to the borrower and financial risk to
taxpayers and the Government were clearly considered in authorizing
federally backed student lending. Under the loan insurance program
enacted in the NVSLIA, the specific potential loss to taxpayers of
concern was the need to pay default claims to banks and other lenders
if the borrowers defaulted on the loans. After its passage, the NVSLIA
was merged into the HEA, which in title IV, part B, has both a direct
Federal loan insurance component and a Federal reinsurance component,
under which the Federal Government reimburses State and private non-
profit loan guaranty agencies upon their payment of default claims. 20
U.S.C. 1071(a)(1). Under either HEA component, taxpayers and the
Government assume the direct financial risk of default. 20 U.S.C.
1078(c) (Federal reinsurance for default claim payments), 20 U.S.C.
1080 (Federal insurance for default claims).
Not only did Congress consider expert assurances that vocational
training would enable graduates to earn wages that would not pose a
``poor financial risk'' of default, but an expert observed that this
conclusion rested on evidence that ``included both those who completed
and those who failed to complete the training.'' APSCU v. Duncan, 870
F.Supp.2d at 139, citing H.R. Rep. No. 89-308, at 4 (1965), and S. Rep.
No. 89-308, at 7, 1965 U.S.C.C.A.N. 3742, 3748.
The concerns regarding excessive student debt reflected in the
legislative history of the gainful employment eligibility provisions of
the HEA are as relevant now as they were then. Indeed, excessive
student debt affects students and the country in three significant
ways: payment burdens on the borrower; the cost of the loan subsidies
to taxpayers; and the negative consequences of default (which affect
borrowers and taxpayers).
The first consideration is payment burdens on the borrower. As we
said previously in connection with the 2011 Prior Rule and restate
here, loan payments that outweigh the benefits of the education and
training for GE programs that purport to lead to jobs and good wages
are an inefficient use of the borrower's resources. See 75 FR 43621.
The second consideration is taxpayer subsidies. As we said
previously in connection with the 2011 Prior Rule and restate here,
borrowers who have low incomes but high debt may reduce their payments
through income-driven repayment plans. These plans can either be at
little or no cost to taxpayers or, through loan cancellation, can cost
taxpayers as much as the full amount of the loan with interest. 75 FR
43622. Deferments and repayment options are important protections for
borrowers because, although postsecondary education generally brings
higher earnings, there is no guarantee for the individual. Policies
that assist those with high debt burdens are a critical form of
insurance. However, these repayment options should not mean that
institutions should increase the level of risk to the individual
student or taxpayers through high-cost, low-value programs. See id.
The third consideration is default. The Federal Government covers
the cost of defaults on Federal student loans. These costs can be
significant to taxpayers. Id. And as we said previously in connection
with the 2011 Prior Rule and restate here, loan defaults harm students
and their families. Id. Their credit rating is damaged, undermining
their ability to rent a house, get a mortgage, or purchase a car. To
the extent they can get credit, they pay much higher interest. And,
increasingly, employers consider credit records in their hiring
decisions. 75 FR 43622. In addition, former students who default on
Federal loans cannot receive additional title IV, HEA program funds for
postsecondary education. Id.; see also section 484(a)(3) of the HEA, 20
U.S.C. 1091(a)(3).
In accordance with the legislative intent behind the gainful
employment eligibility provisions now found in sections 101, 102, and
481 of the HEA and the significant policy concerns they reflect, we
propose to use the certification requirements to establish a program's
eligibility and, to assess continuing eligibility, the metrics-based
standards that measure whether students will be able to pay back the
educational debt they incur to enroll in the occupational training
programs that are the subject of this rulemaking. 20 U.S.C. 1001(b)(1),
1002(b)(1)(A)(i), (c)(1)(A), 1088(b).
Certification Requirements
Under proposed Sec. Sec. 668.403 and 668.414, institutions must
certify through their program participation agreements that their GE
programs meet all applicable accreditation and State and Federal
licensing requirements to be eligible for title IV, HEA program funds.
Through the certification requirements, institutions would be required
to assess their programs to determine whether they meet these minimum
required standards.
[[Page 16442]]
A program that cannot meet the basic certification requirements
cannot be said to be preparing students for gainful employment in a
recognized occupation. We believe that any student attending such a
program would have a difficult time or be unable to secure employment
in the occupation for which he or she received training and,
consequently, would likely struggle to repay the debt incurred for
enrolling in that program. The certification requirements are intended
to help prevent such outcomes and are an appropriate condition that
programs must meet to qualify for title IV, HEA program funds as they
squarely address the debt repayment concerns underlying the gainful
employment eligibility provisions of the HEA. As we have proposed that
these certifications must be signed by an institution's most senior
executive officer, we believe that institutions would make this self-
assessment in good faith and after appropriate due diligence. The
certification requirements are discussed in more detail in ``Sec.
668.414 Certification requirements for GE programs.''
The GE Measures
The debt-to-earnings measures under both the 2011 Prior Rule and
the proposed regulations assess the debt burden incurred by students
who completed a GE program in relation to their earnings. The pCDR
measure, like the loan repayment rate in the 2011 Prior Rule, would
assess the extent to which a program's borrowers are paying back their
loans, whether or not they completed the program, by measuring the GE
program's loan default rate.
Both the D/E rates measure and pCDR measure assess program outcomes
that, consistent with legislative intent, indicate whether a program is
preparing students for gainful employment. Although the measures
supplement and complement one another, each focuses on separate and
distinct expectations on which Congress relied in enacting legislation
that make these programs eligible for title IV, HEA program funds based
on the condition that they provide training that prepares students for
gainful employment. Consequently, we believe the measures should
operate independently.
Some negotiators questioned the proposed use of D/E rates and pCDR
as independent eligibility measures. They suggested the accountability
framework is inconsistent with the approach taken in the 2011 Prior
Rule in which the debt measures, taken together, were designed to
identify the worst performing programs. Our change in approach is a
change not in overall objective, but in the manner in which we believe
that objective is best accomplished.
The D/E rates and pCDR measures are designed to reflect and account
for the three primary reasons that a program may fail to prepare
students for gainful employment where former students are unable to
earn wages adequate to manage their educational debt: (1) a program
does not train students in the skills they need to obtain and maintain
jobs in the occupation for which the program purports to train
students, (2) a program provides training for an occupation for which
low wages do not justify program costs, and (3) the program is
experiencing a high number of withdrawals or ``churn'' because
relatively large numbers of students enroll but few, or none, complete
the program, which can often lead to default. See ``Sec. 668.413
Calculating, issuing, and challenging completion rates, withdrawal
rates, repayment rates, median loan debt, and median earnings,'' for a
more complete discussion of withdrawal rates and ``churn.''
The D/E rates measure assesses the outcomes of only those students
who complete the program. The calculation includes former title IV, HEA
program fund recipients who took on educational debt and recipients who
did not. And, for those students who have debt, the D/E rates take into
account private loans and institutional financing in addition to title
IV, HEA program loans.
The D/E rates primarily assess whether the loan funds obtained by
students ``pay dividends in terms of benefits accruing from the
training students received,'' and whether such training has indeed
equipped students to earn enough to repay their loans such that they
are not unduly burdened. H.R. Rep. No. 89-308, at 4 (1956); S. Rep. No.
89-758, at 7 (1965). A 2002 survey found that a majority of borrowers
felt burdened by their student loan payments and reported that they
would borrow ``much less'' or a ``little less'' to finance their higher
education if they were to enroll again in an educational program. An
analysis of the 2002 survey combined borrowers' responses to questions
about student loan burden, hardship, and regret to create a ``debt
burden index'' that was significantly positively associated with
borrowers' debt-to-income ratios; in other words, borrowers with higher
debt-to-income ratios tended to feel higher levels of burden, hardship,
and regret.\45\ ``Burden'' and ``regret'' were significantly positively
associated with one's debt-to-income ratio.\46\
---------------------------------------------------------------------------
\45\ Baum, S., and Schwartz, S. (2003). How Much Debt is Too
Much? Defining Benchmarks for Managing Student Debt.
\46\ Id.
---------------------------------------------------------------------------
As a result, the D/E rates measure identifies programs that fail to
adequately provide students with the occupational skills needed to
obtain employment or that train students for occupations with low
demand and low wages. The D/E rates also provide evidence of the
experience of borrowers and, specifically, where borrowers may be
struggling with their debt burden.
In contrast to the D/E rates measure, pCDR measures the extent to
which a program's former students are paying back their Direct and FFEL
loans regardless of their earnings, if any. In comparison to the D/E
rates measure, the pCDR measure applies to those programs that have
relatively high enrollments but no or few completions such that
students are left with debt they cannot repay. A substantial body of
research suggests that ``completing a postsecondary program is the
strongest single predictor of not defaulting regardless of institution
type.'' \47\
---------------------------------------------------------------------------
\47\ Gross, J. P., Cekic, O., Hossler, D., and Hillman, N.
(2009). What Matters in Student Loan Default: A Review of the
Research Literature. Journal of Student Financial Aid, 39(1), 19-29.
---------------------------------------------------------------------------
The legislative history supports inclusion of students who did not
complete a program in the proposed accountability framework. As
discussed previously, Congress specifically considered expert advice
that students who took out Federal loans for the purpose of training
programs, including students who do not complete the programs, would be
able to repay those loans, as defaults by those students would burden
taxpayers in the same way as defaults by students who completed the
program.
The pCDR, consequently, is foremost a measure that assesses whether
a program presents a ``poor financial risk to the taxpayer.'' 76 FR
34392. In light of congressional intent reflected in the legislative
history, a program that presents a poor financial risk for taxpayers
cannot be considered a program that prepares students for gainful
employment.
Despite the distinctive purposes of the D/E rates and pCDR
measures, the measures supplement and complement one another. The scope
of the pCDR measure is broader than the D/E rates measure as pCDR also
takes into account the outcomes of borrowers who did not complete the
program. Accordingly, the pCDR measure supplements the D/E rates in
those cases in which D/E rates cannot be calculated
[[Page 16443]]
because no or very few students who enrolled in a program actually
completed the program. By including an accountability metric that
reflects the outcomes of students who do not complete the program,
institutions would have incentive to address any high dropout and
``churn'' issues or face the loss of eligibility.
Likewise, the D/E rates measure complements the pCDR measure.
Specifically, the pCDR measure does not take into account the many
students who may be struggling to repay their loans, such as those
receiving economic hardship deferments or who are in an income-driven
repayment plan. These students may see their loans grow, rather than
shrink, because their incomes are low and their debts are high. While
the pCDR measure may not identify programs whose former students are in
such circumstances, the D/E rates measure would take into account those
students who are struggling with their debt burden despite having
completed their programs.
Although we have proposed the pCDR measure to assess the outcomes
of all students who attend a program, both students who complete the
program and those who do not, we invite comment as to whether the D/E
rates measure should also consider the outcomes of students who do not
complete the program, in addition to those who do. We ask commenters to
provide information, studies, and data to support their comments.
D/E Rates
The proposed regulations would include the same two debt-to-
earnings measures as the 2011 Prior Rule. Under the proposed
regulations, the first D/E rate, the discretionary income rate,
measures the proportion of annual discretionary income--the amount of
income above 150 percent of the Poverty Guideline for a single person
in the continental United States--that students who complete the
program are devoting to annual debt payments. The Department also
proposes a second rate, the annual earnings rate, which measures the
proportion of annual earnings that students who complete the program
are devoting to annual debt payments. A program would pass the D/E
rates measure by meeting the standards of either of the two metrics,
the discretionary income rate or the annual earnings rate. For an
explanation of the methodology that would be used to calculate the D/E
rates, see ``Sec. 668.404 Calculating D/E rates.''
The proposed passing thresholds for the discretionary income rate
and the annual earnings rate are based upon mortgage industry practices
and expert recommendations. The passing threshold for the discretionary
income rate is set at 20 percent, based on research conducted by
economists Sandy Baum and Saul Schwartz, which the Department
previously considered in connection with the 2011 Prior Rule.\48\
Specifically, Baum and Schwartz proposed benchmarks for manageable debt
levels at 20 percent of discretionary income. Such benchmarks would
ensure that low income borrowers have no repayment obligations and that
no borrower would ever have repayment obligations that exceeded 20
percent of their income, a level they found to be unreasonable under
virtually all circumstances.\49\ The passing threshold of 8 percent for
the annual earnings rate used in the proposed regulations has been a
fairly common mortgage-underwriting standard, as many lenders typically
recommend that all non-mortgage loan installments not exceed 8 percent
of the borrower's pretax income.\50\ Studies of student debt have
accepted the 8 percent standard and some State agencies have
established guidelines based on this limit. Eight percent represents
the difference between the typical ratios used by lenders for the limit
of total debt service payments to pretax income, 36 percent, and
housing payments to pretax income, 28 percent.\51\
---------------------------------------------------------------------------
\48\ Baum, S., and Schwartz, S. (2006). How Much Debt is Too
Much? Defining Benchmarks for Managing Student Debt. See also S.
Baum, ``Gainful Employment,'' posting to The Chronicle of Higher
Education, http://chronicle.com/blogs/innovations/gainful-employment/26770, in which Baum described the 2006 study:
This paper traced the history of the long-time rule of thumb
that students who had to pay more than 8% of their incomes for
student loans might face difficulties and looked for better
guidelines. It concluded that manageable payment-to-income ratios
increase with incomes, but that no former student should have to pay
more than 20% of their discretionary income for all student loans
from all sources.
\49\ Id.
\50\ Id. at 2-3.
\51\ Id.
---------------------------------------------------------------------------
In the 2011 Prior Rule, the passing thresholds for the debt-to-
earnings ratios were based on the same expert recommendations and
industry practice, but were increased by 50 percent to 30 percent for
the discretionary income rate and 12 percent for the annual earnings
rate to identify the lowest-performing GE programs and to build in a
tolerance. 76 FR 34400.
Upon further consideration of this issue and analysis of the GE
Data, we believe that the stated objectives of the 2011 Prior Rule to
identify the worst performing programs and build a ``tolerance'' into
the thresholds are better achieved by setting 30 percent for the
discretionary income rate and 12 percent for the annual earnings rate
as the upper boundaries for a zone rather than as the passing
thresholds. For the following reasons, adopting this approach is
consistent with the Department's objectives in this rulemaking of
identifying poorly performing programs, and providing institutions
time, particularly in the initial years of the proposed regulations, to
improve their programs.
First, the proposed regulations would still identify the lowest
performing programs, those with a discretionary income rate greater
than 30 percent and an annual earnings rate greater than 12 percent, by
categorizing them as failing. Whereas the 2011 Prior Rule provided that
a program would be ineligible if it had failing rates for three out of
any four consecutive years, under the proposed regulations, a GE
program that fails the D/E rates measure in two out of any three
consecutive years would become ineligible. This reflects the
Department's view in the prior rulemaking, as well as here, that any
program with D/E rates above a 30 percent discretionary income rate or
a 12 percent annual earnings rate is producing very poor outcomes for
its students and should, in order to minimize the program's negative
impact on students, be given only limited time before it loses its
eligibility.
Because of the previous rulemaking and the release of the 2011 GE
informational rates in June 2012, we believe many institutions have had
relevant information for a sufficient amount of time to assess their
programs and make improvements, particularly by reducing costs. As
discussed in more detail below, the proposed four-year transition
period would take into consideration these improvements. Even where
institutions have not taken action, or in cases where programs were not
included in the 2011 GE informational rates, the transition period
would still account for any immediate reductions in costs that
institutions make in response to the proposed regulations. For a more
detailed explanation of the transition period, see ``Sec. 668.404
Calculating D/E rates.'' Accordingly, less time to ineligibility for
failing programs is merited in comparison to the 2011 Prior Rule.
Second, we propose setting the passing thresholds at 20 percent for
the discretionary income rate and 8 percent for the annual earnings
rate, which are what experts and industry practice deem to be the
outside limit of
[[Page 16444]]
acceptable debt burden. As stated above, Baum and Schwarz concluded
that the ratio of discretionary income to debt should never exceed 17
to 20 percent.\52\ Similarly, the 8 percent threshold for the annual
earnings rate is based on the credit underwriting industry's judgment
of the outside limit of all non-mortgage debt. Although not among the
very worst performers, programs with D/E rates exceeding the 20 percent
and 8 percent thresholds still exhibit poor outcomes and unacceptable
debt levels. Eventual ineligibility for these programs is appropriate
if they do not make improvements that will be reflected in their D/E
rates.
---------------------------------------------------------------------------
\52\ Baum, S., and Schwartz, S. (2003). How Much Debt is Too
Much? Defining Benchmarks for Managing Student Debt.
---------------------------------------------------------------------------
Our analysis of the 2012 GE informational rates indicates that the
stricter thresholds would more effectively identify poorly performing
programs. The average earnings of students who completed programs
evaluated by the Department with a discretionary income rate or an
annual earnings rate in between the passing thresholds of the proposed
regulations and the 2011 Prior Rule, 20-30 percent and 8-12 percent,
respectively, is under $18,000.\53\ Under the thresholds of the 2011
Prior Rule, a zone program would pass the D/E rates measure, even
though its graduates could be devoting up to almost $2,200, or 12
percent, of their $18,000 in annual earnings toward student loan
payments. We believe it would be very difficult for an individual
earning $18,000 to manage that level of debt. That 25 percent of
borrowers from zone programs evaluated by the Department default on
their Federal student loans within the first three years of entering
repayment lends support to this conclusion.\54\ In comparison, the
average default rate of programs evaluated by the Department that would
pass the D/E rates measure under the proposed regulations is 19
percent.\55\ These results indicate that students who complete zone
programs have very different outcomes than students who complete
passing programs. These programs, accordingly, should not be treated
the same.
---------------------------------------------------------------------------
\53\ 2012 GE informational rates.
\54\ Id.
\55\ Id.
---------------------------------------------------------------------------
Third, because programs in the zone are not among the very worst,
they have a greater potential to raise their performance to passing
levels than programs with poorer outcomes. We believe they should be
afforded an opportunity to do so. For this reason, the proposed
regulations include a four-year zone and allow for a transition period
to allow zone programs more time than failing programs to improve
before being made ineligible. Because institutions have the ability to
impact the debt that their students accumulate by lowering tuition and
fees, which the transitional D/E rates calculations would take into
account, we believe it is possible for zone programs to improve. If
institutions do not make improvements to these programs, they would be
made ineligible just as failing programs, because, as deemed by experts
and industry practice and supported by our own data analysis, both
groups of programs are leaving their students with unacceptable debt
burdens in comparison to their incomes.
As discussed under ``Sec. 668.404 Calculating D/E rates,'' the
proposed regulations would allow for a transition period for the first
four years after the final regulations become effective. During the
transition period, an alternative D/E rates calculation would be made
so that institutions could benefit from any immediate reductions in
cost they make. During these four years, the transition period and zone
together would allow institutions to make improvements to their
programs in order to become passing. Institutions that lower tuition
and fees sufficiently at the outset of the transition period could move
failing programs into the zone in order to avoid ineligibility. These
institutions would then have additional transition and zone years to
continue to improve their programs and make them passing. During this
period, the Department would also provide to institutions their results
under the regular D/E rates calculation so that they could measure the
amount of cost reduction they would need to make in order for their
programs to pass once the transition period concludes.
After the conclusion of the transition period, the overall
accountability and transparency framework of the proposed regulations,
including the zone, should motivate continuous improvement by
institutions. If institutions begin reducing costs and improving
quality at the start of the transition period, and sustain those
efforts after the transition period, a program that falls in the zone
in the future would benefit from the four-year time period because
consistent improvements would be reflected in the program's D/E rates
on an ongoing basis.
Fourth, a four-year zone provides a buffer to account for
statistical imprecision due to random year-to-year variations,
virtually eliminating the possibility that a program would mistakenly
be found ineligible on the basis of D/E rates for students who
completed the program in any one year. As demonstrated below by the
Department's analysis of the 2012 GE informational rates, given the
extreme unlikelihood that an unrepresentative population of students
who completed the program could occur in four out of four consecutive
years, that is, that a program's D/E rates exceed the 8 percent and 20
percent thresholds four years in a row when in fact its D/E rates are
on average less than 8 percent and 20 percent for a typical year, there
is no need to build in a tolerance by adjusting the thresholds at the
expense of holding all poorly performing programs accountable as was
done in the 2011 Prior Rule because the zone provides that tolerance.
In other words, we believe the zone accounts for statistical
imprecision while still holding all poorly performing programs
accountable over time.
The findings of our statistical analysis are discussed in the
following paragraphs. For demonstrative purposes, the probabilities
provided below are for the annual earnings rate because our analysis
indicates that, of programs that would pass the D/E rates, the
substantial majority would pass this measure. Our analysis assumes that
the observed annual earnings rates of passing programs reasonably
approximate the true distribution of passing annual earnings rates.
Note also that, although we have proposed an ``n-size'' of 30 in the
proposed regulations, we have also invited comment on an n-size of 10.
See ``Sec. 668.404 Calculating D/E rates.'' Accordingly, our analysis
assessed the statistical precision of the measure using both an n-size
of 30 and an n-size of 10.
If the minimum number of students completing a program (``n-size'')
necessary to calculate the program's D/E rates is set at 30, as is the
case in the proposed regulations, the expected or average probability
that a passing program would be mischaracterized as a zone program in a
single year is no more than 2.7 percent. Because this is an average
across all programs with passing D/E rates, it is important to note
that the probability is lower the farther a program is from the passing
threshold and higher for programs with D/E rates closer to the passing
threshold. At an n-size of 10, the probability that a passing program
would be mischaracterized as a zone program in a single year would be
no more than 6.7 percent.
Because no program would be found ineligible after just a single
year, it is important to look at the statistical precision analysis
across multiple years. These probabilities drop significantly for both
an n-size of 30 and 10 when
[[Page 16445]]
looking across the four years that a program could be in the zone
before becoming ineligible. The average probability of a passing
program becoming ineligible as a result of being mischaracterized as a
zone program for four consecutive years at an n-size of 30 is close to
0 percent. At an n-size of 10, the average probability is no more than
1.4 percent.
Setting the failing D/E rates thresholds at 30 percent for the
discretionary income rate and 12 percent for the annual earnings rate
also virtually eliminates the probability of a passing program losing
eligibility because of being mischaracterized as failing at either n-
size.
The probability of a passing program being mischaracterized as a
failing program in a single year at an n-size of 30 is close to 0
percent. At an n-size of 10, the probability is no more than 0.7
percent. Although we know that these are the upper limits of the
probabilities of a passing program being mischaracterized as failing,
it is likely that the probabilities are lower when taken across the two
years of failures required for a program to become ineligible. We are
unable to provide more precise probabilities for the scenario of
failing two out three years due to limitations in our data.\56\
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\56\ We are unable to provide more precise probabilities for the
scenario of a program that fails the D/E rates measure in two out of
three years. Because some students are common to consecutive two-
year cohort periods for the D/E rates calculations, we cannot rely
on the assumption that each year's D/E rates are statistically
independent from the previous and subsequent year's D/E rates.
Without the assumption of independence between years, there is no
widely accepted method for calculating the probability of a program
failing the D/E rates measure in two out of three years.
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Other aspects of the D/E rates measure in the proposed regulations
also reduce the probability of a program becoming a failing or
ineligible program in error. As a general matter, both the debt and
earnings components of the discretionary income rate and annual
earnings rate calculations are calculated as means or medians, which,
as measures of central tendency, account for outliers. And as stated
previously, both passing thresholds are set at the very outside limits
of the recommendations from which they are drawn, resulting in a
``built-in'' buffer.
Although we propose to use the same D/E rates measure for the
purpose of determining program eligibility as in the 2011 Prior Rule
but with stricter passing thresholds and a zone category, we seek
comment on whether the passing thresholds used in the 2011 Prior Rule--
12 percent for the annual earnings rate and 30 percent for the
discretionary income rate--should be adopted instead. We strongly urge
commenters to provide supporting data or studies that the Department
can use in evaluating regulatory alternatives.
pCDR
To assess the repayment performance of former students, we propose
to use a different method than the loan repayment rate measure in the
2011 Prior Rule: the percentage of those students who default within a
defined period, which we refer to as the program cohort default rate or
pCDR.
In the 2011 Prior Rule, to assess repayment performance, the
Department used the loan repayment rate measure in Sec. 668.7(b),
which measured the extent to which students who borrowed to enroll in a
GE program were repaying their loans. In proposing the loan repayment
rate measure, the Department explained that the measure was designed to
protect the taxpayer as well as the borrower from exposure to default:
``This concern--protecting the taxpayer--motivates the repayment rate
measure, which indicates the taxpayer's exposure to delayed repayment
or default.'' 75 FR 43622 (emphasis added). The Department adopted in
Sec. 668.7(a)(2) and (b) of the 2011 Prior Rule a minimum threshold of
35 percent as the percentage of loan amount borrowed by former students
that those borrowers had actually repaid, through the recent fiscal
year, at a rate that reduced the ``outstanding balance'' owed. That
threshold was adopted to identify ``the approximately one-quarter of
programs where 65 percent of the former students attempting to repay
their loans were nonetheless seeing their loan balances grow.'' 73 FR
34395.
In APSCU v. Duncan, the court found that the Department had not
provided a ``reasoned explanation'' for the 35 percent threshold other
than that it would identify the worst-performing quartile, APSCU v.
Duncan, 870 F.Supp.2d at 154, and vacated that portion of the
regulations. Nevertheless, we continue to consider loan repayment
performance of a GE program's former students to be relevant evidence
of whether a program meets the gainful employment requirement. Unlike
with the debt-to-earnings rates, however, the Department has found no
expert studies or industry practice that would provide the kind of
factual support for identifying a particular loan repayment rate as an
appropriate threshold for determining whether a program prepares
students for gainful employment, nor has it found alternative support
or arguments in support of a threshold.
Instead, we seek to measure the loan repayment performance based on
the proposed pCDR accountability metric, which is modeled after the
cohort default rate metric that is currently used to determine
institutional eligibility to participate in title IV, HEA programs
(institutional CDR or iCDR). Specifically, we propose to use pCDR as a
measure, independent of the D/E rates measure, to determine the
continuing title IV, HEA eligibility of a GE program. To determine
whether a program is failing, the Department would use the same
threshold as is used to disqualify institutions from the title IV, HEA
programs. 20 U.S.C. 1085(m). A program would be failing the pCDR
measure if it had a pCDR of 30 percent or greater.
Because the HEA sets the standard for when an institution loses
eligibility under the iCDR provisions, we consider that congressional
determination--three consecutive fiscal years of an iCDR of 30 percent
or greater--to provide compelling support for use of the identical
standard to assess the eligibility of a GE program. Because every
institution is the sum of its programs, the iCDR is simply the
aggregate outcome of the default performance of students from all of
its programs.
The legislative history of the HEA provisions that impose the iCDR
eligibility test do not appear to discuss the rationale for any of the
specific threshold rates Congress chose to use between 1990 (30
percent) and the present (also 30 percent). The legislative history
does show, however, that Congress has closely attended to calibrating
the iCDR test and its effect on institutions, as evidenced by numerous
and regular amendments. These amendments made significant changes to
the iCDR rule over the years: they changed the rates themselves,
exempted various classes of institutions from the test, expanded and
refined the grounds on which institutions could appeal a loss of
eligibility, denied eligibility for Pell Grants to those institutions
that lost eligibility on CDR grounds, and, most recently, expanded the
period during which defaults were held against the institution from the
two-year period adopted in 1990 to three years.\57\ This history amply
[[Page 16446]]
demonstrates that the current iCDR rate, which is incorporated into the
proposed regulations at the program level, reflects Congress's
experiences and careful deliberation over the years.
---------------------------------------------------------------------------
\57\ The earliest legislation to use cohort default rate was
Public Law 101-239, section 2003(a), Dec. 19, 1989, 103 Stat 2106,
2120, which made an institution with a single year CDR of 30 percent
or more ineligible for Supplemental Loans for Students, a FFELP loan
authorized under section 428A as in effect at the time, and added
subsection (m) to section 435 of the HEA to define the term cohort
default rate. This followed the Department's June 5, 1989, adoption
of regulations that made an institution with a single-year CDR of 40
percent or greater subject to termination of eligibility. 34 CFR
668.15 (1990), 54 FR 24114 (June 5, 1989). The three-year CDR test
structure was adopted shortly thereafter by Pub. L. 101-508, section
3004, Nov. 5, 1990, 104 Stat. 1388-26, which amended section 435(a)
of the HEA to adopt the three-year CDR test in effect ever since; to
set the CDR rate thresholds at 35 percent for FY 1991 and 1992, and
30 percent for FY 1993 and subsequent fiscal years; and to exempt
until 1994 historically black colleges and universities and tribally
controlled colleges and universities, as identified by the Tribally
Controlled Community College Assistance Act and the Navajo Community
College Act from the cohort default rate thresholds. 20 U.S.C.
1085(a)(2)(B), (C). (This exemption was extended several times and
ultimately ended in 1999.) Congress revised the CDR thresholds in
1992 amendments, reducing the threshold to 25 percent for fiscal
years beginning in 1994. Pub. L. 102-325, section 427, 106 Stat 448,
July 23, 1992. Congress substantially revised the appeal options in
1993 to allow challenges to loss of eligibility based on improper
servicing, Pub. L. 103-208, section 2(c)(55), Dec. 20, 1993, 107
Stat 2457. Appeal options were further expanded in 1998 to permit
appeals based on ``mitigating circumstances,'' including low
borrowing and high placement rates for GE programs, and
disqualifying from Pell Grant eligibility those institutions that
fail the CDR test. Pub. L. 105-244, sections 401, 429, Oct. 7, 1998,
112 Stat. 1704 to 1709. Most recently, Congress extended the period
during which defaults would be assessed from the two-year period
under prior law to a three fiscal year period and changed the CDR
threshold back to 30 percent for fiscal years beginning in 2012, the
first year in which the three-year period would apply. Pub. L. 110-
315, section 436, 102 Stat 3258.
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Thus, we consider it reasonable to rely on the 30 percent standard
adopted by Congress. We have found no analytical criticism of the 30
percent standard. Given the unique characteristics of the Federal
student loan program, such as the lack of any creditworthiness test, we
propose to rely on the well-established standard deliberated and
adopted by Congress.
Moreover, this standard has been applied on a program-level basis
for many years, as there are a number of institutions offering only one
eligible program that are evaluated on whether that one program's
default rate is meeting the 30 percent threshold established by
Congress. In other words, in those cases, the iCDR measure is
effectively already used as a program-level CDR measure.
In connection with the negotiated rulemaking process for the 2011
Prior Rule, several commenters suggested that the Department use
institutional CDR as a measure of whether a program prepares students
for gainful employment. The Department declined to do so, stating that
``an institution's average [cohort default rate] does not measure the
effect of any individual program.'' 76 FR 34386, 34387 (June 11, 2011)
(emphasis added). The institutional CDR ``may mask an underperforming
program . . . [and] may therefore be a misleading measure of an
individual program's success in providing students with sufficient
income to pay off educational loan debt.'' 76 FR 34411 (emphasis
added). Notably, these arguments apply only to the use of iCDR to
measure whether individual programs produce excessive debt burdens. The
Department did not consider applying the iCDR methodology to assess the
default performance of individual programs, as we now propose. Further,
at that time, the Department's proposal already included a metric to
measure loan repayment performance--the loan repayment rate.
We continue to believe that iCDR itself is not a useful measure in
determining whether a program prepares students for gainful employment
in a recognized occupation (except for institutions offering only one
eligible program). Although a passing iCDR indicates that an
institution is, on average, across programs, producing an acceptable
number of students that are able to pay their loans, iCDR does not
measure individual GE program performance and, therefore, does not
provide the information that would be most useful to prospective
students and their families considering a particular program. For
students who find themselves in a GE program that is leaving its
students with unmanageable debt, the fact that an institution has other
programs that are producing better student outcomes is of limited
utility. When applied at the program level, however, we believe a
cohort default rate is a valuable measure of GE program performance. We
also expect the implementation of pCDR as a GE measure would have a
similar effect on the cohort default rates at a program level as did
iCDR on the institutional level. 76 FR 34484. That is, when iCDR was
introduced there was an initial elimination of the worst-performing
programs followed by a new equilibrium in which programs complied with
the minimum standards in the regulations. Id.
Proposed new subpart R would establish the procedures and
methodology that would be applied to determine a GE program's pCDR.
Subpart R is virtually identical to subpart N of part 668, which
establishes the procedures and methodology used to determine iCDR. We
have drafted proposed subpart R to follow the text and procedures in
subpart N in order to assist institutions already familiar with the
iCDR process to understand the pCDR procedures and methodology.
Provisions of subpart N that are not relevant to pCDR determinations or
are not adopted for pCDR purposes have been reserved in subpart R.
The major difference between iCDR and our proposed use of pCDR is
that, in the proposed regulations, we would adopt only the statutory
CDR threshold for loss of eligibility (rates of 30 percent or greater
for three consecutive fiscal years), and would not adopt the additional
regulatory provision under which an institution loses eligibility if it
has an iCDR greater than 40 percent in a single fiscal year. This is
consistent with our overall approach to allow institutions time to
improve their programs so that a program would not lose eligibility
after only a single year of failure to meet a GE measure.
For the pCDR measure, we propose no counterpart to the zone or the
transition period used for the D/E rates measure. There are no
equivalent provisions in the iCDR framework. However, we note that
because institutions have been subject to the iCDR standards for many
years, we do not believe that there is a similar need for a zone or a
transition period in connection with the pCDR measure.
Under the proposed regulations, we would replicate the iCDR
determination process for the purpose of determining pCDR. Thus, the
same procedures and methodology used in calculating cohort default
rates for institutions under section 435 of the HEA, 20 U.S.C. 1085,
and Department regulations would largely apply to the calculation of
pCDR. For example, the proposed regulations would mirror regulations
contained in subpart R that address the calculation of cohort default
rates for institutions with few borrowers entering repayment, Sec.
668.202(a)(2) (calculation of rate when fewer than 30 borrowers enter
repayment in a fiscal year).
The proposed regulations would also provide an institution with the
same challenges and appeals for the pCDR determination as are provided
for the iCDR determination. We believe that institutions are familiar
with these challenges and appeals and can readily use them in
connection with pCDR determinations.
We propose to exclude from subpart R provisions of 34 CFR part 668,
subpart N, that address matters that are not necessary components of
the rate determination process itself, such as Sec. 668.204(c)(1)(iii)
(affecting administrative capability of the institution under Sec.
668.16(m)), or do not readily apply to program-level rates, such as
Sec. 668.203 (calculation of CDR
[[Page 16447]]
for institutions or locations that undergo a change in ownership).
We have considered each provision of subpart N to determine its
applicability to pCDR and believe that a cohort default rate,
calculated under the specific procedures and methodology adopted from
iCDR, is a valuable and reasonable metric at the program level for the
reasons explained above.
During the negotiation sessions, several non-Federal negotiators
suggested that pCDR would be an inadequate measure of whether a program
prepares students for gainful employment. These negotiators believed
that the iCDR methodology does not capture the extent to which
borrowers facing an excessive debt burden can, by various deferments
and forbearances, temporarily avoid the adverse consequence of that
debt burden, only to default after the three-year period during which
the CDR tracks defaults. They were concerned that institutions would
encourage students to enter forbearance or deferment in order to evade
the consequences of the pCDR measure and urged the Department to modify
the existing iCDR methodology to disregard these non-payors when
calculating pCDR.
We acknowledge that cohort default rates do not take into account
students who are receiving deferments or forbearances, or who may be
paying much less or even nothing as a result of repaying under an
income-driven repayment plan, but we are not inclined to make a change
that would cause the proposed pCDR requirements to differ so
significantly from the institutional CDR requirements. Although we are
concerned about the manipulation of cohort default rates through the
deferments, forbearances, and income-driven repayment plans identified
by some negotiators, we believe that pCDR should be consistent with
iCDR to avoid conflicting results. For example, if we accepted the
negotiators' proposal to adopt, but modify, the iCDR provisions for
purposes of pCDR to address the concern presented, an institution with
only one program could be determined to be an eligible institution with
respect to its one program under iCDR, but that program could be
determined to be ineligible under the proposed pCDR provision. The
Department wishes to avoid such contrary consequences.
During the negotiations, we encouraged the negotiators to submit
proposals for alternative methods of assessing loan repayment and the
corresponding thresholds, together with the kind of evidence or
analysis that the Department would need to pursue a different approach
to assessing repayment. Negotiators responded to this request with
proposals that included using completion rates, placement rates, and
repayment rates as alternative eligibility measures. However, we
received no proposals with a level of support sufficient for
rulemaking. We believe section 435 of the HEA, 20 U.S.C. 1085, provides
such support for the pCDR measure, and explain above why application of
the cohort default rate at a program level is reasonable.
Negotiators also provided responses on a proposal the Department
made at the second negotiation session to evaluate loan repayment
performance based on whether the program's loan portfolio was
negatively amortized. As we explained at the third session, we were
unable to draw conclusions from the data available at the time on the
negative amortization proposal. Accordingly, we have not pursued this
proposal further.
Other negotiators strongly objected to the proposal not to adopt,
for the purpose of pCDR as an eligibility measure, the iCDR regulatory
provision that results in the termination of an institution's
eligibility after one fiscal year iCDR of greater than 40 percent. 34
CFR 668.206(a)(1). The negotiators were concerned that a program that
may be one of the worst performers would remain eligible for perhaps
two more years, harming more students in the interim. However, as
explained earlier, we propose to adopt an accountability framework that
does not result in ineligibility based on just one year of poor
performance. Adopting a provision that would make a program ineligible
after one year of failure would not be consistent with that intention.
For a program that fails the pCDR measure, an institution can make
efforts to assist subsequent cohorts of borrowers entering repayment
with managing their debt burdens to lower the rates of default and,
over the long term, can reduce debt burden altogether by lowering
costs.
Some negotiators questioned whether the iCDR methodology would
effectively address situations in which a program has a small number of
borrowers, and whether such lesser numbers might result in volatility
of rates. We responded, and repeat here, that the iCDR process, as
established by statute and as refined by regulation, explicitly
addresses the manner in which rates are calculated for institutions
with a small number of borrowers entering repayment, in ways that
mitigate volatility that may arise from small numbers. Indeed, section
435(m)(3) of the HEA, 20 U.S.C. 1085(m)(3), explicitly provides that
when fewer than 30 borrowers enter repayment in a fiscal year, the iCDR
of that institution for that year is based on those students who
entered repayment in that fiscal year and the preceding two fiscal
years. Sec. 668.202(d)(2). Proposed Sec. 668.502(d)(2) would adopt
the same rule. In addition, Sec. 668.216 provides that an institution
does not lose eligibility regardless of its iCDR if the total number of
students entering repayment for the three-year period is fewer than 30.
We include the same exception for pCDR in proposed Sec. 668.516. Years
of experience under these regulations have produced no evidence of
volatility of institutional CDRs, and we see no basis for concern that
the same rules applied to pCDR would pose such a risk.
Negotiators who expressed concern about the burden posed for
programs with low rates of borrowing also objected to adopting for pCDR
the same ``participation rate'' challenge available for iCDR. Under
this participation rate challenge and appeal option in Sec. 668.214,
an institution subject to a loss of eligibility could avoid that loss
by demonstrating that the percentage of students who borrow is
sufficiently low that, when that percentage of students is multiplied
by the iCDR for any of the three years for which its iCDR was 30
percent or greater, the product is less than 0.0625. An institution can
assert this claim at two points in the process: First, under Sec.
668.204(c)(1)(ii), when the draft iCDR that would constitute the third-
year rate of 30 percent or greater is issued, and, second, under Sec.
668.214, when that third-year iCDR is issued as the official iCDR. The
negotiator contended that the Department should allow an institution to
challenge a pCDR based on a participation rate challenge or appeal when
the first pCDR of 30 percent or greater is issued, and not require the
institution to wait until the third such rate is issued. For the
reasons we have already stated, we believe there should be consistency
between the iCDR and pCDR calculations.
We seek comment on whether there are other measures we should
consider that would further the Department's stated policy goals. We
restate our interest in ensuring the viability of the regulations
through measures and thresholds that rest on a solid and well-reasoned
basis and request that commenters submit supporting rationale, studies,
and data for their proposals. We invite comment, however, on whether it
may be possible to accomplish the intended goals of the GE measures
without establishing a two-metric eligibility framework or whether
[[Page 16448]]
there are other measures that should be considered.
Rates Not Calculated
If the minimum number of required students for the D/E rates to be
calculated is not met or if SSA does not provide earnings information
for the calculation of a program's D/E rates, the D/E rates would not
be calculated and the program would not receive rates for the award
year. We believe it is logical to disregard a year for which the D/E
rates are not calculated for the purpose of determining eligibility
under the D/E rates (as explained previously, pCDR would always be
calculated). For example, if a program failed the D/E rates measure in
year 1, did not receive rates in year 2, passed the D/E rates measure
in year 3, and failed the D/E rates measure in year 4, that program
would be deemed ineligible after year 4 because it failed the D/E rates
measure in two out of three consecutive years for which D/E rates were
calculated. This approach would avoid simply allowing a program to pass
the D/E rates measure when an insufficient number of students complete
the program.
In contrast, under the 2011 Prior Rule, a program would be deemed
to have ``satisfied'' the debt measures if one of the debt measures
could not be calculated. Since the 2011 Prior Rule provided that a
program would satisfy the debt measures if it passed either of the
debt-to-earnings ratios or the loan repayment rate, it would not have
been appropriate to evaluate a program without results on all of the
measures. That is not the case in the proposed regulations, as the D/E
rates and pCDR measures would operate as independent measures.
We seek comment on the appropriate number of consecutive ``no
rate'' years under the proposed regulations after which a program's
zone or failing results should reset. As proposed, a program would
become ineligible after failing the D/E rates measure in two out of any
three consecutive years for which D/E rates are calculated. However, we
seek comment as to whether this should apply where a significant period
of time has passed between results. For example, as proposed, a program
that failed the D/E rates measure for award year 2014-2015, and had no
D/E rates calculated for the next five award years (2015-2016 through
2019-2020), would lose eligibility if it failed the D/E rates measure
for 2021-2022. This pattern may indicate that the program was and
remains a failing program, with the intervening years showing no
evidence of successful outcomes. On the other hand, if the program had
actually failed the D/E rates measure in two consecutive award years
(e.g., 2014-2015 and 2015-2016), that program could potentially regain
eligibility in 2020 (three years after the date on which the program
lost eligibility).
Section 668.404 Calculating D/E rates
Current Regulations: Under section 668.7(c) of the 2011 Prior Rule,
two debt-to-earnings ratios, the annual earnings rate and the
discretionary income rate, would be calculated each fiscal year for GE
programs using the following formulas:
[GRAPHIC] [TIFF OMITTED] TP25MR14.008
Both ratios would be calculated based on the debt and earnings
outcomes of students who completed the program during an applicable
cohort period. These students would include both those who received
title IV, HEA program funds and those who did not.
For both ratios, the annual loan payment would be calculated by
determining the median loan debt of students completing the program
during the applicable cohort period and amortizing that median debt
amount over a 10-, 15-, or 20-year repayment period depending on the
credential level of the program, using the interest rate on Federal
Direct Unsubsidized Loans at the time of the calculation. Loan debt
would include FFEL and Direct Loans (except PLUS Loans made to parents
or Direct Unsubsidized loans that were converted from TEACH Grants),
private education loans, and institutional loans that a student
received for attendance in the program. In cases where students
completed multiple programs at the same institution, all loan debt
would be attributed to the highest credentialed program that the
student completed. Also excluded from the calculations would be
students whose title IV, HEA loans were in military deferment, whose
title IV, HEA loans were discharged, or being considered for discharge,
because of disability, who were enrolled at an institution of higher
education for any amount of time in the same calendar year that
earnings are measured for the D/E rates, or who died. Loan debt
incurred by the student for enrollment in a GE program at another
institution would generally not be included. However, the Secretary
could choose to include this debt if the institution and the other
institution were under common ownership or control, as determined under
34 CFR 600.31. The loan debt associated with a student would be capped
at an amount equivalent to the program's tuition and fees if tuition
and fees information was provided by the institution, as such reporting
would be optional, and if the amount of tuition and fees was less than
the student's loan debt.
The discretionary income rate denominator would be the higher of
the SSA-provided mean or median earnings minus 150 percent of the
Poverty Guideline for a single person residing in the continental
United States as published by the U.S. Department of Health and Human
Services. The denominator of the annual earnings rate would be the
higher of the mean or median earnings of the students for the most
currently available calendar year, as obtained from SSA or another
Federal agency.
The 2011 Prior Rule would require at least 30 students to have
completed the program during an applicable cohort period for the debt-
to-earnings ratios to be calculated. If, after applying the exclusions,
30 or more students completed the program during the two-year period
comprised of the third and fourth fiscal years prior to the fiscal year
for which the calculations are made (referred to in the 2011 Prior Rule
as the ``2YP''), then the applicable cohort period would be the 2YP. If
fewer than 30 students completed the program during the 2YP, then a
four-year period comprised of the third, fourth, fifth, and sixth
fiscal years prior to the fiscal year
[[Page 16449]]
for which the calculations are made (referred to in the 2011 Prior Rule
as the ``4YP'') would be evaluated. If, after applying the exclusions,
fewer than 30 students completed the program during the 4YP, ratios
would not be calculated and the program would be considered to satisfy
the debt measures. Ratios would also not be calculated if SSA did not
provide the mean and median earnings for the program or the median loan
debt of the program is zero. In both cases, the program would be
considered to satisfy the debt measures.
Section 668.7(k) of the 2011 Prior Rule would have set, in the
first year that programs could become ineligible, for each
institutional category (public, private non-profit, proprietary), a cap
on the number of ineligible programs, such that the number of
ineligible programs would not account for more than 5 percent of the
total number of students who completed GE programs in that
institutional category. Further, for the first three years that the
2011 Prior Rule would be effective, for programs failing the debt-to-
earnings ratios, institutions could recalculate and appeal their
results under the ratios using earnings data from the Bureau of Labor
Statistics (BLS) to replace SSA earnings data. See ``Sec. 668.406 D/E
rates alternate earnings appeals and showings of mitigating
circumstances'' for more detail on the BLS data-based appeal under the
2011 Prior Rule.
Proposed Regulations: Under proposed Sec. 668.404(a) the
Department would calculate the same two debt-to-earnings ratios for GE
programs as in the 2011 Prior Rule: a discretionary income rate and an
annual earnings rate (referred to in the 2011 Prior Rule as the
``earnings rate''). Unlike the 2011 Prior Rule, under which D/E rates
are calculated on a fiscal year basis, the proposed regulations would
calculate the D/E rates on an award year basis. An award year begins on
July 1 and ends on June 30 of the following year whereas a fiscal year
begins on October 1 and ends on September 30 of the following year.
Both D/E rates would be calculated at the program level based on the
debt and earnings outcomes of students who completed the program during
an ``applicable cohort period'' as discussed in more detail below.
Unlike the 2011 Prior Rule, the D/E rates would be based only on the
outcomes of students receiving title IV, HEA program funds. But, as
with the 2011 Prior Rule, students receiving title IV, HEA program
funds would include students who received title IV, HEA program loans
and those who received only Pell grants or other grants but no loans.
See ``Sec. 668.401 Scope and purpose'' for a more detailed discussion
of the definition of ``student'' in the proposed regulations.
Exclusions
A student would be excluded from the D/E rates calculations for a
GE program if (1) one or more of the student's title IV loans were in a
military-related deferment at any time during the same calendar year
that earnings are measured for the D/E rates, (2) one or more of the
student's title IV loans are under consideration by the Department, or
have been approved, for a discharge on the basis of the student's total
and permanent disability, under 34 CFR 674.61 (Perkins), 682.402
(FFEL), or 685.212 (Direct Loans), (3) the student was enrolled in
another eligible program at the same institution or at another
institution during the same calendar year that earnings are measured
for the D/E rates, (4) if the program is an undergraduate program, the
student subsequently completed a higher credentialed undergraduate GE
program at the same institution, or, if the program is a post-
baccalaureate, graduate certificate, or graduate degree GE program, the
student subsequently completed a higher credentialed graduate GE
program at the same institution, or (5) the student died. These
exclusions are the same as those in the 2011 Prior Rule with the
addition of an exclusion for students completing a higher credentialed
GE program at the same institution.
Applicable Cohort Period and Minimum Number of Students Completing the
Program
As stated previously, the calculations for both D/E rates would be
based on the debt and earnings outcomes of students who completed a
program during an applicable cohort period. As with the 2011 Prior
Rule, for D/E rates to be calculated for a program, a minimum of 30
students would need to have completed the program, after applying the
exclusions, during the applicable cohort period. If 30 or more students
completed the program during the third and fourth award years prior to
the award year for which the D/E rates are calculated, then the
applicable cohort period would be that ``two-year cohort period.''
``Two-year cohort period'' is a defined term in proposed Sec. 668.402.
If at least 30 students did not complete the program during the two-
year cohort period, then the applicable cohort period would be expanded
to include the previous two years, the fifth and sixth award years
prior to the award year for which the D/E rates are being calculated,
and rates would be calculated if 30 or more students completed the
program during that ``four-year cohort period'' after applying the
exclusions. ``Four-year cohort period'' is a defined term in proposed
Sec. 668.402. If, after applying the exclusions, 30 or more students
did not complete a program over the two-year cohort period, or the
expanded four-year cohort period, then D/E rates would not be
calculated for the program. As an example, for the D/E rates
calculations for the 2014-2015 award year, the two-year cohort period
would be award years 2010-2011 and 2011-2012 and the four-year cohort
period would be award years 2008-2009, 2009-2010, 2010-2011, and 2011-
2012.
The two- and four-year cohort periods as described would apply to
all programs except for medical and dental programs whose students are
required to complete an internship or residency after completion of the
program. For medical and dental programs, the two-year cohort period
would be the sixth and seventh award years prior to the award year for
which the D/E rates are calculated. The four-year cohort period would
be the sixth, seventh, eighth, and ninth award years prior to the award
year for which D/E rates are calculated.
The 2011 Prior Rule applied the same two-year and four-year cohort
periods for the debt-to-earnings ratios calculations, but, as
discussed, the 2YP and 4YP would be measured in fiscal years rather
than award years. Unlike the 2011 Prior Rule, a program would not
satisfy the D/E rates measure if rates could not be calculated because
there was not a sufficient number of students who completed a program.
Rather, the eligibility of the program would not be affected.
Formulas for Calculating the D/E Rates
Each award year, D/E rates would be calculated for each GE program
that meets the minimum size of 30 students completing the program for
the two-year or four-year cohort period. In calculating the D/E rates,
the Secretary would use the same formulas as under the 2011 Prior Rule:
[[Page 16450]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.009
Annual Loan Payment
The annual loan payment for each formula would be calculated as
follows.
First, the loan debt that each student in the applicable cohort
period accumulated for attendance in the GE program would be determined
based on information in the Department's NSLDS and information reported
by the institution under proposed Sec. 668.411. Under proposed Sec.
668.404(d), loan debt would include all title IV loans (excluding
Federal PLUS Loans made to parents of dependent students, Direct PLUS
Loans made to parents of dependent students, and Direct Unsubsidized
Loans that were converted from TEACH Grants), private education loans
as defined in 34 CFR 601.2, and institutional student loans. Unlike the
2011 Prior Rule, under the proposed regulations, loan debt would
include Perkins Loans. In comparison to the 2011 Prior Rule, the
proposed regulations clarify that institutional loan debt would include
any outstanding debt as a result of credit extended to the student by,
or on behalf of, the institution (e.g., institutional financing or
payment plans) that the student would be obligated to repay after
completing the program.
As discussed in more detail under ``Sec. 668.411 Reporting
requirements for GE programs,'' the credential levels under the
proposed regulations would differ from the credential levels of the
2011 Prior Rule. The 2011 Prior Rule had one credential level for
undergraduate certificates. The proposed regulations would break out
undergraduate certificates into three credential levels based upon the
length of the program. Further, the proposed regulations would add a
graduate credential and clarify that postgraduate certificates would be
included in the post-baccalaureate certificate credential level.
All of the loan debt incurred by the student for attendance in any
undergraduate GE program at the same institution would be attributed to
the highest credentialed undergraduate GE program subsequently
completed by the student at the institution. Similarly, all of the loan
debt incurred by the student for attendance in any post-baccalaureate
or graduate GE program at the institution would be attributed to the
highest credentialed graduate degree GE program completed by the
student at the institution. As defined in proposed Sec. 668.402, the
undergraduate credential levels are less than one year undergraduate
certificate or diploma, one year or longer but less than two years
undergraduate certificate or diploma, two years or longer undergraduate
certificate or diploma, associate degree, and bachelor's degree. The
graduate credential levels are post-baccalaureate certificate
(including postgraduate certificates), graduate certificate, master's
degree, doctoral degree, and first-professional degree.
The 2011 Prior Rule included a similar debt attribution scheme, but
would not have differentiated between undergraduate and graduate
programs. Debt would simply have been rolled up to the highest
credentialed GE program that the student completed at the same
institution regardless of whether the highest credentialed program was
an undergraduate program or graduate program. As under the 2011 Prior
Rule, the Department would have the discretion to include in the loan
debt attribution all loan debt incurred by the student for attending GE
programs at another institution if the institution and the other
institution are under common ownership or control, as determined under
34 CFR 600.31.
Under proposed Sec. 668.404(b)(1)(ii), an adjustment to the amount
of each student's loan debt would be made if the student's loan debt
exceeds the total amount of the tuition and fees assessed to the
student for his or her entire enrollment in the program plus the total
amount of the allowances for books, supplies, and equipment included in
the student's title IV cost of attendance, pursuant to section 472 of
the HEA, 20 U.S.C. 1087ll, or a higher amount if assessed to the
student by the institution. The amount used for each student's loan
debt in the D/E rates calculations would be the lower of the total
amount of the student's loan debt or the total amount of the student's
tuition and fees and books, supplies, and equipment. In comparison to
the 2011 Prior Rule, the proposed regulations add books, supplies, and
equipment to the limitation of loan debt to tuition and fees.
Second, the median loan debt of the students in the applicable
cohort period would be determined using the loan debt information
previously described.
Third, as under the 2011 Prior Rule, the median loan debt would be
amortized over a 10-, 15-, or 20-year repayment period depending on the
credential level of the program. A 10-year repayment period would be
used for programs that lead to an undergraduate certificate, a post-
baccalaureate certificate, an associate degree, or a graduate
certificate. Fifteen years would be used for programs that lead to a
bachelor's degree or to a master's degree. Twenty years would be used
for programs that lead to a doctoral or first-professional degree.
The interest rate used to amortize the median loan debt would be
the average annual interest rate on Federal Direct Unsubsidized Loans
during the six years prior to the end of the applicable cohort period.
These six years would include the applicable cohort period. For
undergraduate programs, the interest rate on Federal Direct
Unsubsidized Undergraduate Loans would be applied. For graduate
programs, the interest rate on Federal Direct Unsubsidized Graduate
Loans would be applied. The interest rate that would be used under the
proposed regulations differs from the 2011 Prior Rule. Under the 2011
Prior Rule, median loan debt would be amortized using the then-current
interest rate on Federal Direct Unsubsidized Loans, regardless of the
credential level of the program.
Discretionary Income
For the denominator of the discretionary income rate, discretionary
income would be calculated by subtracting 150 percent of the Poverty
Guideline for a single person residing in the continental United States
as published by HHS from the higher of the mean or median annual
earnings. The proposed regulations and the 2011 Prior Rule use the same
calculation for discretionary income.
Annual Earnings
Under proposed Sec. 668.404(c), as under the 2011 Prior Rule, the
Department would obtain from SSA or another Federal agency the most
currently available mean and median
[[Page 16451]]
annual earnings for students who completed the program during the
applicable cohort period. As an example, the D/E rates calculations for
the 2014-2015 award year would be based on the loan debt of students
completing a program in the 2010-2011 and 2011-2012 award years, if the
applicable cohort period for that program was the two-year cohort
period, and the earnings of those former students for the 2014 calendar
year. Annual earnings include earnings reported by employers to SSA and
earnings reported to SSA by self-employed individuals. The higher of
the mean or median annual earnings would be used as the denominator of
the annual earnings rate.
Transition Period
Under proposed Sec. 668.404(g), for a failing or zone program, in
the first four years that the regulations are in effect, for example,
award years 2014-2015, 2015-2016, 2016-2017, and 2017-2018, the
Department would calculate transitional D/E rates using the median loan
debt of students who completed the program during the most recently
completed award year instead of the median loan debt of students who
completed during the applicable cohort period. The earnings component
of the calculations would still use the most currently available
earnings of the students who completed the program during the
applicable cohort period. For example, for the 2014-2015 award year,
the denominator of both standard D/E rates calculations would use the
higher of the mean or median calendar year 2014 earnings of students
who completed a program during the 2010-2011 and 2011-2012 award years
(the two-year cohort period) if 30 or more students completed the
program during the two-year cohort period. The standard D/E rates would
use as the numerator an annual loan payment calculated based on the
debt of those same former students. However, the transitional D/E rates
would use the same earnings information as the standard D/E rates, but
the annual loan payment amount would be calculated based on the debt of
students who completed the program during the 2014-2015 award year. The
lower of the standard D/E rates or transitional D/E rates would be used
to assess the program. Although the 2011 Prior Rule did not include a
transition period, it would have capped the number of ineligible
programs in the first year that programs could become ineligible, and,
additionally, in the first three years that the 2011 Prior Rule would
be effective, would have allowed for an alternate earnings appeal based
on BLS earnings data.
Reasons: The methodology that would be used to calculate the D/E
rates under the proposed regulations is substantially similar to that
of the 2011 Prior Rule. We discuss our reasoning regarding these
proposals, particularly any differences from the 2011 Prior Rule, by
subject area.
Minimum Number of Students Completing the GE Program
As under the 2011 Prior Rule, the proposed regulations would
establish a minimum threshold number of students who completed a
program, or ``n-size,'' for D/E rates to be calculated for that
program. Both the 2011 Prior Rule and the proposed regulations require
a minimum n-size of 30 students completing the program. However, some
GE programs are relatively small in terms of the number of students
enrolled and, perhaps more critically, in the number of students who
complete the program. In many cases, these may be the very programs
whose performance should be measured, as low completion rates may be an
indication of poor quality. As a result, we considered, and presented
during the negotiations, a lower n-size of 10.
We estimate that in 2010, there were roughly 50,000 total GE
programs in existence and about 4 million students receiving title IV,
HEA program funds enrolled in those programs. At an n-size of 30, we
estimate, based on our analysis of the 2012 GE informational rates,
that approximately 5,539 of those programs would have received D/E
rates. Those programs cover just above 60 percent of the total
enrollment of students who received title IV, HEA program funds in GE
programs in 2010. At an n-size of 10, approximately 11,050 GE programs
would have received D/E rates, representing about 75 percent of the
total enrollment of students who received title IV, HEA program funds
in GE programs.
The non-Federal negotiators raised several issues with the proposal
to use a lower n-size of 10. First, some of the negotiators questioned
whether the D/E rates calculations using an n-size of 10 would be
statistically valid. See ``Sec. 668.403 Gainful employment framework''
for a discussion of the Department's tolerance analysis of the D/E
rates and thresholds. Further, they were concerned that reducing the
minimum n-size to 10 could make it too easy to identify particular
individuals, putting student privacy at risk. These negotiators noted
that other entities, which they did not identify, requiring these types
of calculations use a minimum n-size of 30 to address these two
concerns.
Other non-Federal negotiators supported the Department's proposal
to reduce the minimum n-size from 30 to 10 students completing the
program. They argued that the lower number would allow the Department
to calculate D/E rates for more GE programs, which would decrease the
risk that GE programs that serve students poorly are not held
accountable. They argued that some GE programs have very low numbers of
students who complete the program, not because these programs enroll
small numbers of students, but because they do not provide adequate
support or are of low quality, and, as a result, relatively few
students who enroll actually complete the program. They argued that
these poorly performing programs may never be held accountable under
the D/E rates measure because they would not have a sufficient number
of students who completed the program for the D/E rates to be
calculated. These negotiators further argued that other proposed
changes from the 2011 Prior Rule, such as only including students
receiving title IV, HEA program funds and disaggregating the
undergraduate certificate credential into three categories, as
discussed in ``Sec. 668.411 Reporting requirements for GE programs,''
would make it less likely that many programs would have 30 students who
completed the program during the cohort period. For these reasons,
these negotiators believed that the Secretary should calculate D/E
rates for any GE program where at least 10 students completed the
program during the applicable cohort period.
We acknowledge the limitations of using 30 students. However, to be
consistent with our regulations governing cohort default rate at the
institutional level, Sec. 668.216, and the proposed pCDR, Sec.
668.516, we propose to retain the minimum n-size of 30 students who
complete the program as we did in the 2011 Prior Rule. However, we
invite comment on whether the minimum n-size should be set at 10. We
encourage commenters to submit relevant data and analysis to support
their views.
Amortization
As under the 2011 Prior Rule, the proposed regulations would use
three different amortization periods, based on the credential level of
the program, for determining a program's annual loan payment amount. At
the negotiations, the Department presented an amortization schedule
that would apply
[[Page 16452]]
a single 10-year amortization period, regardless of credential level.
However, in the proposed regulations, we have retained the 10-, 15-,
and 20-year schedule. This schedule would mirror the loan repayment
options available under the HEA, which are available to borrowers based
on the amount of their loan debt, and account for the fact that
borrowers who were enrolled in higher-credentialed programs (e.g.,
bachelor's and graduate degree programs) are likely to have more loan
debt than borrowers who enrolled in lower-credentialed programs and, as
a result, are more likely to be in a repayment plan that would allow
for a longer repayment period.
Our data show that a substantial majority of borrowers entering
repayment in 2012, regardless of credential level, are in the standard
repayment option of 10 years. Graduate students are in this plan at a
lower rate, 63 percent, than students who attended two-year and four-
year institutions, who are in 10-year repayment at rates between 80 and
90 percent.
We analyzed data on the repayment behavior of borrowers across all
sectors who entered repayment earlier, between 1980 and 2011. Adjusting
for inflation, in 2011 dollars, average loan sizes have increased only
moderately over the past 15 years. From 1999, when the majority of
borrowers repaid their loans within 10 years, to 2009, average loan
size has increased by about 6 percent (in 2011 dollars).
We further analyzed the repayment patterns of the subset of
borrowers within this group who entered repayment between 1993 and
2002. Overall, about 54 percent of these borrowers had repaid their
loans in full within 10 years upon entering repayment, about 65 percent
had repaid their loans within 12 years, about 74 percent within 15
years, and, for the 1993 cohort, 83 percent within 20 years.\58\
---------------------------------------------------------------------------
\58\ In comparison, the average percentage of borrowers who
repaid their loans within 20 years for the cohort of borrowers that
entered repayment between 1988 and 1993 was 81 percent.
---------------------------------------------------------------------------
Within this same 1993-2002 subset, repayment periods differed
somewhat among credential levels. The percentage of graduate students
who repaid their loans within 10 years lagged slightly behind the rate
among undergraduates at two-year and four-year institutions. Within 10
years of entering repayment, about 58 percent of undergraduates at two-
year institutions, 54 percent of undergraduates at four-year
institutions, and 47 percent of graduate students had fully repaid
their loans. Within 15 years of entering repayment, about 74 percent of
undergraduates at two-year institutions, 76 percent of undergraduates
at four-year institutions, and 72 percent of graduate students had
fully repaid their loans.
For more recent cohorts, repayment behavior may depart from
historical trends. For example, of borrowers who entered repayment in
2002, 55 percent of undergraduates at two-year institutions, 44 percent
of undergraduates at four-year institutions, and 31 percent of graduate
students had repaid their loans within 10 years.\59\
---------------------------------------------------------------------------
\59\ Department of Education analysis of NSLDS data.
---------------------------------------------------------------------------
Although some negotiators supported the continuation of the
amortization schedule from the 2011 Prior Rule, others were concerned
that the 15- and 20-year time periods are too long, would allow for
excessive tuition charges, and are not likely to reflect the actual
time to repayment for most borrowers. We invite comments on the
proposed amortization provision as well as on a 10-year amortization
period for all credential levels and a 20-year amortization period for
all credential levels. We encourage commenters to submit relevant data
and analysis to support their views.
Loan Debt
As under the 2011 Prior Rule, in calculating a student's loan debt,
the Department would include title IV, HEA program loans and private
education loans that the student borrowed for enrollment in the GE
program. The amount of a student's loan debt would also include any
outstanding debt as a result of credit extended to the student by, or
on behalf of, the institution (e.g., institutional financing or payment
plans) that the student is obligated to repay after completing the
program. Including both private loans and institutional loans in
addition to Federal loan debt would provide the most complete picture
of the indebtedness a student has incurred to enroll in a GE program.
In comparison to the 2011 Prior Rule, the proposed regulations
would add Perkins Loans to the title IV, HEA program loans that would
be considered as a part of a student's loan debt. We have done this
because some GE programs accept Perkins Loans in addition to FFEL and
Direct Loans.
Calculation of D/E Rates
There are a number of differences in the D/E rates calculation
procedures between the 2011 Prior Rule and the proposed regulations:
Measuring the D/E rates on an award year basis, rather
than on a fiscal year basis.
Using an average interest rate over the approximate period
of attendance instead of the current interest rate to calculate the
annual loan payment.
Including books, equipment, and supplies as part of the
charges, in addition to tuition and fees, in determining the amount of
a student's loan debt that will be considered in calculating the annual
loan payment for a program.
Separating undergraduate and graduate programs in
attributing loan debt to the highest credentialed program completed at
an institution.
Excluding from a program's D/E rates calculations students
who subsequently completed a higher credentialed GE program.
The reasons for these changes are discussed in turn below. Further,
although the D/E rates calculation under the proposed regulations, as
under the 2011 Prior Rule, would apply the higher of the mean or median
annual earnings, we invite comment on whether the calculation should
use only the mean annual earnings or only the median annual earnings
instead.
Award Year
We propose to use award year rather than fiscal year for the
purpose of calculating a GE program's D/E rates in order to better
align the calculations with institutional reporting and recordkeeping,
which are by award year. Using an award year for calculation of the D/E
rates would help to simplify the reporting process under the proposed
regulations for institutions. It is important to note that award years,
like fiscal years, span 12 months.
Interest Rate
We propose using the average interest rate over a six-year period
going back from the end of the applicable cohort period to address two
issues. First, as opposed to using the current interest rate, as was
provided in the 2011 Prior Rule, using the average of the interest
rates in effect during the six years prior to the end of the applicable
cohort period better aligns the D/E rates calculations with the actual
interest rate on the loans taken out by individual students who
completed the program during the cohort period. As demonstrated by the
following table, regardless of credential level, over 90 percent of
title IV loans entering
[[Page 16453]]
repayment in 2012 were originated within the six years prior to 2012.
Distribution by Loan Origination Year for Title IV Loans (Non-Consolidated) Entering Repayment in 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of years prior to year loan entered repayment (2012)
IHE type & sector -------------------------------------------------------------------------------------------------
0 1 2 3 4 5 6 or more
--------------------------------------------------------------------------------------------------------------------------------------------------------
2yr or less public.................................... 11.67% 38.64 23.3 11.27 6.49 3.97 4.66
2yr or less private................................... 7.8 47.57 27.57 9.04 3.5 2.15 2.37
2yr or less for-profit................................ 7.74 57.67 27.64 4.89 1.17 0.41 0.5
4yr public............................................ 5.41 21.81 21.25 15.6 17.01 9.92 9
4yr private........................................... 4.86 19.9 21.36 16.96 19.25 9.34 8.33
4yr for-profit........................................ 8.03 36.07 27.37 15.12 7.41 3.54 2.46
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: NSLDS.
Second, the use of an average rate helps minimize year-to-year
fluctuations in the interest rate that would be applied to the D/E
rates calculations and therefore would lead to more predictability for
institutions. An analysis of the data provided to the negotiating
committee shows that the number of programs that have D/E rates that
are passing, in the zone, or failing changes materially as the interest
rate changes:
Interest Rate Variations for Debt to Earnings on 2012 GE Informational Sample \60\
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% 4% 5% 6% 7% 8% 9%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passing Programs............................................. 4,555 4,441 4,304 4,185 4,033 3,919 3,795
Zone Programs................................................ 670 728 807 855 948 986 1,033
Failing Programs............................................. 314 370 428 499 558 634 711
--------------------------------------------------------------------------------------------------------------------------------------------------------
For example, roughly twice as many programs in the informational
sample would fail the D/E rates measure at an 8 percent interest rate
in comparison to a 3 percent interest rate.
---------------------------------------------------------------------------
\60\ Sample includes only two-year cohort period
programs (programs eligible for D/E rates only under the four-year
cohort period are not included).
Interest rates are the same for graduate and
undergraduate programs.
Program n-size of 30.
Calculations are based on annual loan payments under
the amortization scheme with a 10-year period for undergraduate
certificate, associate's degree, and post-baccalaureate certificate
programs, a 15-year period for bachelor's and master's degree
programs, and a 20-year period for doctoral and first professional
degree programs.
---------------------------------------------------------------------------
We seek comment on the proposed method for determining the interest
rate for the D/E rates calculations, and further invite proposals on
other methods to set the interest rate. Specifically, we invite comment
on whether rates should be averaged over a time period other than six
years, varying based on the length of the program, or whether a
weighted average of the actual interest rates associated with the loans
included in the median loan debt calculation should be used. We
encourage commenters to submit relevant data and analysis to support
their views.
Books, Equipment, and Supplies
As under the 2011 Prior Rule, we propose to cap loan debt for the
D/E rates calculations at the total costs assessed to each student for
enrollment in a GE program because institutions can exercise control
over this portion of the amount that a student may borrow. Students may
borrow up to the lower of the cost of attendance or annual and
aggregate loan limits imposed under parts B and D of the HEA. Cost of
attendance is comprised of costs assessed by institutions for the
program, tuition, fees, books, supplies, and equipment and,
additionally, costs that students incur that are not related to the
program, such as living expenses and other indirect costs.
Initially, the Department did not propose a cap. Many of the
institutional negotiators, however, argued in favor of this cap
because, under the HEA, institutions may not generally limit the amount
an otherwise eligible student may borrow up to the cost of attendance
or annual and aggregate loan limits under the HEA. These negotiators
noted that students often borrow to cover costs other than those
directly related to the program, such as for living expenses, over
which institutions have little, if any, control. They argued that
institutions have no ability to prevent a student from borrowing the
maximum amount permissible, even if the cost of the program is much
lower. These negotiators suggested that institutions should not be held
accountable for those portions of student debt that are unrelated to
the cost of the program.
Some of the committee members suggested including in the loan cap
calculation not only the amount of tuition and fees assessed the
student, but also the total cost of books, supplies, and equipment that
a student would incur in completing the program. The negotiators
reasoned that, like tuition and fees, an institution controlled these
costs, either directly by providing the books, supplies, and equipment
to a student or indirectly by requiring the student to purchase the
materials. We agree and propose that, in the determination of a
borrower's loan debt, we would use the lower of:
The amount of the student's loan debt attributed to
enrollment in the program; and
The total of the student's assessed tuition and fees, and
the student's allowance for books, supplies, and equipment included in
the cost of attendance disclosed under proposed Sec. 668.412, or the
actual amount charged each student in any sale of books, supplies, and
equipment, if higher.
We invite comment on the inclusion of books, supplies, and
equipment in the tuition and fees cap.
Attributing Loan Debt
Under the 2011 Prior Rule, all loan debt incurred by a student for
enrollment in GE programs at an institution would be attributed to the
highest credentialed GE program completed by the student, based on the
[[Page 16454]]
presumption that a student's earnings stem from the highest
credentialed program completed. Although we maintain the same
presumption in the proposed regulations, we propose to modify the
attribution rule by differentiating between undergraduate and graduate
programs to account for a lack of equity that the 2011 Prior Rule would
create between an institution that offers only graduate programs and
one that offers lower credentialed programs in addition to graduate
programs. To illustrate, we offer the following example under the 2011
Prior Rule: A student completed a bachelor's degree GE program at
Institution A and subsequently enrolled in and completed a graduate GE
program at the same institution. In this scenario, if the student
completed the graduate program, all of the student's loan debt, both
the amount incurred for the lower credentialed program and for the
graduate degree program, would be attributed to the graduate degree
program and no debt would be attributed to the lower credentialed
program.
However, for a similarly situated student who completed the same
bachelor's degree GE program at Institution A, but then enrolled in and
completed a graduate GE program at another institution that offers only
graduate programs, Institution B, the results would be different. For
Institution B, only the loan debt incurred by the student for enrolling
in the graduate GE program at Institution B would be attributed to that
graduate degree program. Institution B would not be held accountable
for the debt incurred by the student at Institution A. Unlike at
Institution B, Institution A could have students who stay at the
institution after completing their undergraduate program to pursue
graduate study. The D/E rates calculations for graduate programs at
Institution A could include more debt, possibly far more debt, than
would the rates for the same program offered by Institution B. The
graduate GE programs at Institution A are at a disadvantage simply
because the institution offers both undergraduate and graduate
programs. This scenario could deter institutions that offer both
undergraduate and graduate programs from encouraging their
undergraduate students to pursue further study out of concern that they
will enroll in graduate programs at that same institution and cause
those programs to have worse outcomes under the D/E rates measure than
if the institution only enrolled students who completed their
undergraduate degrees at other institutions.
To address this issue, we propose that (1) any loan debt incurred
by a student at an institution for enrollment in undergraduate GE
programs be attributed to the highest credentialed undergraduate
program completed by the student, and (2) any loan debt incurred for
enrollment in graduate GE programs at an institution be attributed to
the highest credentialed graduate GE program completed by the student.
We do not believe that the same distinction should apply with
respect to lower credentialed undergraduate programs and higher
credentialed undergraduate programs. The academic credits earned in an
associate degree program, for example, are necessary for and would be
applied toward the credits required to complete a bachelor's degree
program. It is reasonable then to attribute the debt associated with
all of the undergraduate academic credit earned by the student to the
highest undergraduate credential subsequently completed by the student.
This reasoning does not apply to the relationship between undergraduate
and graduate programs. Although a bachelor's degree might be a
prerequisite to pursue graduate study, the undergraduate academic
credits would not be applied toward the academic requirements of the
graduate program. We invite comment on this change from the 2011 Prior
Rule.
In attributing loan debt, we propose to exclude any loan debt
incurred by the student for enrollment in programs at another
institution. However, the Secretary may include loan debt incurred by
the student for enrollment in GE programs at other institutions if the
institution and the other institutions are under common ownership or
control. The 2011 Prior Rule included the same provision. As we noted
at that time, although we generally would not include loan debt from
other institutions students previously attended, entities with
ownership or control of more than one institution offering similar
programs might have an incentive to shift students between those
institutions to shield some portion of the loan debt from the D/E rates
calculations. 76 FR 34417. Including the provision that the Secretary
may choose to include that loan debt should serve to discourage
institutions from making these kinds of changes.
Several of the negotiators expressed concerns with this proposal
and, in particular, the provision that provides the Secretary with
discretion to include the loan debt incurred at an institution under
common ownership or control. These negotiators indicated that the
Secretary should always include this loan debt. The Department could
not implement such a provision, however, because we do not categorize
institutions by ownership or control. Further, because this provision
is included to ensure that institutions do not manipulate their D/E
rates, it should only be applied in cases where there is evidence of
such behavior. In those cases, the Secretary would have the discretion
to make adjustments. A negotiator also suggested that the proposed
regulations outline the criteria the Secretary would use when
determining whether to include the loan debt incurred at an institution
under common ownership or control. We invite comment on whether such
criteria should be included in the proposed regulations, what those
criteria should be, and how to implement those criteria.
Exclusions
Under the proposed regulations, we would exclude from the D/E rates
calculations the same categories of students that we would exclude
under the 2011 Prior Rule. Although the text of the 2011 Prior Rule did
not specifically state the exclusion for students who completed a
higher credentialed GE program at the same institution at which they
previously completed a lower credentialed GE program, the exclusion is
reflected in our discussion of attributions and exclusions in the 2011
Prior Rule. See 76 FR 34417.
We believe the approach we adopted in the 2011 Prior Rule continues
to be sound policy. With respect to students whose loans are in
deferment or have been discharged, the reasons for which these
students' loans are in deferment or have been discharged (i.e.,
military service, total and permanent disability, death) are not
related to whether a program prepares students for gainful employment.
However, we invite comment on, for the exclusion based on military-
related loan deferment, whether the proposed regulations should require
that the loans are in deferment for a minimum number of days out of the
year for the exclusion to apply.
We also continue to believe that we should not include the earnings
or loan debt of students who were enrolled in another eligible program
at the institution or at another institution during the year for which
the Secretary obtains earnings information. These students are unlikely
to be working full-time while in school and consequently their earnings
would not be reflective of
[[Page 16455]]
the program being assessed under the D/E rates. It would therefore be
unfair to include these students in the D/E rates calculation.
To clarify our policy from the 2011 Prior Rule, we are including in
the proposed regulations an exclusion from the D/E rates calculations
for students who have completed a higher credentialed GE program after
completing a lower credentialed GE program. We would do this to avoid a
student being counted twice since, under the attribution rules, the
debt incurred in the lower credentialed program would be attributed to
the debt incurred in the higher credentialed program pursuant to
proposed Sec. 668.404(d)(2).
Transition Period
Section 668.7(k) of the 2011 Prior Rule provides for, in the first
year in which programs could become ineligible, for each institutional
category (public, private non-profit, proprietary), a cap on the number
of programs that would lose eligibility. Within each category, programs
with failing debt measures would be ranked by repayment rate and would
lose eligibility based on their ranking until the number of programs
made ineligible accounted for 5 percent of the total number of students
who completed programs in that institutional category. The cap was set
for each institutional category so that no one sector would bear more
than 5 percent of the initial impact of the regulations and to lessen
the impact on small entities. Specifically, in connection with the 2011
Prior Rule, we said, ``the delayed effective date and initial cap on
the regulations' effect will provide time for small entities to adapt
to the regulations.'' 76 FR 34386, 34509 (June 13, 2011).
The proposed regulations do not include a similar cap on the number
of GE programs that could lose title IV, HEA program eligibility. As
discussed in ``Sec. 668.403 Gainful employment framework,'' we believe
that programs that do not pass the D/E rates measure but are not among
the worst performers should be given time, opportunity, and incentive
to improve. But, if these programs do not improve--if their performance
remains below the proposed D/E rates thresholds--they should become
ineligible for participation in the title IV, HEA loan programs.
The proposed regulations also do not include the availability of an
alternate earnings appeal in the first three years using BLS data as
the 2011 Prior Rule did. For our reasoning, see ``Sec. 668.406 D/E
rates alternate earnings appeals and showings of mitigating
circumstances.''
Some negotiators representing institutions expressed concern that
immediate efforts by institutions to improve programs and reduce debt
at the time the proposed regulations go into effect would not be
reflected in the first few years of D/E rates calculations as the
calculation takes into account the outcomes of students who completed
the program several years in the past. To allow for that improvement,
the proposed regulations provide for an alternative calculation of a GE
program's D/E rates during a four-year transition period. In summary,
during the transition period, if a GE program's draft D/E rates are
failing or in the zone, the Secretary would calculate transitional
draft D/E rates using the median loan debt of the students who
completed the program during the most recently completed award year,
rather than the median loan debt of the students who completed the
program during the applicable cohort period. Because the transitional
calculation would apply the loan debt of students completing a program
after the proposed regulations go into effect, immediate reductions in
tuition and fees and other adjustments by an institution in order to
decrease debt of current students would be reflected in the results of
a program's transitional D/E rates. Whereas the cap under the 2011
Prior Rule afforded institutions an opportunity to avoid a loss of
eligibility without doing anything to improve their programs, the
transition period in the proposed regulations provides institutions an
opportunity to avoid ineligibility and, at the same time, improve
student outcomes.
We invite comment on the proposed transition period, including
whether the transition calculation should apply to all programs or, as
in the proposed regulations, only to programs whose draft D/E rates are
in the zone or are failing. Additionally, we invite comments on whether
to include in the final regulations a cap on program ineligibility in
the first year programs could become ineligible as was included in the
2011 Prior Rule.
Section 668.405 Issuing and Challenging D/E Rates
Current Regulations: Section 668.7(e) of the 2011 Prior Rule
establishes the process by which the Secretary would provide an
institution notice of the GE program's students whose debts and
earnings would be considered to determine the program's debt-to-
earnings ratios. Under this process, the Secretary would provide the
institution with a list of those students, and the institution would
have an opportunity to correct that list during a 30-day correction
period. Under the 2011 Prior Rule, if the Secretary accepted as
accurate the information provided by the institution to support a
correction, the updated information would be used to create a final
list of students that the Secretary submits to SSA in order to obtain
the earnings information needed to calculate the debt-to-earnings
ratios.
The 2011 Prior Rule provided that the Department would provide the
final list of students to SSA, which, pursuant to a data-sharing
arrangement with the Department, would obtain the individual earnings
data for all of the students on the list, and then calculate and
provide to the Department the mean and median earnings data for the
students on the list. To preserve the privacy of students' individual
earnings information, SSA would only provide the Department with the
aggregate earnings information for a list of students if SSA is able to
``match'' at least 10 students on the list with its own earnings data.
Because SSA does not disclose any individual earnings data that
would enable the Secretary to assess a challenge to an individual
student's reported earnings, the Secretary would not consider, under
Sec. 668.7(e) of the 2011 Prior Rule, any challenge to the accuracy of
the mean or median annual earnings data that the Secretary obtains from
SSA to calculate the GE program's debt-to-earnings ratios. Thus, under
the 2011 Prior Rule, an institution's opportunity to challenge the
information needed to determine the aggregate earnings information used
in calculating the draft debt-to-earnings ratios is limited to a review
of the list that would be sent to SSA. The institution would only be
permitted to review and propose corrections to the list of students
prior to the Department providing the final list to SSA.
Under the 2011 Prior Rule, the Department would:
Based on the information submitted by institutions under
Sec. 668.6 of the 2011 Prior Rule, create a list of the students who
completed the program during the applicable 2YP or 4YP (Sec.
668.7(e)(1));
Provide the list of students to the institution and
consider any changes to the list that the institution proposed within
30 days of being provided the list (Sec. 668.7(e)(1));
Obtain from SSA or another Federal agency the mean and
median annual earnings of the students on the list (Sec.
668.7(e)(1)(iii));
[[Page 16456]]
If SSA is unable to match certain students on the list,
exclude from the calculation of the median loan debt for failing
programs the same number of students with the highest loan debts as the
number of students whose earnings SSA did not match (Sec.
668.7(e)(3)(ii));
Calculate draft debt-to-earnings ratios for the program
using the higher of the mean and median earnings provided by SSA (Sec.
668.7(e)(1)(iii));
Provide the draft debt-to-earnings ratios to the
institution along with the individual student loan data on which the
ratios were based, and consider any challenges to the individual
student loan data used to calculate the ratios submitted by the
institution within 45 days after the Secretary notifies the institution
of the draft debt-to-earnings ratios (Sec. 668.7(e)(2)); and
Issue final debt-to-earnings ratios (Sec. 668.7(f)).
Under the 2011 Prior Rule, an institution would have the
opportunity to appeal the determination of a program's final debt-to-
earnings ratios in certain circumstances. The appeals process under the
2011 Prior Rule and the Department's related proposed regulations are
discussed under ``Sec. 668.406 D/E rates alternate earnings appeals
and showings of mitigating circumstances.''
Proposed Regulations: Proposed Sec. 668.405 would adopt the
procedures for issuing and challenging debt-to-earnings ratios included
in the 2011 Prior Rule, but provide additional detail with respect to
the procedures involved.
As in the 2011 Prior Rule, under proposed Sec. 668.405, the
Secretary would provide an institution the data on which the D/E rates
for a GE program would be based and an opportunity to correct the data
before the Secretary would issue draft D/E rates for the program.
Specifically, under the proposed process, the Secretary would:
Based on the information submitted by institutions under
proposed Sec. 668.411, create a list of the students who completed the
program during the applicable cohort period, and indicate which
students would be removed from the list under Sec. 668.404(e) and the
specific reason for the exclusion (Sec. 668.405(b)(1));
Provide the list of students to the institution and
consider any changes to the list that the institution proposes within
45 days of receiving the list (Sec. Sec. 668.405(b)(2); 668.405(c));
Obtain from SSA or another Federal agency the mean and
median annual earnings of the students on the final list (Sec.
668.405(d));
If SSA is unable to match certain students on the list,
exclude from the calculation of the median loan debt the same number of
students with the highest loan debts as the number of students whose
earnings SSA did not match (Sec. 668.405(e)(2));
Calculate draft D/E rates for the program using the higher
of the mean or median annual earnings provided by SSA (Sec.
668.405(e)(1));
Provide the draft D/E rates to the institution along with
the individual student loan data on which the rates were based, and
consider any challenges to the individual student loan data used to
calculate the rates submitted by the institution within 45 days after
the Secretary notifies the institution of the draft D/E rates (Sec.
668.405(f)); and
Issue final D/E rates (Sec. 668.405(g)).
Each of these steps was included in Sec. 668.7(e) and (f) of the
2011 Prior Rule with several changes as noted in the following
discussion.
In calculating the draft D/E rates under proposed Sec. 668.405,
the Secretary would first create the list of students who completed a
GE program during the applicable cohort period from data previously
reported by the institution. Although not specifically included in the
2011 Prior Rule, we have provided in the proposed regulations that the
Secretary would indicate on the list the students the Secretary would
exclude from the list (and the reason for the exclusion) under proposed
Sec. 668.404(e). Although this departs from the regulatory language in
the 2011 Prior Rule, it is consistent with the operating procedure the
Department used to implement the regulations. We believe it would be
helpful to provide this clarity in the proposed regulations.
Students who may be excluded under proposed Sec. 668.404(e) are
those students whose status during the award year is such that
including their earnings would tend to distort the assessment of the
program's D/E rates (e.g., students in military deferment status or
students who are enrolled in another eligible educational program at
any time during the calendar year for which earnings are obtained). The
Secretary would also notify the institution of the applicable cohort
period that the Department would use to compile the final list.
Similar to the 2011 Prior Rule, the institution would have the
opportunity to propose corrections to the list. However, instead of the
30-day period provided under the 2011 Prior Rule, the institution would
have 45 days from receiving the student list from the Secretary to
submit its corrections. The institution may seek to correct any data
included on the list regarding an individual student. An institution
might inform the Department that, although it previously reported that
a student completed a GE program, its report was incorrect and the
student did not in fact complete the program. The institution may also
request correction of other details regarding the listed students, such
as whether a student had in fact enrolled in the program, whether a
student completed the program during the applicable cohort period,
whether a student should be excluded on the basis indicated on the
list, and the credential level offered by the program that the student
completed. The proposed regulations, in Sec. 668.405(c)(3), like the
2011 Prior Rule, require the institution to identify at this point in
the process any corrections it wishes to make to the student-specific
data on the list. This precludes an institution from renewing later in
the process an unsuccessful challenge to student-specific data with
respect to a student included on the final list on which the draft D/E
rates are based. An institution also would not be permitted to assert
in response to the draft D/E rates final list a challenge to the
student-specific data of an individual on that final list. If an
institution contends that an individual student should be removed from
the list because the student did not complete the program, did not
complete the program during the applicable cohort period, or was not
enrolled in the program, and the Secretary accepts the proposed
correction and removes the student from the list, the institution
retains the right to challenge other student-specific data regarding
that student if the student is later included in a proposed list for a
different award year. If the institution contends only that the student
should be removed from the list and raises no other correction, and the
Secretary rejects the proposed correction, the institution may not
later seek to correct other elements of student-specific data for that
student.
If the institution proposes a correction to the list, the Secretary
would notify the institution whether a proposed correction is accepted.
The Secretary would use any accepted correction to create the final
list of students. We believe that requiring any corrections to student-
specific data to be raised at this point, in response to the proposed
list of students, rather than again in response to the draft D/E rates,
produces a more efficient process. To facilitate this process, the
proposed regulations expand the period for asserting such corrections
from 30 days to 45 days.
As under the 2011 Prior Rule, after finalizing the list of
students, the Secretary would submit the list to SSA or another Federal
agency. The Secretary would obtain from SSA the
[[Page 16457]]
mean and median earnings, in aggregate form, of those students on the
list whom SSA has matched to its earnings data. The Secretary would
calculate draft D/E rates using the higher of the mean or median
earnings reported by SSA.
Consistent with the 2011 Prior Rule, the list provided by the
Department to SSA would include the student's full name, date of birth,
and Social Security Number. SSA only provides earnings data if at least
10 of the students on the Department's list for the GE program can be
matched with its own earnings data. If SSA identifies a minimum of 10
matches, SSA would then identify the annual earnings for the students
whose data it matched, using SSA's procedures for identifying an
individual, and would provide to the Secretary for that group only the
aggregate data for the students on the list. SSA would also advise the
Secretary of the number, but not the identity, of students whom it
could not match successfully against its records of earnings.
In turn, the Secretary would use the number of SSA non-matches to
exclude from the calculation of the median loan debt (and therefore
annual loan payment) the same number of students as the SSA non-
matches, starting with the student with the largest loan debt on the
list. This process, the same as that used in the 2011 Prior Rule, would
treat the non-matches as originating from the students with the highest
loan debt and eliminate those loan amounts from the calculation. The
debts of the remaining students would then be used to calculate the
annual loan payment used in the numerator for the D/E rates. We note,
however, that under the 2011 Prior Rule, this process was only applied
to programs that failed the debt-to-earnings ratios.
Upon calculation of the draft D/E rates, the Secretary would notify
the institution of the GE program's draft D/E rates and provide the
student loan information on each individual student loan on which the
rates were based. The Secretary would also indicate the number of loans
that were removed based upon the number of students in the program
whose earnings could not be obtained from SSA.
Under proposed Sec. 668.405(f), the institution would then have
the opportunity, within 45 days of notice of the draft D/E rates, to
challenge the accuracy of the rates. Specifically, as under the 2011
Prior Rule, the institution at this point would be permitted to
challenge only the loan data used to calculate the debt component of
the draft D/E rates and the accuracy of the actual calculation of the
rates from that data and the reported aggregate earnings. The Secretary
would notify the institution whether a proposed challenge is accepted
and, if so, would use any corrected loan data to recalculate the GE
program's draft D/E rates. For an award year's D/E rates calculation,
an institution would be permitted one challenge to the accuracy of the
loan debt information that the Secretary used to calculate that award
year's median loan debt for the program; we note that no such
limitation was included in the 2011 Prior Rule. This would not preclude
an institution from challenging the inclusion of a student who appears
on a different list for a different cohort or for a different program.
Although the 2011 Prior Rule did not specify a timeframe by which
the Secretary would issue a final determination, under proposed Sec.
668.405(g), the rates would become final 45 days after the date the
draft D/E rates are provided to the institution or after resolution of
a timely challenge to the draft D/E rates. The Secretary would notify
the institution of the final rates by issuing the notice of
determination described in proposed Sec. 668.409. That notice would
also explain the specific consequences triggered by those rates, if
any, for the GE program. D/E rates, once final, would become public
information.
There are three additional details about the proposed corrections
and challenge processes worth noting. Although not specified in the
2011 Prior Rule, the proposed regulations clarify that the institution
would bear the burden of proof to show that the list of students, or
that the loan debt information used to calculate the median loan debt
for the program, is incorrect. The institution would be required to
ensure that any material it submits to make a correction or challenge
is complete, timely, accurate, and in a format acceptable to the
Secretary and consistent with any instructions that the Secretary
provides to the institution with the notice of draft D/E rates. In
addition, the proposed regulations would provide that an institution
that does not timely challenge the draft D/E rates during the 45-day
period waives any objection to those rates.
As under the 2011 Prior Rule, an institution's opportunity to
challenge the GE program earnings information obtained from SSA would
be limited to offering corrections to the list of students to be
provided to SSA. The Secretary would not consider, under the proposed
regulations, any challenge to the aggregate earnings information used
to calculate the draft D/E rates for the GE program. Although
challenges to the SSA earnings data would not be permitted as part of
the D/E rates calculation process, institutions would have the
opportunity to appeal the determination of a program's final D/E rates
using earnings data from other sources. That appeals process is
discussed under ``Sec. 668.406 D/E rates alternate earnings appeals
and showings of mitigating circumstances.''
The proposed regulations, like the 2011 Prior Rule, provide that a
program's D/E rates would be based on the debt and earnings of those
students who completed the program in the two-year cohort period, so
long as that number is equal to or greater than 30. However, if there
are fewer than 30 students who completed the program in the two-year
cohort period, the Secretary would calculate the program's D/E rates
using the debt and earnings of the students who completed the program
in the four-year cohort period.
Specifically, consistent with our treatment of programs with small
numbers in Sec. 668.7(d)(2)(i)(A) of the 2011 Prior Rule, we note
that, for some GE programs that initially have 30 or more students who
completed the program on the list of students for the two-year cohort
period being evaluated, the number could fall to fewer than 30 upon
correction by the institution before the list is finalized for
submission to SSA. In those situations, the group of students on which
the D/E rates calculations are based would be expanded from those
included in the two-year cohort period to those included in the four-
year cohort period. Again, if the total number of students in the
applicable cohort period is fewer than 30, the Department would not
calculate D/E rates.
To make the corrections process more efficient when there is a
possibility that a four-year cohort period may be needed to calculate
D/E rates, we would provide both a two-year cohort period list and a
separate list--one that would name those additional students who
completed the program during the two years prior to that--to the
institution and explain that both lists would be used to determine a
program's D/E rates if the two-year cohort period list did not, after
correction by the school, identify at least 30 students who completed
the program.
Reasons: In the interest of fairness and due process, the proposed
regulations are intended to provide institutions with an adequate
opportunity to correct the list that would be submitted to SSA and to
challenge the loan data on which the draft D/E rates are calculated. In
that regard, the proposed regulations retain
[[Page 16458]]
much of the content of the 2011 Prior Rule, but provide more detail to
give institutions greater clarity as to the process for issuing draft
D/E rates and the corrections and challenges permitted in connection
with that process.
The proposed regulations continue to base the draft D/E rates on
the aggregate SSA earnings information for students who completed the
program in the applicable cohort period. We believe that SSA earnings
information is reliable. The information is reported by individuals and
entities, and maintained, monitored, and preserved by SSA, within a
strict, legal framework. The individual earnings data are required by
Federal law to be reported to SSA, the data are maintained by SSA in
compliance with congressionally mandated security and privacy
restrictions, and the data are released to the Department only in
conformance with congressionally mandated information quality
requirements. 76 FR 34423.
Specifically, employers are required by section 3102 of the
Internal Revenue Code to withhold from earnings and to remit to the
Internal Revenue Service (IRS) employment taxes, and to report through
Form W-2 the earnings on which the withholdings were based. 20 CFR
404.114. SSA maintains earnings information in its Master Earnings File
(MEF). A detailed description of the process SSA uses to obtain data
from employers and maintain that data in the MEF can be found at
www.ssa.gov/policy/docs/ssb/v69n3/v69n3p29.html. Furthermore, SSA's
data are subject to verification, correction, and adjustment. SSA
compares the earnings information it receives from employers through
Forms W-2 against earnings reports sent by the employer to the IRS
through Forms 941, 943, or 944 or Schedule H (Form 1040). SSA routinely
performs a reconciliation of the data it receives with the data
received by the IRS. See 20 CFR 404.114(d); see www.ssa.gov/employer/recon/recon.htm for an explanation of the process. Only after SSA
performs these reconciliations does it release earnings data. Moreover,
before SSA will provide data matching for another agency, the sources
of the data are required to report any corrections and SSA will make
any adjustments to the individual earnings data after the end of the
respective calendar year.
Appeals of the earnings data obtained from SSA and used in the
calculation of the draft D/E rates are limited, however, not just
because of the reliability of the data. As the Department noted in the
2011 Prior Rule, there appears to be ``no authority that would require
or even allow the Department to question the quality, objectivity,
utility, and integrity of SSA's information under the provisions of the
Information Quality Act [Pub. L. 106-554, section 515, 44 U.S.C. 3516,
note] or otherwise.'' 76 FR 34424. Also, as explained in connection
with the 2011 Prior Rule, we would not consider challenges to the
accuracy of the earnings data received from SSA because SSA provides
the Department with only the mean and median earnings and the number of
non-matches for a program. That is, SSA does not disclose students'
individual earnings data that would enable the Secretary to assess a
challenge to reported earnings. Therefore, an institution's opportunity
to challenge a program's earnings information obtained from SSA would
be limited to offering corrections to the list of students who
completed the program to be provided to SSA. The Secretary would not
consider, under the 2011 Prior Rule and the proposed regulations, any
challenge to the program's earnings used to calculate the draft D/E
rates.
We would, however, provide an adequate opportunity for an
institution to correct any inaccuracies in the list of students to be
submitted to SSA to obtain the aggregate earnings data, and also to
challenge the loan debt of the students who completed the program in
the applicable cohort period that is used to calculate the rates, along
with the Department's actual computation of the D/E rates. In addition,
and as explained further in ``Sec. 668.406 D/E rates alternate
earnings appeals and showings of mitigating circumstances,'' we
recognize that this process must provide an institution an adequate
opportunity to present and have considered rebuttal evidence of the
earnings data, and the alternate earnings appeal process provides that
opportunity.
Non-Federal negotiators asked the Department a number of questions
about the usefulness of SSA earnings data given the possibility of non-
matches between the students who completed a GE program during the
applicable cohort period and available earnings information.\61\ We do
not believe this possibility would affect in any significant way the
accuracy of the calculations, because we believe that non-matches would
be infrequent. For instance, for the 2011 GE informational rates
calculated under the 2011 Prior Rule and released in June 2012, for
students who completed GE programs in fiscal year 2007 and 2008, the
match rate was approximately 98 percent. And, with the proposed change
to include in the calculation only students who received title IV, HEA
program funds, that match rate is likely to be higher since all
students who received title IV, HEA program funds have gone through an
SSA matching protocol before being determined eligible to receive title
IV, HEA program funds. Accordingly, we believe that the process
proposed in Sec. 668.405 would result in useful and reliable data that
the Secretary could then use to calculate a GE program's D/E rates.
---------------------------------------------------------------------------
\61\ The Department has had years of experience with matching
student data received on FAFSAs with SSA data, and stated that it
expected the incidence of non-matches under the 2011 Prior Rule
would be less than 2 percent of all students for whom it sought
earnings data from SSA. 76 FR 34401. Actual experience with matches
already conducted has been consistent with that expectation.
---------------------------------------------------------------------------
Although we fully expect to rely on SSA data, the proposed
regulations would also allow the Department, as an alternative, to
obtain earnings information from other Federal agencies. We have
included this provision to ensure that the Department can implement the
proposed regulations even if unforeseen circumstances arise that
preclude obtaining earnings information from SSA.
One of the non-Federal negotiators proposed that, in the event
there are non-matches, the Secretary remove a corresponding number of
loan debts that reflect an average loan debt for the students on the
list, rather than a corresponding number of the highest loan debts from
the D/E rates calculation. Because SSA only identifies the number of
students in a program for whom no match was established and does not
identify those individuals specifically, the Department would not know
the actual loan debts for a student whose earnings were not matched by
SSA. By using that number of non-matches to remove the students with
the highest loan debts from the D/E rates, consistent with the 2011
Prior Rule, we are proposing the most conservative approach to avoid
overstating the mean and median loan debt for a program for the
calculation of the draft D/E rates. Given that there is a 98 percent
match rate, we do not expect that removing the highest loan debts in
these circumstances will distort the resulting D/E rates.
We note that the 2011 Prior Rule provided that the Department would
remove the highest loan debts in situations where SSA was not able to
match students and earnings for failing programs only. We think the
better approach is to apply this rule for all GE programs being
evaluated, whether they have failing, zone, or passing rates, to
[[Page 16459]]
ensure fairness and consistency in the calculations across all
programs.
Although the 2011 Prior Rule specified that an institution would
have 30 days to submit corrections to the list of students, to ensure
that institutions have sufficient time to review the lists and submit
their corrections, we are proposing that an institution have a period
of 45 days in which to submit its corrections to the list of students
provided by the Secretary.
Additionally, proposed Sec. 668.405 would clarify several items
that were not included in the 2011 Prior Rule, providing for clearer
and more transparent corrections and challenge processes. The proposed
regulations would provide that the Department would identify, on the
initial list of students provided to the institution, those students
the Department would exclude under Sec. 668.404(e) and the reasons for
the exclusion. This would permit the institution to confirm that the
students the Department proposes to exclude should in fact be excluded
from the list submitted to SSA.
The proposed regulations would also provide that the burden of
proof with respect to a correction or challenge lies with the
institution. This burden is routinely required by regulations governing
challenges to institutional CDRs, on which this challenge process is
modeled. 34 CFR 668.204(a)(4), 668.208(c)(1), (f)(2).\62\
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\62\ The same requirements have been applied for many years to
the calculation of CDRs under prior standards. See, e.g., 34 CFR
668.185(a)(4), 668.187(e)(1), 668.189(c), and 668.189(f)(1) (2001).
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Section 668.405 would clarify the submission requirements that
institutions must meet for a proposed correction to the list of
students or challenge to draft D/E rates. Outlining these conditions in
the regulations would ensure that institutions have notice of the
requirements that apply to their correction and challenge submissions.
And, finally, in order to provide for finality to the challenge
process, and to ensure the timely issuance of final D/E rates, we have
proposed that an institution that does not timely challenge the draft
D/E rates within 45 days of receiving the rates waives any objection to
those rates and that an institution may submit only one challenge to
the loan debt information the Secretary uses to calculate the draft D/E
rates. As we have stated previously, the limitation on one challenge
does not preclude an institution from challenging the inclusion of a
student on another list or in another cohort.
Section 668.406 D/E Rates Alternate Earnings Appeals and Showings of
Mitigating Circumstances
Current Regulations: Under Sec. 668.7(g) of the 2011 Prior Rule,
an institution would have the opportunity to appeal a GE program's
failing debt-to-earnings ratios by submitting alternate evidence of
earnings of students in the applicable cohort period. Institutions
could obtain such evidence from State earnings data or BLS data (for a
limited time period only) or could conduct a survey of the GE program's
former students in accordance with standards developed by the National
Center for Education Statistics (NCES). Through the appeal, an
institution could demonstrate that, using the alternate earnings data
obtained through one of the permitted methods, the GE program meets a
passing debt-to-earnings standard based on the alternate earnings data.
Section 668.7(g) of the 2011 Prior Rule also specifies procedures an
institution must follow, including deadlines an institution must meet,
when making an alternate earnings appeal.
Under the 2011 Prior Rule, a program's debt-to-earnings ratios are
calculated based on the outcomes of all of the individuals who
completed the program, rather than only the students who received title
IV, HEA funds.
Proposed Regulations:
Alternate Earnings Appeals
As under the 2011 Prior Rule, under the proposed regulations, an
institution would be permitted to make an alternate earnings appeal of
final D/E rates that are failing. The proposed regulations would also
permit an institution to submit an appeal any year the final D/E rates
are in the zone. If the institution fails to submit a timely appeal,
the GE program's rates for that year become final.
In submitting an alternate earnings appeal under the proposed
regulations, an institution would seek to demonstrate that the earnings
of students who completed the GE program in the applicable cohort
period are sufficient to pass the D/E rates measure. Unlike under the
2011 Prior Rule, the institution would base its appeal only on
alternate earnings evidence from a State earnings database or an
earnings survey conducted in accordance with requirements established
by NCES, and not on earnings information from BLS.
Under proposed Sec. 668.406(a)(3), for the purpose of an alternate
earnings appeals based on a survey, the Secretary would publish in the
Federal Register an Earnings Survey Form developed by NCES. The
Earnings Survey Form would be a model field-tested sample survey that
could be used by an institution in accordance with the survey standards
that the institution would be required to meet to guarantee the
validity and reliability of the results. The survey standards would be
developed by NCES specifically for the alternate earnings survey
appeal, would include such items as a required response rate or
subsequent nonresponse bias analysis, and could differ slightly from
the general NCES standards utilized under the 2011 Prior Rule. Although
use of the sample survey would not be required, and the Earnings Survey
Form would be provided by NCES as a service to the institutions, the
institutions would be required to adhere to the survey standards
outlined in the form.
Under the proposed regulations, the institution would certify that
the survey was conducted in accordance with the requirements of the
NCES Earnings Survey Form, and submit an examination-level attestation
engagement report prepared by an independent public accountant or
independent governmental auditor, as appropriate, that the survey was
conducted in accordance with the standards outlined in the NCES
Earnings Survey Form. As with other attestations institutions are
required to submit to the Department, the proposed regulations would
require that the attestation meet the standards contained in the GAO's
Government Auditing Standards promulgated by the Comptroller General of
the United States (available at www.gao.gov/yellowbook/overview), and
with procedures for attestations contained in guides developed by and
available from the Department's Office of Inspector General.
The proposed regulations provide that the survey must include all
of the students who received title IV, HEA program funds and who
completed the program during the applicable cohort period.
The second alternate earnings appeal method described in the
proposed regulations would allow an institution to make an appeal based
on State earnings data obtained from one or more State-sponsored data
systems. Section 668.7(g)(2) of the 2011 Prior Rule allowed
institutions to appeal their debt-to-earnings ratios by submitting
alternate earnings evidence derived from State-sponsored data systems,
such as State longitudinal data systems and State workforce agency
systems. Under proposed Sec. 668.406(a)(4), for alternate earnings
appeals based on earnings
[[Page 16460]]
information in State data systems, as under the 2011 Prior Rule,
institutions would only be permitted to use this alternative if the
institution was able to demonstrate that it had obtained alternate
earnings data for a minimum number of students. Under the 2011 Prior
Rule, an institution must obtain the data for more than 50 percent, and
more than 30, of the students who completed the GE program during the
applicable cohort periods, without regard to whether they had received
title IV, HEA program funds. Under the proposed regulations, in
obtaining earnings data, the institution would be required to submit to
the administrator of the State-sponsored system a list of the students
who received title IV, HEA program funds and who completed the GE
program during the applicable cohort period.
Under this method, the institution would be required to demonstrate
that matches were obtained for more than 50 percent of all of the
students on the list submitted to the State administrator and that the
number of matched students is 30 or more.
Under proposed Sec. 668.406(a)(5), to pursue an alternate earnings
appeal, the institution would notify the Secretary of its intent to
submit an appeal no earlier than the date the Secretary provides the
institution with the GE program's draft D/E rates and no later than
three business days after the Secretary issues the program's final D/E
rates, as compared to the 2011 Prior Rule, which provided an
institution 14 days after receiving the final rates to submit the
notice of intent to appeal. The institution would then be required to
submit all supporting documentation for the appeal no later than 60
days after the Secretary issues the final D/E rates.
In making any alternate earnings appeal, the institution would be
subject to the conditions for corrections, challenges, and appeals
under proposed Sec. 668.405(h), relating to requirements such as the
format and completeness of the evidence provided to support the appeal.
If an institution timely files an alternate earnings appeal, during
the appeal process, it would not be subject to any of the requirements
that would otherwise be triggered by the final D/E rates as provided in
proposed Sec. 668.403, regarding eligibility, and proposed Sec.
668.410, regarding the student warning.
Under the proposed regulations, if the appealed final D/E rates
were made public, they would be noted as under appeal, and the rates
would be revised, if needed, based on the Secretary's decision on the
appeal. If the Secretary determines that the institution's appeal is
not sufficient to warrant revising the final D/E rates, the Secretary
would notify the institution and the D/E rates under Sec. 668.409(a)
would remain the final D/E rates for the program for the award year. If
the Secretary determines that the appeal is sufficient to warrant
revising the final D/E rates, the Secretary would recalculate the rates
and notify the institution that the recalculated D/E rates are the
final D/E rates for the program.
Showing of Mitigating Circumstances
The proposed regulations would also provide that, if a program is
failing or in the zone under the D/E rates measure, the institution may
demonstrate mitigating circumstances by showing that less than 50
percent of all individuals, both those who received title IV, HEA
program funds and those who did not, who completed the program during
the applicable cohort period incurred any loan debt (as defined in
proposed Sec. 668.404(d)(1)) for enrollment in the program. If the
institution is able to make such a demonstration, the program would be
deemed to pass the D/E rates measure. However, the final D/E rates
identified in the notice of determination that were based solely on the
students who completed the program and received title IV, HEA program
funds would remain the program's final D/E rates and would be annotated
to reflect that the institution's showing of mitigating circumstances
was accepted and that the program was deemed to be passing.
To make a showing of mitigating circumstances, an institution would
calculate the program's ``borrowing rate'' by:
Step 1. Determining the number of individuals, including students
who did not receive title IV, HEA program funds, who completed the
program during the applicable cohort period;
Step 2. Of all of the individuals described in Step 1, determining
the number who incurred loan debt for enrollment in the program; and
Step 3. Dividing the number in Step 2 by the number in Step 1.
If the borrowing rate for the program is less than 50 percent, the
program would be deemed to pass the D/E rates measure.
When making a showing of mitigating circumstances, the institution
would have to submit a certification signed by its chief executive
officer identifying the borrowing rate and attesting to its accuracy,
as well as any other supporting documentation requested by the
Secretary.
Reasons: Proposed Sec. 668.406 would clarify the submission
requirements that institutions must meet for an alternate earnings
appeal or a showing of mitigating circumstances. Outlining these
conditions in the regulations would ensure that institutions have
notice of the requirements that apply to their appeal submissions and
showings of mitigating circumstances.
Alternate Earnings Appeal
As under the 2011 Prior Rule, institutions would not be permitted
to challenge the accuracy of the earnings data provided by SSA and used
in the calculation of draft D/E rates because the Department receives
the data from SSA in an aggregate form and, therefore, lacks the
information required to assess any such appeal. Therefore, as in the
2011 Prior Rule, we are proposing to permit institutions to appeal
their D/E rates, which are based on SSA earnings data, by demonstrating
that the difference between the mean or median annual earnings the
Secretary obtained from SSA and the mean or median annual earnings from
an institutional survey or State-sponsored databases warrants revision
of the final D/E rates. Consistent with the 2011 Prior Rule, an
institution could appeal a GE program's final D/E rates in any year in
which the program is failing the D/E rates. However, to account for the
addition of the zone, the proposed regulations would also permit an
institution to make an appeal in any year in which the program's final
D/E rates are in the zone for that year. Because a program's continued
performance in the zone can ultimately lead to an ineligibility
determination, we believe due process warrants allowing appeals for
both failing and zone final D/E rates.
The two primary differences between proposed Sec. 668.406 and the
2011 Prior Rule, with respect to alternate earnings appeals, is that we
would consider only the alternate earnings of students who received
title IV, HEA program funds for enrollment in the program and we have
limited the bases for alternate earnings appeals to surveys conducted
in accordance with an NCES Earnings Survey Form and data collected from
one or more State-approved databases. First, we consider only the
alternate earnings of students who received title IV, HEA program funds
because, to align the proposed regulations with the court's
interpretation of relevant law in APSCU v. Duncan and better monitor
the Federal investment in GE programs, we have defined ``student'' for
the purpose of subpart Q to be an individual who receives title IV, HEA
program funds for enrollment in the applicable
[[Page 16461]]
program. See ``Sec. 668.401 Scope and purpose'' for a complete
discussion of the definition of ``student.'' Second, unlike in the 2011
Prior Rule, we would not permit an alternate earnings appeal that
relies on BLS data because the average earnings reported by BLS for an
occupation are not based on the specific earnings of the individuals
who completed the GE program at the institution, and therefore would
not provide useful information about whether the institution's GE
program prepared students for gainful employment in that occupation.
With respect to the use of an earnings survey, the 2011 Prior Rule
specified that any earnings survey must be conducted in accordance with
NCES standards. NCES is the primary Federal entity responsible for
collecting and analyzing data related to education in the United States
and other nations. NCES fulfills a congressional mandate to collect,
collate, analyze, and report complete statistics on the condition of
American education; conduct and publish reports; and review and report
on education activities internationally. As a part of fulfilling its
mandate, NCES has developed an extensive Statistical Standards Program
that consults and advises on methodological and statistical aspects
involved in the design, collection, and analysis of data collections.
Through this program, NCES has established statistical standards and
guidelines to provide high-quality, reliable, useful, and informative
statistical information to public policy decision makers and to the
public and ensure that field work and reporting standards are met. The
NCES standards and guidelines provide clear direction regarding how
data should be collected in NCES surveys and the limits of acceptable
applications and use. We continue to believe that complying with the
NCES standards when conducting the alternate earnings survey is
necessary in order to ensure the results of the survey are valid and
reliable.
However, as the NCES standards were developed to guide the work of
NCES itself, we believe it is important to develop standards specific
to the alternate earnings survey. As such, we have proposed that NCES
would develop the Earnings Survey Form and publish in the Federal
Register. The form would have two components. The first component would
be standards developed by NCES specific to the alternate earnings
survey, which could differ from the existing NCES standards. The second
component would be a model alternate earnings survey that NCES would
develop for use by institutions. As stated previously, complying with
the standards set forth in the Earnings Survey Form would be required
for any institution choosing to conduct an alternate earnings survey.
However, use of the model survey would be voluntary and it would only
be provided by NCES in order to reduce the cost, burden, and
implementation timeline of the institutions when conducting the survey.
In addition to the alternate earnings survey, we would permit an
alternate earnings appeal using State earnings data. We propose this
option in order to provide institutions with an alternative form of
appeal as we recognize that some institutions may already have, or
could subsequently implement, processes and procedures to access State
earnings data. Additionally, we recognize that some institutions may
have challenges meeting the requirements of the Earnings Survey Form.
However, we are concerned about several limitations of State earnings
data. First, not all States have longitudinal data systems that contain
earnings data, and, in States that do have such systems, not all
institutions have access to them. There are circumstances where an
institution may be able to access earnings data directly from a State
workforce agency that maintains the earnings data as opposed to
accessing it through the State longitudinal data system. However, State
or Federal law or regulation, or both, may generally prohibit or
significantly complicate the sharing of needed data between the
institution and the State agency. Third, some students who complete a
GE program can be expected to obtain employment in different States. In
order for an alternate earnings appeal based on State data to be
comprehensive, an institution may not only have to access its own
State's earnings records, but also the records of other States likely
to employ the GE program's graduates. Fourth, State earnings databases
are typically maintained to support a State's own unemployment
insurance program. For example, for any given State, not all employers
may be liable for unemployment insurance contributions and not all
workers may accrue unemployment insurance benefit rights, in which case
those employers or those workers may not be included in the database,
and those coverage determinations will vary by State.
For these reasons, we invite comment on whether we should permit
the use of data from State databases for alternate earnings appeals. It
is important to note that the Department would only accept an alternate
earnings appeal using a State data system if the submission contains
matches for more than 50 percent of all students on the list submitted
to the State administrator and that number of matched students is 30 or
more. As in the 2011 Prior Rule, this is to ensure there is a large
enough sample for the data to be representative of the GE program as a
whole.
We believe that there are more significant and definitive
shortcomings associated with the use of BLS data for this purpose. As
we said in the 2011 Prior Rule:
The Department has several concerns about using BLS data to
calculate the debt-to-earnings ratios. First, as a national earnings
metric that includes untrained, poorly-trained and well-trained
employees, BLS earnings data do not distinguish between excellent and
low-performing programs offering similar credentials.
Second, BLS earnings data do not relate directly to a program--the
data relate to a Standard Occupational Classification (SOC) code or a
family of SOC codes stemming from the education and training provided
by the program. An institution may identify the SOC codes by using the
BLS CIP-to-SOC crosswalk that lists the various SOC codes associated
with a program, or the institution could identify through its placement
or employment records the SOC codes for which program completers find
employment.
In either case, the BLS data may not reflect the academic content
of the program, particularly for degree programs. Assuming the SOC
codes can be properly identified, the institution could then attempt to
associate the SOC codes to BLS earnings data. BLS provides earnings
data at various percentiles (10, 25, 50, 75, and 90), but the
percentile earnings do not relate in any way to the educational level
or experience of the persons employed in the SOC code.
So, it would be difficult for an institution to determine the
appropriate earnings, particularly for students who complete programs
with the same CIP code but at different credential levels. For example,
there is no difference in earnings in the SOC codes associated with a
certificate program and an associate degree program with the same CIP
code. Moreover, because BLS percentiles simply reflect the distribution
of earnings of those employed in a SOC code, selecting the appropriate
percentile is somewhat arbitrary.
For example, the 10th percentile does not reflect entry-level
earnings any more than the 50th percentile reflects earnings of persons
employed for 10
[[Page 16462]]
years. Even if the institution could reasonably associate the earnings
for each SOC code to a program, the earnings vary, sometimes
significantly, between the associated SOC codes, so the earnings would
need to be averaged or somehow weighted to derive an amount that could
be used in the denominator for the debt-to-earnings ratios.
Finally, and perhaps most significantly, BLS earnings do not
directly reflect the earnings of the students who complete a program at
an institution. Instead, BLS earnings reflect the earnings of workers
in a particular occupation, without any relationship to what
educational institutions those workers attended. While it is reasonable
to use proxy earnings like those available from BLS for research or
consumer information purposes, we believe a direct measure of program
performance must be used in determining whether a program remains
eligible for title IV, HEA funds. The earnings data we obtain from SSA
will reflect the actual earnings of program without the ambiguity and
complexity inherent with attempting to use BLS data for a purpose
outside of its intended scope. 76 FR 34386, 34421
Recognizing these shortcomings, in the 2011 Prior Rule, the
Department permitted the use of BLS data as a source of earnings
information only for challenges to debt-to-earnings ratios calculated
in the first three years of the Department's implementation of Sec.
668.7(g). This was done to address the concerns of institutions that
they would be receiving earnings information for the first time on
students who had already completed the program, at a point in time at
which they could not implement improvements to the program that would
affect the student debt burdens. See 76 FR 34423. In order to confirm
the accuracy of the data used in a BLS-based alternate earnings appeal,
Sec. 668.7(g) of the 2011 Prior Rule also required an institution to
submit, at the Department's request, extensive documentation, including
employment and placement records.
We believe that the reasons for previously permitting the use of
BLS data, despite its shortcomings, no longer apply. Most institutions
have now had experience with SSA data on their students' earnings
through the 2011 GE informational rates; thus, many programs are no
longer in the situation where they would be receiving earnings data for
the first time under the proposed regulations. In addition, the
proposed regulations provide for a four-year transition period (for
example, in award years 2014-2015, 2015-2016, 2016-2017, and 2017-
2018), during which the Department would provide the institution an
opportunity to have its program's D/E rates calculated using more
recent loan debt data. By doing so, the proposed regulations would
allow an institution to immediately benefit from changes it makes to
the GE program that reduce student debt.
Given the shortcomings of the BLS data in producing a reliable
assessment of student outcomes for a particular GE program, the fact
that many programs had access to earnings data under the 2011 Prior
Rule, and our proposal to include a four-year transition period, we are
not including in the proposed regulations a provision permitting the
use of BLS data for alternate earnings appeals.
The procedures an institution would be required to follow in making
an alternate earnings appeal under the proposed regulations are largely
similar to those in the 2011 Prior Rule. Under the 2011 Prior Rule, an
institution was required to notify the Secretary of its intent to use
alternate earnings no later than 14 days after the institution received
its final debt measures. We intend to provide an institution with
adequate time to pursue an alternate earnings appeal, while ensuring
that the Department can disclose as soon as possible to the public the
program's final rates, with appropriate notice that the institution
intends to appeal the rates. We are therefore proposing in the
regulations that an institution must notify the Secretary of its intent
to appeal no later than three business days after the date the
Secretary issues the notice of determination with the final D/E rates.
The institution must indicate its intent to appeal no earlier than the
date the Secretary provides the institution with its draft D/E rates.
However, as explained more fully below, the notice deadlines do not
limit the time available to an institution to actually conduct the
survey. As with the 2011 Prior Rule, the institution would have 60 days
after it receives the notice of determination to submit all supporting
documentation in support of its appeal. In the interest of providing
finality in the alternate appeals process, we would provide that an
institution waives its right to appeal failing or zone final D/E rates
if it does not submit a timely appeal.
The non-Federal negotiators raised questions about our initial plan
during the negotiated rulemaking process to rely solely on earnings
surveys conducted in accordance with NCES standards. Specifically, some
non-Federal negotiators expressed concern that, given the proposed
deadlines in Sec. 668.406 and the effort required to complete a
reliable survey under NCES standards, the survey option would not be a
viable appeal mechanism. In particular, some of the negotiators raised
concerns that smaller institutions would not have the resources
necessary to properly conduct the survey.
We note that an institution would be able to begin its survey at
any point in time and need not wait for issuance of draft D/E rates to
plan and conduct the survey. The proposed regulations simply propose
deadlines by which the institution must notify the Department that it
will be submitting an appeal and by which it must submit the actual
survey results.
To put these deadlines in context, under the proposed regulations,
as an example, assume that the first award year for which D/E rates
could be issued is award year 2014-2015. Those rates would be based on
the outcomes of students who completed a GE program in award years
2010-2011 and 2011-2012 for a two-year cohort period, and 2008-2009,
2009-2010, 2010-2011, and 2011-2012 for a four-year cohort period. SSA
would provide to the Department data on the students' earnings for
calendar year 2014 approximately 13 months after the end of calendar
year 2014, in early 2016. Those earnings data would be used to
calculate the D/E rates for award year 2014-2015, and draft rates would
be issued shortly after the final earnings data are obtained from SSA.
Under our anticipated timeline, an institution that receives draft D/E
rates that are in the zone or failing for award year 2014-2015 would
receive those draft rates early in 2016. The draft D/E rates for the
following year--award year 2015-2016--would be issued in early calendar
year 2017. An institution that wished to conduct a survey to support a
potential alternate earnings appeal of its D/E rates for award year
2015-2016--the earliest date by which rates that could render the
program ineligible would be issued--would base its appeal on student
earnings during calendar year 2015 for rates calculated on a two-year
cohort period. Students who completed the GE program would know by
early 2016 how much they earned, and could be surveyed, as early as the
beginning of 2016--more than a full year before the Department would
issue final D/E rates for award year 2015-2016, the rates for which the
institution would use the survey results. We believe the proposed
regulations provide more than adequate time to permit an institution to
conduct and present an alternate earnings appeal and that to permit
more time would unnecessarily increase the risk that more students
would invest their time
[[Page 16463]]
and money, and their limited eligibility for title IV, HEA program
funds, in a failing GE program.
In response to concerns voiced by some negotiators that the rigor
of NCES survey standards would make it prohibitively difficult and
expensive for some institutions to conduct an alternate earnings appeal
based on survey data, we made two modifications to the alternate
earnings appeal process that are reflected in the proposed regulations.
First, we have provided that NCES would prepare an Earnings Survey
Form, which would contain a model survey that institutions could elect
to use. The availability of an already developed model survey would
reduce the expense for institutions as they would not need to develop
their own survey. Moreover, we have proposed that the form would
outline the standards that must be followed even if an institution
chose to use a different form. In addition to making a survey-based
alternate earnings appeal more accessible, we added to the proposed
regulations the option to use earnings data obtained from State-
sponsored databases, so that institutions would have more avenues of
appeal.
We invite comment on whether the proposed regulations should permit
institutions to expand the applicable cohort surveyed under
circumstances in which the size of the applicable cohort may make it
difficult for the institution to satisfy the survey standards or meet
the matching requirements proposed in connection with appeals based on
State-sponsored database earnings information. We also invite comment
on how we might improve the alternate earnings appeals process so that
it is less data intensive, but nonetheless is based on accurate
earnings information.
At least one negotiator suggested that, if an institution elects to
make an alternate earnings appeal, it should be required to post an
appeal bond and should remain subject to at least some of the
requirements in proposed Sec. 668.410 otherwise triggered by the final
D/E rates, such as the student warning, until the resolution of the
appeal. We do not typically require institutions that appeal a
limitation or termination proposed on other title IV, HEA program
performance grounds to comply with the limitation or post a bond
pending resolution of an appeal. For the purpose of the proposed
regulations, we do not believe it would be necessary to impose these
restrictions before an institution has had its alternate earnings
appeal considered and received a decision on the merits of that appeal.
In discussing the procedures for calculating D/E rates under the
proposed regulations, some negotiators expressed concern over including
only the earnings of students who receive title IV, HEA program funds.
As explained in ``Sec. 668.401 Scope and purpose,'' our focus in the
proposed regulations is on students who receive title IV, HEA program
funds for enrollment in a GE program. However, we invite comment as to
whether institutions should be permitted to include the earnings
information of individuals who did not receive title IV, HEA program
funds for enrollment in the program, and on what basis. That is, how
would D/E rates based on the earnings of individuals who did not
receive title IV, HEA program funds demonstrate that the program
satisfies the gainful employment requirement for students who did
receive title IV, HEA program funds? We also invite comment as to
whether, if the earnings information of individuals who did not receive
title IV, HEA program funds were included, a successful appeal should
result in published recalculated D/E rates for a program, and whether
the program should be deemed as passing under the D/E rates measure or
if the program should not receive an official result, but also not be
subject to any sanctions based on that year's D/E rates.
Showings of Mitigating Circumstances
Several negotiators argued that low-cost, and consequently low-
risk, programs where borrowing is largely unnecessary should not be
subject to the D/E rates measure because the measure would not
accurately reflect the level of borrowing by individuals enrolled in
the program and the low cost of the program. The negotiators claimed
that, for many low-cost programs, students receiving title IV, HEA
program funds constitute only a small, unrepresentative portion of the
students in terms of borrowing behavior. They argued that, for these
programs, the percentage of students who receive title IV, HEA program
funds and incur debt to enroll in the program is significantly greater
than the percentage of all students who incur debt to enroll in the
program. According to the negotiators, a program in which a majority of
students have no debt is unlikely to produce graduates whose
educational debts would be excessive because the tuition and costs are
likely to be modest and require little borrowing, and therefore would
not place the Federal investment in the program at significant risk. To
more adequately account for low-cost, low-risk programs, the
negotiators suggested that a GE program should pass the D/E rates
measure if (1) the median loan debt of all individuals who complete the
program in the applicable cohort period (both individuals who received,
and who did not receive, title IV, HEA program funds) is zero, or (2)
the program has a borrowing rate of less than 50 percent.
Under the proposed regulations, the loan debt component of the D/E
rates measure would be calculated as a median, so that a program would
have an annual loan payment of $0, and, consequently, passing D/E rates
of 0, if less than half of the students who receive title IV, HEA
program funds and complete the program during the applicable cohort
period are borrowers.
However, because the D/E rates measure assesses only the outcomes
of students receiving title IV, HEA program funds, it might not in all
cases fully recognize the benefit of programs that present low risk to
students and taxpayers. Under the proposed regulations, the D/E rates
measure would attribute a student's loan debt to a program, up to the
amount of tuition, fees, and equipment and supplies, even though the
student could have obtained the loan only to pay for living expenses.
As a result, the D/E rates measure might not fully reflect the impact
of low costs in reducing the overall debt burden of a program's
students. Therefore, in order to fully assess the benefit of programs
that do not place students at risk of unaffordable debts, the proposed
regulations would permit an institution to demonstrate that a program
with D/E rates that are failing or in the zone should be deemed to be
passing the D/E rates measure because less than 50 percent of all
individuals who completed the program, both those who received title
IV, HEA program funds, and those who did not, did not have to assume
any debt to enroll in the program. The less than 50 percent standard is
appropriate because a borrowing rate of less than 50 percent would mean
that the median loan debt of the program is zero.
On the other hand, we recognize that in all cases a program with a
borrowing rate of less than 50 percent may not, in fact, be low risk.
For example, the majority of students could have alternative resources
to pay the program costs, such as employers, State grant programs, or
military benefits, or the program could still have a significant number
of students who received title IV, HEA program loans for enrollment in
the program.
We request specific comment on whether a program that demonstrates
a borrowing rate of less than 50 percent should be deemed to be passing
the D/
[[Page 16464]]
E rates measure and whether and how it may be appropriate to take into
account students who do not receive title IV, HEA program funds to make
that determination. We also invite comment as to whether the program
should receive an official result, and whether the program should be
subject to any sanctions on the basis of that year's D/E rates.
In addition, we invite comment on the method that should be used to
ensure that borrowing rate showings are based on reliable evidence.
Current regulations require an institution to create and maintain for
audit and program review purposes records needed to verify data that
appear in any report it uses to participate in a title IV, HEA program.
34 CFR 668.24(c)(1)(vi). A borrowing rate showing is a report that an
institution would use to participate in title IV, HEA programs, and the
institution would, thus, be required to maintain a complete list
identifying all individuals included in its borrower rate calculations,
as well as records evidencing those individuals' enrollment in the
program and the dates on which they completed the program. We seek
comment on whether the institution should also be required to submit as
part of the showing a modified list of these individuals that would
fully identify the students who received title IV, HEA program funds,
but provide the list of students who did not receive title IV, HEA
program funds in deidentified form, as is now commonly done in program
review reports. Such deidentified list would show no more than the
individuals' initials and last four digits of the social security
number or another numeric identifier.
Finally, we invite alternative proposals to assess whether a
program leads to low rates of borrowing.
Section 668.407 Calculating pCDR
Section 668.408 Issuing and Challenging pCDR
Subpart R
Current Regulations: None.
Proposed Regulations: Under proposed Sec. Sec. 668.407 and
668.408, the Department would use pCDR as a second accountability
metric, independent of the D/E rates measure, to determine whether a
program remains eligible for title IV, HEA program funds. For a
complete discussion of our proposed use of, and standards associated
with, the pCDR measure for the purpose of determining a GE program's
eligibility for title IV, HEA program funds, see ``Sec. 668.403
Gainful employment framework.''
Section 435(m) of the HEA provides that an institutional cohort
default rate (iCDR) is the percentage of an institution's FFEL and
Direct Loan borrowers who entered repayment in a given Federal fiscal
year and who defaulted by the end of the second fiscal year following
the year in which the borrowers entered repayment, referred to as the
CDR monitoring period. 20 U.S.C. 1085(m). Subpart N of part 668 of the
regulations currently implements, and typically tracks, the iCDR
provisions of section 435(a) and (m) of the HEA, 20 U.S.C. 1085(a) and
(m).
Proposed Sec. Sec. 668.407 and 668.408 provide that the Secretary
would generally determine a GE program's pCDR using the same
methodologies and procedures used to calculate iCDRs pursuant to
section 435(m) of the HEA. 20 U.S.C. 1085(m). These methodologies and
procedures are set forth in detail in proposed subpart R of part 668.
The proposed pCDR regulations in subpart R would generally mirror the
structure of the iCDR regulations in subpart N. Because institutions
are familiar with subpart N, proposed subpart R would adopt the text
and section designations used in subpart N, with minor changes to
reflect the application of the iCDR process to pCDR determinations.
Because some provisions in subpart N that are applicable to
institutions would not be relevant at the program level, these sections
or parts of subpart N have been omitted and reserved in subpart R.
In calculating a GE program's pCDR, the Secretary would consider
the students who received a FFEL or Direct Loan for enrollment in the
GE program and who entered repayment on those loans during a relevant
Federal fiscal year and determine the number of those students who
defaulted on those loans in that fiscal year or by the end of the
following two fiscal years--the CDR monitoring period. The pCDR measure
would use the same fiscal year for establishing the cohort of students
and the same CDR monitoring period for determining how many students in
the cohort defaulted as is used for iCDR calculations. However, the
pCDR measure would be based on a different measurement period and
different cohort of students than the proposed D/E rates. Under
proposed Sec. 668.404, D/E rates are calculated for a cohort of
students who received title IV, HEA program funds, including Federal
loans, Federal Pell Grants, and other title IV, HEA program funds, and
who completed the program during an applicable cohort period. In
contrast, the pCDR measure, like iCDR, would include students who
received FFEL and Direct Loans and who entered repayment on those loans
during the relevant fiscal year, whether or not they completed the
program. FFEL and Direct Loan borrowers generally enter repayment after
a six-month grace period that begins when the borrower ceases
enrollment on at least a half-time basis. 34 CFR 682.200, 682.209(a)(3)
(FFEL Loans); Sec. 685.207(b)(2), (c)(2) (Direct Loans).
A GE program's pCDR would be based on students who (1) enrolled in
the GE program, whether or not they completed the program, (2) received
one or more FFEL or Direct Loans for enrollment in the program, and (3)
entered repayment on one or more of those loans during the fiscal year
that precedes by 3 years the year in which the rate is calculated. If
2016, for example, is the first year that pCDRs for GE programs are
released under the proposed regulations, the pCDRs would be for the
fiscal year 2013 cohort. To calculate the program's pCDR, the Secretary
would determine the number of borrowers who entered repayment on their
FFEL or Direct Loans between October 1, 2012, and September 30, 2013.
The Secretary would then determine how many of those students defaulted
by September 30, 2015.
A FFEL Loan would be considered to be in default if a guaranty
agency paid a default claim to the FFEL lender on the loan. Sec.
668.502(c)(1)(i). A Direct Loan would be considered to be in default if
a borrower failed to make a required installment payment for 360 days.
Sec. 668.502(c)(1)(ii). These pCDR provisions would be identical to
the corresponding iCDR provisions in Sec. 668.202(c).
Under the proposed regulations, each year, the Secretary would
calculate a draft pCDR for each GE program by: (1) Identifying, from
information reported by the institution under proposed Sec. 668.411
and from information in NSLDS, a cohort of borrowers who received FFEL
or Direct Loans for enrollment in the GE program and who entered
repayment during the fiscal year and (2) determining the percentage of
those borrowers who defaulted within the pCDR monitoring period. Sec.
668.502(a). If fewer than 30 borrowers entered repayment in the fiscal
year, the cohort of borrowers would include, in addition to the
borrowers who entered repayment in the fiscal year, borrowers who
entered repayment in the two preceding fiscal years. In that case, the
program's draft pCDR would be based on the total cohort from the three
years. Sec. 668.502(d)(2).
As set forth in proposed Sec. 668.504, the Department would notify
an institution of a program's draft pCDR and provide
[[Page 16465]]
a report listing the students included in the cohort and the loan
details that were used in the calculations. The report would allow the
institution an opportunity to challenge the information used to
calculate the draft pCDR. The pCDR challenge process mirrors the iCDR
process, as follows. The institution would have 45 days to submit an
``incorrect data challenge'' to the accuracy of the data used to
calculate the draft pCDR. For most FFEL loans, the institution would
send its incorrect data challenge to the relevant guaranty agency. For
Direct Loans and for FFEL loans held by the Department, the institution
would send its incorrect data challenge to the Department's loan
servicer from whose records the data were obtained. The guaranty agency
or Departmental servicer would be required to respond to the
institution's challenge. The Department would review the challenge and
response and either accept the challenge and recalculate the program's
pCDR, or reject the challenge and notify the institution of the
rejection.
If a GE program's draft pCDR is 30 percent or greater for the third
fiscal year following two consecutive years for which the official pCDR
was 30 percent or greater, the institution would be able to submit a
``participation rate index'' challenge to the draft pCDR for that third
year. This challenge rests on the position that the number of students
who borrow title IV, HEA program loans for enrollment in the GE program
constitutes a small percentage of the program's students. Specifically,
if the program's pCDR multiplied by the percentage of title IV, HEA
program loan borrowers among all regular students (including students
who did not receive title IV, HEA program funds) enrolled in the
program is less than 0.0625, the program would not be subject to a loss
of title IV, HEA program eligibility on account of a third consecutive
year's pCDR of 30 percent or greater. Sec. 668.504(c).
After resolution of a participation rate index challenge or after
the date by which such a challenge would have to be made, the
Department would issue an official pCDR. Unlike the procedures for
issuance of iCDRs, we would not provide this notification
electronically.
The institution could request to have the official pCDR adjusted on
several grounds, or could appeal the official pCDR, if that pCDR would
be the third consecutive year's pCDR of 30 percent or greater. Sec.
668.508. Each of these appeals and requests for adjustment is available
to institutions under the iCDR provisions. Sec. 668.208. Most appeals
and adjustment options are available for appeals and requests for
adjustment of any iCDR. However, iCDR regulations limit the
availability of some appeals to those rates that would result in loss
of institutional eligibility, and the proposed regulations would
similarly allow some appeals only for a pCDR that would subject the GE
program to a loss of eligibility under proposed Sec. 668.403, as a
result of the third consecutive year's pCDR of 30 percent or greater.
First, the institution would have two possible ways to request an
adjustment to the data used to calculate any official pCDR:
Uncorrected data adjustment: A correction approved as a
result of an ``incorrect data challenge'' that was previously approved
is not reflected in the official pCDR, Sec. 668.509; and
New data adjustment: New data used in the calculation of
the official pCDR differs from data previously provided to the
institution with the program's draft pCDR, and it is inaccurate, Sec.
668.510.
Second, the institution would be able to request that any pCDR be
recalculated through two types of appeals:
Erroneous data appeal: The pCDR should be recalculated
because the data previously challenged or newly added are incorrect,
Sec. 668.511; and
Loan servicing appeal: The pCDR should be recalculated
because the servicer failed to perform certain due diligence activities
before the loan defaulted, Sec. 668.512.
Third, the institution would be able to avoid a loss of program
eligibility under proposed Sec. 668.403 through a successful appeal of
a pCDR that would have resulted in loss of eligibility on any of the
following four grounds:
Economically disadvantaged appeal: Of all the students
enrolled in the program on at least a half-time basis (including those
who did not receive title IV, HEA program funds), (a) two-thirds were
either eligible to receive at least half the maximum Pell Grant or had
a family income below the HHS poverty guideline standard for that
family size, and (b) of these students, at least 70 percent timely
completed the degree program, transferred to a higher credentialed
program, were still enrolled, or entered military service, or, for non-
degree programs, at least 44 percent within a year had obtained
employment in the occupation for which the program was offered or
entered military service, Sec. 668.513;
Participation rate index appeal: Similar to the
participation rate index challenge previously described for draft pCDR,
except it would be submitted after official pCDRs have been calculated,
Sec. 668.514;
Average rates appeal: Two or more of the pCDRs on which
loss of eligibility would be based had been calculated as an average
rate under Sec. 668.502(d)(2)(i) because fewer than 30 borrowers
entered repayment in the fiscal year, and the rates for any two of
those ``averaged rate'' years would pass the pCDR measure if calculated
based only on the borrowers who entered repayment in each of those two
fiscal years, Sec. 668.515; and
Thirty-or-fewer borrowers appeal: The total number of
borrowers who comprise the pCDR cohorts for the three years at issue
was 30 or fewer, Sec. 668.516.
Reasons: Our reasons for proposing Sec. 668.407, Sec. 668.408,
and subpart R of part 668, and the use of pCDR as a new and independent
GE measure, are described in ``Sec. 668.403 Gainful employment
framework.'' We also discuss there our reasons for proposing adoption
of the iCDR calculation, appeal, and challenge procedures for the pCDR
measure. The proposed consequences associated with a GE program's pCDR,
and our related reasoning, are described in ``Sec. 668.403 Gainful
employment framework'' and ``Sec. 668.410 Consequences of GE
measures.''
We propose to adopt the challenges, adjustments, and appeals for
pCDR that are currently available for iCDR and, in several instances,
that are based on provisions of the HEA itself. Two of those options--
participation rate index challenges and appeals, and economically
disadvantaged appeals--include consideration of individuals who did not
receive title IV, HEA program funds. We invite comment as to whether we
should modify those provisions for pCDR to include only those students
who receive title IV, HEA program funds.
Section 668.409 Final Determination of GE Measures
Current Regulations: Section 668.7(f) of the 2011 Prior Rule
provides that the Secretary would notify an institution of any draft
results of the debt measures for its GE programs that are not
challenged, challenged unsuccessfully, or recalculated after a
successful challenge. These results would be the final debt measures
for the program.
The Secretary would notify an institution if it were to become
ineligible. If an institution submits an alternate earnings appeal of a
program's final debt-to-earnings ratios and it is denied, the Secretary
would also separately notify the institution and provide reasons for
the denial.
[[Page 16466]]
Proposed Regulations: Proposed Sec. 668.409 provides that the
Secretary would issue a separate notice of determination for the D/E
rates measure and for the pCDR measure for each GE program at an
institution. In comparison, under the 2011 Prior Rule, information
regarding all of the debt measures would be provided in a single notice
instead of separately for each metric.
The notice of determination for the D/E rates measure would be
issued for each award year that D/E rates are calculated for a program,
after the period for the D/E rates challenge process under Sec.
668.405 has passed, or any challenges are resolved. The notice would
include a program's final D/E rates, the effective date of the
determination, and whether, based on the program's final D/E rates:
The program is passing, failing, or in the zone as
determined under proposed Sec. 668.403;
The program is ineligible as determined under proposed
Sec. 668.403 and, if so, the consequences as provided under proposed
Sec. 668.410;
The program could become ineligible based on its final D/E
rates for the next award year;
The institution must provide warnings about the program to
students and prospective students as provided under proposed Sec.
668.410; and
For a program that is failing or in the zone under the D/E
rates measure, instructions on how it may make an alternate earnings
appeal or make a showing of mitigating circumstances under proposed
Sec. 668.406.
The notice of determination for the pCDR measure would be issued
each year, after the period for the pCDR appeals and adjustment process
under proposed Sec. 668.408 and subpart R has passed, or any appeals
or requests for adjustment are resolved. The notice would include the
program's official pCDR, the effective date of the determination, and
whether, based on the program's official pCDR:
The program is passing or failing as determined under
proposed Sec. 668.403;
The program is ineligible as determined under proposed
Sec. 668.403 and, if so, the consequences as provided under proposed
Sec. 668.410;
The institution must provide warnings about the program to
students and prospective students as provided under proposed Sec.
668.410; and,
For a program that has failed the pCDR two consecutive
years or three consecutive years, instructions on how it may appeal or
seek an adjustment to its official pCDR under proposed Sec. 668.508.
If an institution were to pursue an alternate earnings appeal of a
program's final D/E rates, or a showing of mitigating circumstances,
under proposed Sec. 668.406, or an appeal or request for adjustment
with respect to a program's official pCDR under proposed Sec. 668.508,
a subsequent notice would be issued with the Department's
determination. If the appeal or adjustment is successful, the notice
would provide the recalculated final D/E rates or official pCDR along
with information regarding the program's status. If the showing of
mitigating circumstances is successful, the institution would be
notified. If an appeal, showing, or adjustment is denied, the notice
would provide the reasons for the denial. The notice of determination,
or subsequent notice after any appeals, showings, or adjustments are
resolved, would constitute the final decision of the Secretary and
would not be subject to further administrative review.
The notice under the 2011 Prior Rule, although similar, would
provide less information than the notice under the proposed
regulations. Specifically, the Prior Rule's notice would not include an
effective date, categorize a program as one that satisfies or is
failing the debt measures, provide information on any consequences, or
notify an institution that a program is ineligible, although an
institution would be notified separately of a program's ineligibility.
Also, in contrast to the proposed regulations, the notice under the
2011 Prior Rule would not provide instructions on appealing or seeking
adjustments to the results of a GE measure. If an appeal was denied, an
institution would be notified separately with the reasons for the
denial.
Reasons: As in Sec. 668.7(f) of the 2011 Prior Rule, proposed
Sec. 668.409 would establish an administrative process to determine,
and notify an institution of, a program's final GE measures. Separate
notices of determination would be issued for the D/E rates and pCDR
measures because the calculation of the D/E rates and pCDR will likely
occur at different times during the year.
In comparison to the 2011 Prior Rule, the notice of determination
under proposed Sec. 668.409 would provide more detailed information in
a single notice for each metric so that an institution could better and
more easily understand the results of its GE measures under the
proposed regulations, when they would be effective, whether the results
are final determinations or could be appealed or adjusted or could be
the subject of a showing of mitigating circumstances, the consequences
of the results, and any actions an institution would be required to
take and by what date. With respect to adjustments, appeals, and
showings of mitigating circumstances, the notification would include
instructions to help ensure that institutions have a clear
understanding of the process.
Section 668.410 Consequences of GE Measures
Current Regulations: Under Sec. 668.7(j) and (l) of the 2011 Prior
Rule, an institution would be subject to one or more restrictions with
respect to a failing program, a program that was made ineligible under
the 2011 Prior Rule, or a program that was voluntarily discontinued at
the time it was failing.
Debt Warnings
For a failing program, an institution would be required to provide
currently enrolled and prospective students with debt warnings that
would vary in urgency based on whether the program failed the GE
measures for a single fiscal year (``first year warning'') or for two
consecutive or two out of the three most recent fiscal years (``second
year warning''). The warnings would be required to be prepared in plain
language and in an easy-to-understand format. Further, to the extent
practicable, institutions would be required to provide alternatives to
English language warnings for those students for whom English is not
their first language.
In the first-year warning, an institution would be required to
explain the debt measures, show the amount by which the program failed
to meet the standards, and describe how the institution plans to
improve the program's performance under the debt measures. The
institution would be required to deliver the first-year warning orally
or in writing directly to students in accordance with procedures
established by the institution. ``Directly to students'' would include
communicating with the student in-person, telephonically, as a part of
a group presentation, or by email to the student's email address. In
the case of an oral warning, the institution would be required to
document how the information was provided, any materials used, and that
the student was present.
In the stronger second-year warning, an institution would be
required to include the same information as the first-year warning and,
additionally, a clear and conspicuous statement that a student who
enrolls or continues in the program should expect to have difficulty
repaying his or her student loans, an explanation of the actions the
institution plans to take in response to the second failure, if the
institution
[[Page 16467]]
plans to discontinue the program, the timeline and options available to
students, the risks associated with enrolling or continuing in the
program, including the potential consequences of ineligibility and
options available to students in such an event, and resources available
to students, including www.collegenavigator.gov, to research other
educational options and compare program costs. An institution would be
required to provide the second-year warning in writing and display the
required information on the program's main Web page and in all
promotional materials. An institution would have the option to include
the second-year warning in the required disclosures under the 2011
Current Rule. The second-year warnings would have to be provided until
the program meets one of the debt measures for two out of the three
most recent fiscal years.
For students enrolled in a failing program, an institution would be
required to provide the relevant debt warning as soon as
administratively feasible but no later than 30 days from the date that
the Secretary notifies the institution that the program failed the debt
measures. With respect to prospective students, an institution would be
required to provide the relevant warning at the time the student first
contacts the institution requesting information about a failing
program. If the prospective student intends to use title IV, HEA
program funds for attendance in the program, an institution would be
prohibited from enrolling the prospective student in the program until
three days after providing the debt warning, and, if more than 30 days
pass from when the debt warning was first provided and the date the
student seeks to enroll in the program, the institution would be
required to provide the debt warning again and wait three days from
that date before enrolling the student.
Ineligibility for Title IV, HEA Program Funds
Except as provided in Sec. 668.26(d) of the 2011 Prior Rule, an
institution would be prohibited from disbursing title IV, HEA program
funds to students enrolled in a program that becomes ineligible as a
result of failing to meet the minimum standards for three out of the
four most recent fiscal years.
Period of Ineligibility
A program that becomes ineligible under the 2011 Prior Rule, or a
failing program that is voluntarily discontinued, would remain
ineligible until the institution reestablishes the eligibility of that
program.
For an ineligible program, or a program that is substantially
similar to an ineligible program, an institution would not be able to
reestablish eligibility until the end of three fiscal years after the
fiscal year in which the program is made ineligible. A program would be
substantially similar to an ineligible program if it has the same
credential level and first four digits of the CIP code.
For a voluntarily discontinued failing program, an institution
would not be able to reestablish eligibility until the end of two
fiscal years after the fiscal year in which the program is discontinued
if it is discontinued at any time after the program is determined to be
failing but no later than 90 days after the date that the Secretary
notifies the institution that it would be required to provide a second-
year debt warning with respect to the program. If the program is
voluntarily discontinued more than 90 days after the date that the
Secretary notifies the institution that it would be required to provide
a second-year debt warning, an institution would not be able to
reestablish eligibility until three fiscal years after the fiscal year
in which the program is discontinued. A failing program would be deemed
as voluntarily discontinued on the date the institution provides
written notice to the Secretary that it relinquishes title IV, HEA
program eligibility.
Proposed Regulations: Although the proposed regulations and the
2011 Prior Rule provide for similar consequences, the circumstances
under which they would be imposed and their specific requirements
differ in many respects.
Student Warning
Under proposed Sec. 668.410(a), within 30 days of receiving a
notice of determination under Sec. 668.409 stating that a GE program
could become ineligible based on its final D/E rates for the next award
year or based on its next official pCDR, an institution would be
required to provide a written warning directly to each student enrolled
in the program and include the student warning on the program's
disclosure template under proposed Sec. 668.412. The following
statement would be required to be included in the student warning:
``You may not be able to use federal student grants or loans to pay
for this institution's program next year because the program is
currently failing standards established by the U.S. Department of
Education. The Department set these standards to help ensure that you
are able to find gainful employment in a recognized occupation and are
not burdened by loan debt you may not be able to repay. A program that
doesn't meet these standards may lose the ability to provide students
with access to federal financial aid to pay for the program.''
The proposed regulations would permit the Secretary to modify the
statement or establish an alternative statement in a notice published
in the Federal Register, after providing the general public and Federal
agencies with an opportunity to comment in connection with the approval
process under the Paperwork Reduction Act of 1995 (PRA). Before
finalizing the statement and the manner in which it would be presented,
the Department would conduct consumer testing to ensure that the
content of the statement advances the goals of the warning, the
language is understandable for the intended audience, the manner of
delivery is effective, and the warning is, on the whole, useful for
consumers.
As a part of the student warning, the institution would also be
required to describe the options available to enrolled students to
continue their education at the institution, or at another institution,
in the event the program loses its eligibility for title IV, HEA
program funds and inform students as to whether or not, if the program
becomes ineligible, it would:
Allow the student to transfer to another program at the
institution;
Continue to provide instruction in the program to allow
the student to complete the program; and
Refund the tuition, fees, and other required charges paid
by, or on behalf of, the student for enrolling in the program.
The proposed regulations would require that the warning be given
directly to the student, meaning that the warning must be hand-
delivered to the student individually or as part of a group
presentation, or must be sent to the primary email address used by the
institution for communicating with the student. Further, as under the
2011 Prior Rule, to the extent practicable, institutions would be
required to provide the warnings in alternative languages to students
whose first language is not English.
Proposed Sec. 668.410(a)(2) would require the institution to
provide this same warning to a prospective student at the time the
prospective student first contacts, or is contacted by, the institution
about a GE program. Further, the institution would not be able to
enroll, register, or enter into a financial commitment with the
prospective student for the program until:
Three business days after the warning was first provided;
or
[[Page 16468]]
If more than 30 days pass from the date the warning is
first provided, three business days after the institution provides
another warning.
Ineligibility for Title IV, HEA Program Funds
If a program loses title IV, HEA eligibility, under proposed Sec.
668.410(b)(1), except for the limited disbursements permitted under 34
CFR 668.26(d), an institution would be prohibited from disbursing title
IV, HEA program funds to students enrolled in the program.
Period of Ineligibility
For an ineligible program, voluntarily discontinued failing or zone
program, or program that is substantially similar to an ineligible
program or voluntarily discontinued failing or zone program, an
institution would not be able to reestablish title IV, HEA program
eligibility under Sec. 668.414 for three calendar years. In the case
of an ineligible program, this three-year period would begin on the
date specified in the notice of determination, under Sec. 668.409,
that the program is ineligible. For a voluntarily discontinued program,
the three-year period would begin on the date the institution provides
written notice to the Secretary that it relinquishes title IV, HEA
program eligibility.
Reasons: We have two overarching goals for the proposed
regulations: (1) To establish an accountability framework for GE
programs and (2) to increase the transparency of GE program student
outcomes. To achieve these goals, we have proposed accountability
metrics--D/E rates and pCDR--that we believe are reasonable and
valuable measures of a program's student outcomes. In proposed Sec.
668.410, we propose consequences that would be imposed on institutions
based on the results of their GE programs under the accountability
metrics that serve both our accountability goal and our transparency
goal.
The proposed regulations would largely adopt the consequences set
forth in the 2011 Prior Rule. They differ from the 2011 Prior Rule in
the timing and content of the language for the student warning and in
the period of time before which ineligible programs can reestablish
title IV, HEA program eligibility. From a policy perspective, the
significant differences are largely attributable to our desire,
consistent with our transparency goals, to streamline the student
warning process so that the message is more accessible to students and
prospective students, to facilitate institutional compliance by
reducing administrative burden, and to motivate continuous improvement
by institutions with respect to their GE programs or face termination
of program eligibility for title IV, HEA program funds.
Student Warning
The accountability framework of the proposed regulations reflects
our belief that, particularly in the initial years of the proposed
regulations, institutions should be given time and incentive to improve
those programs that are not among the very worst, but still have
outcomes that do not meet minimum acceptable levels of performance. We
recognize, however, that some of these programs may not improve, or
improve sufficiently, and may consequently lose eligibility for title
IV, HEA program funds. A program's loss of eligibility could make it
impossible for some students to complete that GE program. Given the
adverse effects on students that may arise from a program's loss of
title IV, HEA program eligibility, we believe that students should be
warned if a program could lose eligibility based on its next result
under one or both of the GE measures. Such warnings would inform
decisions of currently enrolled students with respect to their
continuing financial investment in the program, and would enable
prospective students to make informed decisions when choosing among
similar programs offered at one institution, or at several
institutions.
The proposed student warning differs from the 2011 Prior Rules in
that there would only be one type of warning instead of two, and the
warning would only be required when a GE program could become
ineligible based on its final D/E rates or official pCDR for the next
year instead of after a first failure. Additionally, the proposed
student warning focuses more narrowly than the warnings under the 2011
Prior Rule on the information that prospective and enrolled students
urgently need to have in considering whether to begin or continue
enrollment in a program facing the possible loss of eligibility.
The proposed regulations include the text that institutions would
use for the student warning in order to standardize the warning and
ensure that the necessary information is conveyed to students. This
particular language was chosen because we believe it would be simple
and easy to comprehend for students. However, we intend to conduct
consumer testing to better understand how different groups of students
would receive and process this information, and may modify our proposed
language based on the results of that testing. As proposed, the warning
would alert both prospective and enrolled students that a GE program
may lose eligibility for title IV, HEA program funds and explain the
implications of ineligibility. In addition, for enrolled students, the
warning would indicate the options that would be available to continue
their education at the institution or at another institution, if the
program lost its title IV, HEA program eligibility.
We believe this simplified warning and statement of options
provides more useful information than what was required by the 2011
Prior Rule. The statement that a program may lose the ability to
provide students with access to title IV, HEA program funds is critical
for students so that they can use that information to decide whether
and when to enroll in a similar, passing program at another institution
or in a passing program at the same institution. Requiring that the
warning be provided directly to a student is intended to make it more
likely that the student will benefit from the information. Further,
requiring that at least three days must pass before the institution
could enroll a prospective student would provide a ``cooling-off
period'' for the student to consider the information contained in the
warning without direct pressure from the institution, and also provide
the student with time to consider alternatives to the program either at
the same institution or at another institution.
The negotiators representing students, legal aid organizations, and
State Attorneys General generally urged the Department to revise the
draft regulations to make the student warning more understandable and
more widely available. They believed that institutions should begin
providing the student warning earlier than in the year before the GE
program could become ineligible, recommending that students should also
receive this information in any year in which a GE program is
identified as a zone program. They argued that as soon as it is
available, students should have any information that indicates that a
program for which they are spending significant time and money,
including title IV, HEA program funds, may not ultimately be a good
investment. Similarly, some negotiators proposed that a less stringent
warning be required for a zone program that is not at risk of losing
eligibility in the following year, and suggested that the Department
issue an alert instead of a warning when a program first enters the
zone, with the alert or warning becoming stronger as the program moves
closer to becoming ineligible.
[[Page 16469]]
Additionally, the negotiators were concerned that bad actors would
undermine the value of the student warning by hiding the information or
downplaying the message of the warning. They suggested that the
Department require institutions to post the warning in classrooms where
the GE program is offered, in the financial aid office, and in other
places where students would likely see it.
With respect to the language of the student warning, the
negotiators representing consumer advocates raised concerns that
specifying language to be included in the student warning would limit
the Department's ability to alter the required text to make it more
meaningful based on experience. They urged the Department to commit to
use focus groups to test and refine the language and format of the
warning to ensure that students, including those with limited English
proficiency or lower literacy levels, would understand the content and
implications.
Lastly, negotiators representing consumer advocates urged the
Department to require an institution to provide the warning to a
prospective student at the time that the student first contacts, or is
contacted by, the institution about the GE program and before a student
signs an enrollment agreement or otherwise makes a financial commitment
for the program. They noted that in many cases, an institution will
contact a prospective student before the student requests information
from the school. For example, some institutions contact a prospective
student visiting the Web site for a particular GE program via a live
chat. The negotiators stated that it was important to capture this type
of contact in the regulations in order to prevent schools from
convincing a student to commit to the program before giving them the
required warning. Along these same lines, these negotiators argued that
it is critical for prospective students to receive the warning before
they sign an enrollment agreement, as opposed to at the time they sign,
because once a student has committed to signing, the warning would have
little to no effect.
Although the other negotiators generally agreed that it is
important to warn students when a program is close to losing
eligibility for title IV, HEA program funds, some raised concerns about
the Department's approach. With regard to the proposal that
institutions would have to describe any options available to students
to continue their education at another institution in the event that
the program loses eligibility for title IV, HEA program funds, one of
the negotiators noted that it is not always possible for a student to
transfer to another institution. The negotiator pointed out that,
particularly in rural areas, there may not be another institution
within close proximity to the student that is offering a similar GE
program. Additionally, the negotiator noted that, even if there were
another institution nearby that was offering a similar program, there
is no guarantee that the institution would allow the student to
transfer into the program.
Another negotiator noted that the warning could be problematic for
institutions in which the typical program length is one and a half
academic years. The negotiator raised concerns that in those cases, a
warning telling students that they may not be able to use Federal
student grants or loans to pay for the program could be misleading
because students enrolled in the program could complete the program
before it lost eligibility. The negotiator argued that providing the
warning to enrolled students in these cases could cause students to
leave the program unnecessarily when they could have completed and
achieved their academic goals. Similarly, some of the negotiators were
concerned about having to provide the warning to prospective students
who would not be affected by a program's loss of title IV, HEA program
eligibility, such as foreign students. They recommended adding language
specifying that the warning must only be provided to a student who
could be affected by a program's loss of eligibility before they are
likely to complete the program.
We have considered the concerns raised during the negotiations
about the student warning, and we have taken into account many of the
suggestions and concerns in the proposed regulations. Although we
understand the position that students should receive a warning or, at a
minimum, a lower-level alert when a GE program is in the zone, we
believe that it is important, particularly in the initial years of the
rule, to give institutions a period of time to improve, without
restrictions, those programs that are either in the zone or not at risk
of losing eligibility under the GE measures in the following year.
Similarly, in future years, sufficient time should be allowed without
restrictions to determine whether a program's poor results are atypical
or whether they reflect a true decrease in its value. Accordingly, we
would limit instances where a warning would be required to potential
losses of eligibility under the D/E rates or the pCDR measure in the
following year. We believe that using one warning instead of the two
different warnings provided in the 2011 Prior Rule would reduce the
complexity of this requirement, facilitating institutional compliance
so that it is more likely that students receive this valuable
information when they need it most.
The proposed regulatory language is also intended to alleviate
concerns that institutions may try to downplay the warnings. First, we
have added language clarifying that providing a written warning
``directly'' to enrolled students means hand-delivering the warning to
a student individually or as part of a group presentation, or sending
the warning to the primary email address used by the institution for
communicating with the student about the program. We believe that this
addition would make it clearer to institutions what they are required
to do and better ensure that students receive the important message
intended to be conveyed by the warning. We invite comment on methods to
make it even more likely that students would receive the warning but at
the same time would not create overly burdensome requirements for
institutions.
Second, we have added proposed language clarifying that the
warnings must be given to a prospective student when the student first
contacts the institution or is contacted by the institution with
respect to a GE program and requiring institutions to provide the
warning before a student enrolls, and not at the time of enrollment, to
prevent an institution from manipulating students into committing to
enroll before it provided the required warning. An institution should
maintain records that showed the warning was provided prior to a
student enrolling at an institution. Sec. 668.24(a)(3).
We note, also, that under proposed Sec. 668.412(b)(2), within 30
days of receiving notice from the Secretary that the student warning is
required for a GE program, an institution would be required to update
the program's disclosure template to include the warning. We believe
that incorporating the student warning into the disclosure template,
which has a set format and standard text and which must be provided via
a prominent, readily accessible, clear, conspicuous, and direct link
from the program's Web site would limit manipulation of the warning
text or presentation to prospective students. For a prospective
student, we would also require the institution to obtain the student's
signature on a written disclosure, as this would ensure that the
student reviews the information in the warning before
[[Page 16470]]
making a financial commitment to the institution.
In the proposed regulations, we have added that we would conduct
consumer testing to ensure that the content of the statement advances
the goals of the warning, the language is understandable for the
intended audience, the manner of delivery is effective, and the warning
is, on the whole, useful for consumers--that is, it clearly
communicates to students the risks associated with enrolling or
continuing enrollment in a program that could soon become ineligible.
The proposed regulations would allow the Secretary to improve the
warning language by publishing a notice in the Federal Register with
any changes to the text, after providing the general public and Federal
agencies with an opportunity to comment in connection with the approval
process under the PRA.
With regard to the concern expressed by some negotiators that
students may not realistically have the option to transfer to a similar
GE program at another institution, the proposed regulations would not
mandate that institutions take affirmative steps to secure transfers
for its students but, rather, would require that institutions tell
students whether or not transfer options are available at the same
institution or another institution. In response to the concerns of the
negotiator who noted that in some cases the warning would discourage
students in short-term programs from completing their programs, we
believe that the potential timing for the loss of eligibility would
still be important information for those students to be aware of.
Further, we note that some programs may be short enough, or an enrolled
student may have already completed enough of the program, that the
potential loss of the program's title IV, HEA program eligibility in
the following year would not be a concern.
In addition, we understand institutional concerns about providing
the warning to prospective students who are categorically ineligible
for title IV, HEA program funds. Institutions would be responsible for
ensuring that any prospective student who could get title IV, HEA
program funds receives the warning, but institutions would not be
required to provide the warning to specific groups of prospective
students whom they know would not be eligible for title IV, HEA program
funds for enrolling in that program, such as foreign students.
Program Eligibility Restrictions
As stated, our proposed accountability framework is designed to
provide an opportunity and strong incentive, particularly in the
initial years of the proposed regulations, for institutions to improve
poorly performing programs before loss of title IV, HEA program
eligibility occurs. At the same time students, prospective students,
and their families and the public, taxpayers, and the Government must
be protected. There is no greater incentive to improve than the
potential loss of eligibility. But, for programs that do not improve,
the eventual loss of eligibility protects students by preventing them
from enrolling in programs that have consistently produced poor student
outcomes.
As in the 2011 Prior Rule, the proposed regulations would establish
a period of time before an ineligible or voluntarily discontinued
program could regain eligibility. However, unlike in the 2011 Prior
Rule where the length of the waiting period varied depending on whether
the program was made ineligible or if it was voluntarily discontinued,
and when it was discontinued, the proposed regulations would use a
single, three-year waiting period without regard to whether a program
became ineligible or was voluntarily discontinued.
Although the negotiators generally did not raise concerns about the
three-year waiting period, one of the negotiators believed that an
institution that voluntarily discontinues a program should always have
to abide by the three-year waiting period before seeking to reestablish
the eligibility of the program, regardless of whether the program was
failing, passing, or in the zone. We believe that it is more
appropriate to impose this period of ineligibility only on programs
determined to be failing or in the zone because there could be
legitimate reasons for discontinuing a passing program, and, further,
we do not wish to impose restrictions on an institution where a program
is meeting the standards of the accountability metrics.
During the negotiated rulemaking sessions members of the negotiated
rulemaking committee raised proposals to create borrower relief
provisions for students in programs that fail the GE measures and to
place additional restrictions on those program. The Department had
proposed, for a program that does not pass the GE measures and is in
jeopardy of losing its eligibility for title IV, HEA program funds, in
addition to the student warning requirement, limits on the number of
students eligible for title IV, HEA program funds who could be enrolled
in the program. In response to the negotiators' concerns, the
Department also proposed, in those circumstances, to require
institutions to make arrangements to reduce student debt. We have not
included these additional consequences in the proposed regulations.
We have not included enrollment limits in the proposed regulations
as we believe that providing warnings to students and prospective
students about potentially ineligible programs, along with the
information that would be available through the required disclosures,
provide meaningful protections and will sufficiently enable students
and their families to make informed decisions about their educational
investment. However, we invite comment on whether enrollment limits
should be imposed on programs that could become ineligible and how
those limits could be practically implemented.
We developed our debt reduction proposal in response to suggestions
from negotiators representing consumer advocates and students. These
negotiators argued that, while a failing or zone program would be
allowed several years to pass the GE measures before becoming
ineligible, students would continue to borrow to attend a program that
the Department, based on the proposed regulations, may not reasonably
expect would lead to gainful employment. Moreover, in the event a
program lost eligibility under the GE measures, enrolled students would
still be responsible for the debt they accumulated despite the fact
they could not complete a program identified by the Department as
failing the performance metrics.
To address this, the negotiators argued that the Department should
provide loan discharges under section 437(c) of the HEA to students who
borrowed for attending a program that loses eligibility under the GE
measures. They contended that these borrowers would also have claims
against the institution for enrolling them in a program that was
offered as an eligible program, but that in fact did not meet the
eligibility requirements proposed in the regulations. They observed
that Federal regulations implementing section 455(h) of the HEA, 20
U.S.C. 1087e(h), allow a Direct Loan borrower to assert, as a defense
to loan repayment, any claim that the borrower has against the
institution, and that this existing regulation would apply to the case
of a program that did not meet the standards of the proposed
regulations. 34 CFR 685.206(c).\63\ These negotiators
[[Page 16471]]
further urged the Department to formally adopt, as a defense to loan
repayment, a program's failure to pass the GE measures, whether or not
the program eventually lost eligibility. Additionally, the negotiators
suggested a variety of other remedies, including requiring institutions
to refund tuition paid for a program that loses eligibility, requiring
institutions to post a surety bond or letter of credit when a program
receives a zone or failing result in order to provide for relief in the
event that the program later becomes ineligible, and requiring all
institutions intending to offer a GE program to contribute to a
``common pool'' fund to be administered by the Department that would be
used to provide debt relief to students affected by a program's loss of
eligibility.
---------------------------------------------------------------------------
\63\ In response to these objections, we noted that the
Department had already expressly interpreted section 437(c) of the
HEA in controlling regulations to provide no relief for a claim that
the loan was arranged for enrollment in an institution that was
ineligible, or that the institution arranged the loan for enrollment
in an ``ineligible program.'' 34 CFR 682.402(e); 59 FR 22470 (April
29, 1994), 59 FR 2490 (Jan. 14, 1994).
---------------------------------------------------------------------------
One of the non-Federal negotiators submitted a proposal that would
allow a program that did not pass the GE measures to remain eligible if
the institution implemented a debt reduction plan that would reduce
borrowing to levels that would meet the GE measures.
In response, at the second and third negotiating sessions, we drew
on the negotiator proposals and presented regulatory provisions that
would have required an institution with a program that could lose
eligibility the following year to make sufficient funds available to
enable the Department, if the program became ineligible, to reduce the
debt burden of students who attended the program during that year. The
amount of funds would have been approximately the amount needed to
reduce the debt burden of students to the level necessary for the
program to pass the GE measures. If the program were to lose
eligibility, the Department would use the funds provided by the
institution to pay down the loans of students who were enrolled at that
time or who attended the program during the following year. We also
included provisions that would allow an institution, during the
transition period, to avoid these requirements by offering to every
enrolled student for the duration of their program, and every student
who subsequently enrolled while the program's eligibility remained in
jeopardy, institutional grants in the amounts necessary to reduce loan
debt to a level that would result in the program passing the GE
measures. If an institution took advantage of this option, a program
that would otherwise lose eligibility would avoid that consequence
during the transition period.
Negotiators voiced numerous concerns about the proposed borrower
relief provisions. These included whether the proposals would be
sufficient to compensate students for enrolling in an ineligible
program, what cohort of students would receive relief, the extent of
the relief to be provided, how any monetary amounts would be
calculated, and costs that would be incurred by institutions in
providing relief. The nature of these discussions made clear that these
are very complex issues that warrant further exploration. Accordingly,
we are not including proposed language regarding borrower relief in the
regulations and request comment on these issues, including other
options that the Department could consider to address borrower relief
concerns.
In addition to the specific concerns discussed about the proposed
consequences, some of the negotiators raised general concerns about how
these consequences would be implemented. In particular, some
institutional representatives on the negotiating committee were
concerned that having separate notices of determination for the D/E
rates measure and for the pCDR measure, indicating different start
dates for the various consequences, would be difficult for institutions
to track and implement. In this regard, the Department has in place an
annual process to determine CDRs for institutions, and the additional
steps needed to determine a pCDR for a GE program would be built into
that existing framework and timelines. We believe that this approach,
as opposed to establishing an alternative process, would minimize the
additional burden for institutions. There is no functional need to
synchronize the calculation of the D/E rates and the pCDR as the
information used for each measure is distinct and tied to different
cohorts of students and different time periods.
Section 668.411 Reporting Requirements for GE Programs
Current Regulations: Under Sec. 668.6(a) of the 2011 Prior Rule,
an institution would be required to annually submit to the Department
information about each student, regardless of whether the student
received title IV, HEA program funds, who enrolled in a program that
prepares students for gainful employment in a recognized occupation
during an award year. Institutions would report, in addition to student
identifiers (name, Social Security Number, and date of birth), the
name, CIP code, and credential level of the program in which the
student is enrolled, the date the student began enrollment in the
program, the student's enrollment dates during the award year, and the
student's attendance status at the end of the award year (i.e.,
completed, withdrew, or still enrolled). If the student completed the
program during the award year, the institution would also report the
date the student completed the program, amounts the student received
from private educational loans and institutional financing, and whether
the student matriculated to a higher credentialed program at the
institution or any available evidence that the student transferred to a
higher credentialed program at another institution.
Additionally, under the 2011 Prior Rule, for each gainful
employment program, institutions would be required to report, by name
and CIP code, the total number of students enrolled in the program at
the end of each award year and identifying information for those
students. In regard to the definition of CIP code, Sec.
600.10(c)(2)(ii) of the 2011 Prior Rule refers, with respect to an
additional education program, to programs with a CIP code under the
taxonomy of instructional program classifications and descriptions
developed by NCES. Section 668.7(a)(2) of the 2011 Prior Rule also
specifies the credential levels for a program.
Finally, under the 2011 Prior Rule, an institution would be
required to provide an explanation, acceptable to the Secretary, of why
the institution failed to comply with any of the reporting
requirements.
Proposed Regulations: Under proposed Sec. 668.411, institutions
would report, for each award year, information about each student who
was enrolled in a GE program and received title IV, HEA program funds
for enrolling in that program.
Specifically, under the proposed regulations, the required
reporting would include:
Information needed to confirm the identity of the student,
such as the student's name, Social Security Number, and date of birth
and the institution;
The name, CIP code, credential level, and length of the GE
program;
Whether the GE program is a medical or dental program
whose students are required to complete an internship or residency;
The date the student first enrolled in the GE program;
[[Page 16472]]
The student's attendance dates and attendance status in
the GE program during the award year; and
The student's enrollment status (i.e., full-time, three-
quarter time, half-time, less than half-time) as of the first day of
the student's enrollment in the program.
Further, if the student completed or withdrew from the GE program
during the award year, the institution would report:
The date the student completed or withdrew from the
program;
The total amount the student received from private
education loans for enrollment in the program that the institution is,
or should reasonably be, aware of;
The total amount of institutional debt incurred for
enrollment in the program that the student owes any party after
completing or withdrawing from the program;
The total amount of tuition and fees assessed the student
for the student's entire enrollment in the GE program; and
The total amount of the allowances for books, supplies,
and equipment included in the student's title IV Cost of Attendance,
pursuant to section 472 of the HEA, for each award year in which the
student was enrolled in the program, or a higher amount if assessed the
student by the institution.
Finally, as in the 2011 Prior Rule, the proposed regulations would
require an institution to provide to the Secretary an explanation,
acceptable to the Secretary, of why the institution failed to comply
with any of the reporting requirements.
No later than July 31 of the year the regulations take effect,
institutions would be required to report this information for the
second through seventh award years prior to that date. For medical and
dental programs that require an internship or residency, institutions
would need to include the eighth award year prior to July 31. For all
subsequent award years, institutions would report not later than
October 1 following the end of the award year, unless the Secretary
establishes a later date in a notice published in the Federal Register.
The proposed regulations would give the Secretary the authority to,
through a notice published in the Federal Register, specify a reporting
deadline later than October 1, as well as the authority to identify
additional reporting items, after providing the general public and
Federal agencies with an opportunity to comment in connection with the
approval process under the PRA.
For example, if these regulations become effective on July 1, 2015,
institutions must report information for the 2008-2009 through the
2013-2014 award years no later than July 31, 2015. For medical and
dental programs, the institution must also include information from the
2007-2008 award year.
Under this example, unless the Secretary establishes a later date
by notice in the Federal Register, institutions must report information
for the 2014-2015 award year by October 1, 2015, and continue to report
each subsequent award year by October 1 following the end of the award
year on June 30.
We note that the terms ``CIP code'' and ``credential level,'' which
are defined in proposed Sec. 668.402, are first substantively used in
proposed Sec. 668.411 and are therefore explained here. The proposed
regulations contain similar definitions as the 2011 Prior Rule;
however, we have included separate definitions of both of these terms
in Sec. 668.402. In our proposed definition of CIP code, we refer, as
we did in the 2011 Prior Rule, to a taxonomy of instructional program
classifications and descriptions as developed by NCES. In the
definition of ``credential level,'' we are identifying more specific
credential levels than we did in the 2011 Prior Rule and have broken
some of those levels into sub-categories. Thus, the undergraduate
credential levels would be: less than one year undergraduate
certificate or diploma, one year or longer but less than two years
undergraduate certificate or diploma, two years or longer undergraduate
certificate or diploma, associate degree, and bachelor's degree; and
the graduate credential levels would be post-baccalaureate certificate
(including postgraduate certificates), graduate certificate, master's
degree, doctoral degree, and first-professional degree (e.g., MD, DDS,
JD).
Reasons: Certain student-specific information is necessary for the
Department to implement the provisions of proposed subpart Q,
specifically to calculate the D/E rates and the pCDR for GE programs
under the accountability framework. This information is also needed to
calculate the completion rates, withdrawal rates, repayment rates,
median loan debt, and median earnings disclosures under proposed Sec.
668.412. As discussed in ``Sec. 668.401 Scope and purpose,'' the
proposed reporting requirements are designed, in part, to facilitate
the accountability of institutions for, and the transparency of, GE
program student outcomes by: ensuring that students, prospective
students, and their families, the public, taxpayers, and the
Government, and institutions have timely and relevant information about
GE programs to inform student and prospective student decision-making;
help the public, taxpayers, and the Government to monitor the results
of the Federal investment in these programs; and allow institutions to
see which programs produce exceptional results for students so that
those programs may be emulated.
Unlike in the 2011 Prior Rule, under the proposed regulations,
institutions would not report information on students who did not
receive title IV, HEA program funds for enrollment in the GE program.
To align the proposed regulations with the court's interpretation of
relevant law in APSCU v. Duncan and better monitor the Federal
investment in GE programs, we have defined ``student'' for the purpose
of subpart Q to be an individual who receives title IV, HEA program
funds for enrollment in the applicable program. See ``Sec. 668.401
Scope and purpose'' for a complete discussion of the definition of
``student.'' The proposed regulations also differ from the 2011 Prior
Rule in that the proposed regulations add the reporting of information
necessary to implement provisions of proposed subpart Q that were not
in the 2011 Prior Rule and, conversely, do not include requirements
that were relevant to provisions in the 2011 Prior Rule that are not in
the proposed regulations.
To enable the Secretary to calculate a program's GE measures and
the relevant disclosures, an institution would be required to provide
information to identify itself, the student, and the GE program in
which the student was enrolled during the award year.
The proposed regulations would require institutions to report the
length of the program. Under Sec. 668.6 in the 2011 Current Rule, an
institution is required to make several disclosures that are tied
closely to the definition of ``normal time,'' namely, the tuition and
fees it charges a student for completing the program within normal
time, as well as the percentage of students who completed the program
within normal time (the on-time graduation rate). ``Normal time'' is
defined in Sec. 668.41(a) as ``the amount of time necessary for a
student to complete all requirements for a degree or certificate,
according to the institution's catalog.''
In the proposed regulations, particularly in the reporting and
disclosure requirements in Sec. Sec. 668.411 and 668.412, we refer to
the ``length of the program'' instead of to the ``normal time'' of the
program. The ``length of the program'' would be defined as the amount
of time in weeks, months, or
[[Page 16473]]
years that is specified in the institution's catalog, marketing
materials, or other official publications for a student to complete the
requirements needed to obtain the degree or credential offered by the
program. The institution would report this information under Sec.
668.411 and disclose the information under Sec. 668.412(a)(3).
Although the substance of the definitions of ``normal time'' and
``length of the program'' is similar, we believe that the change in
terminology is necessary to promote uniformity in the reporting
requirements between the proposed regulations and the Moving Ahead for
Progress in the 21st Century Act (MAP-21) that amended the HEA. MAP-21
limits a borrower's receipt of Direct Subsidized Loans to ``a period
equal to 150 percent of the published length of the educational program
in which the student is enrolled.'' Accordingly, the Department must
collect the published length of the program to determine the borrower's
maximum eligibility for such loans. Consistent with guidance issued by
the Department for Sec. 668.6(b) and in the preamble to the Interim
Final Regulations establishing 34 CFR 685.200(f), published May 16,
2013, in the Federal Register (78 FR 28953), the length of the program
that an institution must report is the amount of time that it takes
full-time students to complete the program. This must be reported and
disclosed in terms of calendar time--weeks, months, or years. We also
believe that requiring this disclosure along with credential level
disclosures would provide greater transparency about whether the length
of the program is appropriate in light of the credential to be
attained. Although the Department makes this type of assessment under
Sec. 668.14(a)(26), we request comment on other ways the Department
could ensure that program lengths identified by institutions in their
program participation agreements are appropriate given the credential
level for the program.
In Sec. 668.402 of the proposed regulations, we would establish
separate definitions for ``CIP code'' and ``credential level.'' The
proposed definition of ``CIP code'' largely mirrors the definition in
the 2011 Prior Rule but would add specificity about the elements that
make up a CIP code. We think this specificity would be helpful to
institutions in identifying programs for the purpose of the reporting
requirements.
In the proposed definition of ``credential level,'' we would also
identify more specific credential levels than we did in the 2011 Prior
Rule. The proposed definition includes a listing of the credential
levels for use in the definition of a GE program. Specifically, we
propose three different credential levels for undergraduate certificate
programs, whereas the 2011 Prior Rule had only one. This breakdown of
undergraduate certificate programs is necessary to properly identify
the program for the purpose of both calculations of a program's D/E
rates and pCDR and disclosures. For example, a one-year or shorter GE
program offered by an institution under a specific CIP code is
significantly different, in terms of student debt, costs, completion,
etc., than a two-year program offered by the institution under the same
CIP code. In addition, the proposed regulations would add a credential
level for graduate certificate programs because of the interest rate
provision in proposed Sec. 668.403(b)(2), which uses a different
interest rate for graduate programs. Reporting whether the program is a
medical or dental program that includes an internship or residency is
necessary because the proposed regulations in Sec. 668.404 would use a
different two-year cohort period--the sixth and seventh award years
prior to the award year--in calculating the D/E rates for those
programs. See ``Sec. 668.404 Calculating D/E rates'' for a discussion
of why these programs would be evaluated differently.
The dates of a student's attendance in the GE program and the
student's attendance status (i.e., completed, withdrawn, or still
enrolled) and enrollment status (i.e., full-time, three-quarter-time,
half-time, and less than half-time) would be needed by the Department
to attribute the correct amount of a student's title IV, HEA program
loans that would be used in the calculation of a program's D/E rates.
These items would also be needed to identify:
The program's former students for inclusion on the list
submitted to SSA to determine the program's mean and median annual
earnings for the purpose of the D/E rates calculation; and
The borrowers who would be considered in the calculation
of the program's pCDR, completion rate, withdrawal rate, loan repayment
rate, median loan debt, and median earnings.
We would require the amount of each student's private education
loans and institutional debt, along with the student's title IV, HEA
program loan debt, to determine the debt portion of the D/E rates.
During the negotiations, several of the non-Federal negotiators
recommended that, in addition to FFEL and Direct Loans, the D/E rates
take into account Federal Perkins Loans that were received by students
for enrollment in a GE program. At that time, the Department noted that
institutions would have to report Federal Perkins Loan amounts, as
NSLDS did not have the necessary detail to correctly attribute Perkins
Loans to a GE program. However, we have now determined that the
necessary information is available without requiring any additional
Perkins Loan reporting by institutions.
We would also require institutions to report the cost of tuition
and fees and the cost of books, supplies, and equipment to calculate
the D/E rates because, as provided under proposed Sec. 668.404, in
determining a GE program's median loan amount, each student's loan debt
would be capped at the total of those two amounts. See ``Sec. 668.404
Calculating D/E rates'' for a discussion of why this cap is included in
the calculation.
One non-Federal negotiator asked why institutions would not be
required to report the SOC codes for the occupations that a program
prepares students to enter. We responded that the institutional
reporting under this section of the proposed regulations is at the
student level and not on a program level. We also note that under the
proposed disclosure requirements in Sec. 668.412, institutions would
disclose the occupations that the program prepares students to enter
and this disclosure would include SOC codes.
Several of the negotiators, particularly those representing
postsecondary institutions, asserted that the proposed reporting would
be overly burdensome. We understand this concern and will continue to
consider ways to reduce reporting burden. To that end we invite comment
on how that may be accomplished. Nonetheless, we believe that the
benefits to students and to taxpayers stemming from the reporting
requirements under proposed subpart Q, which allow implementation of
the proposed accountability and transparency frameworks, far outweigh
any additional institutional burden. Further, we note that the
information reported enables the Department to calculate each program's
GE measures and disclosure items, which we believe is more efficient,
much less burdensome, and results in greater accuracy than requiring
institutions to perform these calculations, though we welcome comment
on the advantages of having institutions perform these calculations.
We propose to retain the provision from the 2011 Prior Rule
requiring an institution to provide the Secretary with an explanation
of why it has failed to
[[Page 16474]]
comply with any of the reporting requirements. Because the Department
would use the reported information to calculate the GE measures and the
institutional disclosures, it is essential for the Secretary to have
information about why an institution may not be able to report the
information.
One negotiator argued that the combination of the reporting
requirements of the proposed GE regulations and the reporting
requirements resulting from the regulations promulgated on May 16,
2013, to implement the 150% Direct Subsidized Loan limit under section
455(q) of the HEA would result in the creation of a student unit
records system in a form that is prohibited by section 134 of the HEA.
That is not the case. Section 134(b) of the HEA allows the continued
operation of a database necessary to implement title IV, HEA programs
if that database was in operation prior to the enactment of section
134(b) of the HEA on August 14, 2008. 20 U.S.C. 1015c(b). Although
NSLDS is a student unit database, it is one that is explicitly
permitted under section 134(b) because it has been in operation prior
to August 14, 2008, and it is necessary for the Secretary to properly
administer the title IV, HEA programs.
Section 668.412 Disclosure Requirements for GE Programs
Disclosures
Current Regulations: Section 668.6(b) of the 2011 Current Rule
requires an institution, for each program that prepares students for
gainful employment in a recognized occupation, to disclose information
about:
(1) the occupations that the program prepares students to enter,
along with links to occupational profiles on O*NET;
(2) the on-time graduation rate for students completing the
program;
(3) the cost of tuition and fees, books and supplies, and room and
board, and a link to other cost information;
(4) the placement rate for students completing the program, as
determined under a methodology to be developed by NCES when it becomes
available, and, in the meantime, if required by the institution's
accreditor or State, a program-level placement rate using the
methodology required by the accreditor or State; and
(5) the median loan debt incurred by students who completed the
program, identified separately as title IV, HEA loan debt and debt from
private educational loans and institutional financing plans.
Proposed Regulations: Although the proposed regulations would
replace Sec. 668.6(b) of the 2011 Current Rule, they would retain many
of the same concepts. The proposed changes would expand the amount of
information that the Department may require to be disclosed and
increase the Department's flexibility to tailor the disclosures in a
way that would be most useful to students and minimize burden to
institutions.
Under the proposed regulations, the disclosure items would include,
but would not be limited to:
(1) the primary occupations (by name and SOC code) that the GE
program prepares students to enter, along with links to the
corresponding occupational profiles on O*Net;
(2) the GE program's completion and withdrawal rates for full-time
and less-than-full-time students;
(3) the length of the program in calendar time (i.e., weeks,
months, years);
(4) the number of clock or credit hours, as applicable, in the
program;
(5) the total number of individuals enrolled in the program during
the most recently completed award year;
(6) the loan repayment rate for any one or all of the following
groups of students who entered repayment on title IV loans during the
two-year cohort period: all students who enrolled in the program,
students who completed the program, or students who withdrew from the
program;
(7) the total cost of tuition and fees, and the total cost of
books, supplies, and equipment that students would incur for completing
the program within the length of the program;
(8) the placement rate for the program, if the institution is
required to calculate a placement rate by its accrediting agency or
State;
(9) of the individuals enrolled in the program during the most
recently completed award year, the percentage who incurred debt for
enrollment in the program;
(10) as provided by the Secretary, the median loan debt incurred by
any or all of the following groups: students who completed the program
during the most recently completed award year, students who withdrew
from the program during the most recently completed award year, or both
those groups of students;
(11) as provided by the Secretary, the median earnings of any one
or all of the following groups: students who completed the program
during the applicable cohort period used to calculate the most recent
D/E rates for the program, students who were in withdrawn status at the
end of the applicable cohort period used to calculate the most recent
D/E rates for the program, or both students who completed the program
during the applicable cohort period used to calculate the most recent
D/E rates and students who were in withdrawn status at the end of that
applicable cohort period;
(12) the most recent pCDR as calculated by the Secretary under
proposed Sec. 668.407;
(13) the most recent annual earnings rate as calculated by the
Secretary under proposed Sec. 668.404;
(14) if applicable, whether completion of the program satisfies the
educational prerequisites for professional licensure in the State in
which the institution is located and in any other State included in the
institution's Metropolitan Statistical Area (according to OMB
guidelines);
(15) if applicable, the programmatic accreditation required for an
individual to obtain employment in the occupation for which the program
prepares a student; and
(16) a link to the College Navigator Web site.
From year to year, in a notice published in the Federal Register,
the Department would identify which of the disclosure items
institutions must include on their disclosure templates; where
applicable, whether the disclosures should be disaggregated to reflect
students who completed the program, students who did not complete the
program, or both students who completed and those who did not complete
the program; and any other information that must be disclosed. If the
Secretary were to require disclosure of completion rates, withdrawal
rates, loan repayment rates, median loan debt, or median earnings, the
Secretary would calculate the required information for each GE program
based on information reported by the institution to the Secretary under
proposed Sec. 668.411 and provide the required disclosure to the
institution to disclose.
The principal differences from the 2011 Prior Rule are that: the
proposed disclosures for all items, except for the number and
percentages of the number of individuals who incurred debt for
enrollment in the GE program and completed or withdrew from the
program, would be made only for students who received title IV, HEA
program funds; the proposed disclosures could be required for all
students enrolled in a program or disaggregated by whether or not they
completed the program so as to provide
[[Page 16475]]
students with the information necessary to make more informed choices;
and the Department would have more flexibility to change the required
disclosures from year to year to reflect new evidence about what
information is most helpful to students.
Reasons: As discussed in ``Sec. 668.401 Scope and purpose,'' the
proposed disclosures are designed to improve the transparency of GE
program student outcomes by: ensuring that students, prospective
students, and their families, the public, taxpayers, and the
Government, and institutions have timely and relevant information about
GE programs to inform student and prospective student decision-making;
help the public, taxpayers, and the Government to monitor the results
of the Federal investment in these programs; and allow institutions to
see which programs produce exceptional results for students so that
those programs may be emulated.
In particular, the proposed disclosures would provide prospective
and enrolled students the information they need to make informed
decisions about their educational investment, including where to spend
their limited title IV, HEA program funds and use their limited title
IV, HEA program eligibility. Prospective students trying to make
decisions about whether to enroll in a GE program would find it useful
to have easy access to information about the jobs that the program is
designed to prepare them to enter, the likelihood that they will
complete the program, the financial and time commitment they will have
to make, their likely debt burden and ability to repay their loans,
their likely earnings, and whether completing the program will provide
them the requisite coursework, experience, and accreditation to obtain
employment in the jobs associated with the program.
The proposed disclosures would also provide valuable information to
enrolled students considering their ongoing educational investment and
post-completion prospects. For example, we believe that disclosure of
completion rates for full-time and less-than-full-time students would
inform prospective and enrolled students as to how long it may take
them to earn the credential offered by the GE program. Similarly, we
believe that requiring institutions to disclose pCDRs, annual earnings
rates, and loan repayment rates would help prospective and enrolled
students to better understand how well students who have attended the
program before them have been able to manage their loan debt, which
could influence their decisions about how much money they should borrow
to enroll in the program. For a discussion about the pCDR and annual
earnings rates and why we believe they are valuable measures of student
outcomes, please see the discussion under ``Sec. 668.403 Gainful
employment framework.'' We address the loan repayment rate briefly in
this section and more extensively under ``Sec. 668.413 Calculating,
issuing, and challenging completion rates, withdrawal rates, repayment
rates, median loan debt, and median earnings.''
Additionally, to the extent that an institution does not
systematically gather or calculate some of this information,
particularly with respect to the completion, withdrawal, and repayment
rates, median loan debt, and median earnings, the Secretary's
calculation of this information for institutions could aid them in
targeting their efforts and resources toward ongoing improvement in
those areas where their programs are not performing well.
Disclosure Items, Generally
Disclosures Regarding Students Receiving Title IV, HEA Program Funds
Unlike in the 2011 Prior Rule, to align the proposed regulations
with the court's interpretation of relevant law in APSCU v. Duncan and
better monitor the Federal investment, the proposed disclosures would
be made only with regard to students who received title IV, HEA program
funds for enrollment in the GE program, with the exception of the
disclosure of the number and percentage of individuals who incurred
debt for enrollment in the GE program. See ``Sec. 668.401 Scope and
purpose'' for a complete discussion of our proposed definition of
``student.''
Many of the non-Federal negotiators strongly disagreed with this
approach, raising numerous concerns. First, several negotiators argued
that excluding students who do not receive title IV, HEA program funds
greatly reduces the usefulness of the information. In particular, they
noted that the disclosures would not reflect the outcomes of all of the
students enrolled in the program. They believed that providing data on
all students enrolled in the program would provide a more complete
picture of the program that would be meaningful to a broader spectrum
of students, regardless of whether those students rely on Federal
student assistance to enroll in the program.
Second, the negotiators raised concerns that some programs would
have too few students who received title IV, HEA program funds to
disclose the required information without jeopardizing student privacy.
For instance, in cases where only a small number of students who
received title IV, HEA program funds completed the program in a prior
award year, the Department might not require the program's completion
rate to be disclosed to protect the privacy of those students. The
negotiators believed that limiting the disclosures to only those
students receiving title IV, HEA program funds would increase the
likelihood that information would be withheld in the disclosures,
particularly given the proposed definition of credential level, which
breaks out credential level to a greater degree than does the 2011
Current Rule.
To address this issue, several negotiators proposed different
approaches. Some of the negotiators urged the Department to broaden the
definition of ``student'' for purposes of the reporting and disclosure
requirements to include all students enrolled in a GE program during an
award year. These negotiators believed that the Department could
collect data on all students enrolled in a GE program to prepare the
aggregate information institutions would disclose in the template
without storing any information in the student database about the
individual students in the program who did not receive title IV, HEA
program funds.
Several negotiators proposed that, as an alternative, institutions,
rather than the Secretary, calculate and disclose the completion and
withdrawal rates for all students enrolled in the program so that the
Secretary would not have to collect information about students who do
not receive title IV, HEA program funds. Other negotiators, however,
argued strongly that the Department should calculate these rates in
order to ensure the integrity of the data and to reduce burden on
institutions.
One negotiator proposed broadening the scope of the disclosures and
reporting to require that all students who have filed a FAFSA be
included, regardless of whether those students subsequently received
title IV, HEA program funds. The negotiator argued that this approach
would permit the Department to retain that information in its student
database so that the program's disclosures would more accurately
portray the students in a GE program while arguably acting in alignment
with APSCU v. Duncan. We discuss this proposal in ``Sec. 668.401 Scope
and purpose.''
Although we understand the negotiators' concerns, we believe that,
[[Page 16476]]
for several reasons, the best approach is to include in the GE measures
and all of the disclosures, except one, only students who received
title IV, HEA program funds to enroll in the GE program.
First, this approach aligns with the court's interpretation of
relevant law in APSCU v. Duncan because the Secretary would not add to
the student database any information about the students enrolled in the
GE program who did not receive title IV, HEA program funds.
Second, as the primary purpose of the proposed regulations is to
evaluate whether a program should continue to be eligible for title IV,
HEA program funds, we believe that, by limiting the GE measures and all
but one of the disclosures to include only students who receive title
IV, HEA program funds, the public, taxpayers, and the Government can
effectively evaluate how the GE program is performing with respect to
the students who received the Federal benefit. We also believe that
disclosure of information that reflects solely the outcomes of students
who received Federal dollars would be more relevant to similarly
situated prospective students. Prospective students who intend to
borrow for enrollment in a GE program would know specifically how
students in similar economic circumstances fared in the program.
Third, the Secretary seeks to reduce the regulatory burden on
institutions by performing the calculations of the completion,
withdrawal, and repayment rates. In the interest of reducing
institutions' regulatory burden, the Department also would calculate
median loan debt using the data reported by the institutions. In
addition to reducing institutional burden, this approach would ensure
that students benefit from reliable data. Although we propose that the
Department, rather than institutions, would calculate the rates
required for disclosure, we invite specific comment on this question.
There is one set of disclosures that we believe institutions should
calculate. Although the Department's calculations of median loan debt
would be based only on the loan debt of students who completed the
program, we are proposing that institutions be required to disclose the
percentage of students who incurred loan debt to enroll in the program
and who either completed the program during the most recently completed
award year or withdrew from the program during the most recently
completed award year. We believe this information would be particularly
useful to students, prospective students, and their families, the
public, taxpayers, and the Government, and institutions. Specifically,
it would provide information about the number of students who are
incurring loans, whether under the title IV, HEA programs or not, to
enroll in a GE program and the extent to which those students complete
or withdraw from the program.
We also note that, for small programs for which complete data are
not available because of applicable privacy laws, institutions must
still disclose several items, including the primary occupations the
program prepares students to enter, the length of the program, the
number of students enrolled in the most recently completed award year,
the program costs, the link to the Department's College Navigator Web
site, and licensure and programmatic accreditation information.
Program Comparability and Utility
Although several negotiators, in particular the representatives for
consumers, students, and State Attorneys General, argued strongly for
robust disclosures for GE programs, other negotiators argued that the
proposed disclosures would not be meaningful to students because of a
lack of comparability across institutions and because of the amount of
information to be provided. Another negotiator contended that a
proprietary institution offering a high-performing degree program would
be required to make the disclosures, whereas a public institution
offering a low-performing degree program in the same field would not
fall under the proposed regulations and consequently would not be
subject to the disclosure requirements. These negotiators, who
primarily represented proprietary institutions, argued that these types
of scenarios demonstrate that requiring disclosures only for GE
programs instead of for all programs undermines the value of the
information for consumers and unfairly burdens institutions offering GE
programs.
Several negotiators also warned that requiring so many disclosures
carries the risk of overwhelming consumers with information to the
point that the disclosures cease to influence behavior. Some of these
negotiators recommended limiting the information to be disclosed to
program completion rates and the earnings and debt levels of students
completing the program. They argued that providing fewer, but still
valuable, data points would serve consumers effectively while reducing
burden on institutions. Additionally, one negotiator noted that the
current conversation in the higher education community surrounding
accountability is in flux, arguing that the items that we believe will
be useful to students today might not be the most useful tomorrow.
We share the concerns raised by the negotiators that the disclosure
information must be as comparable and meaningful as possible. However,
we are using this rulemaking process to propose regulations
specifically for programs that are required under the HEA to prepare
students for gainful employment in recognized occupations. Given this
specific focus, the Department is not establishing new disclosure
requirements for non-GE programs through the proposed regulations.
However, we believe that the proposed disclosures would still be
valuable because they would provide comparable information across GE
programs.
To address the concern about overwhelming consumers with too much
information, the proposed regulations would allow the Secretary to
identify from a number of possible disclosures which items must be
disclosed for a particular award year through a notice published in the
Federal Register. This would allow the Department to conduct consumer
testing to ensure that the disclosures advance the goals of the
transparency framework, the language is understandable for the intended
audience, the manner of delivery is effective, and the disclosures are,
on the whole, useful for consumers and to modify the required
disclosures based on the results of the consumer testing and
experience. In addition, we invite comment as to which disclosures
might be most useful to students, prospective students, and their
families.
Individual Disclosure Items
In general, requiring institutions to disclose information
regarding their GE programs is consistent with the provisions of
section 487(a)(8) of the HEA, which requires institutions to provide
prospective students with recent graduation, employment, and State
licensing information related to the jobs for which the institution
provides training. The negotiators raised a variety of concerns,
however, about the adequacy of individual disclosure elements, while
others had suggestions for additional required disclosures.
Placement Rate
Some negotiators, particularly those representing consumer
advocates, State Attorneys General, and students, strongly urged the
Department to develop a national placement rate methodology for the
purpose of the placement rate disclosure. They believed that placement
information is
[[Page 16477]]
critical to prospective students making a decision about where to
enroll, and they argued that it is important to have a uniform
methodology to allow for useful comparisons across programs. Further,
these negotiators recommended standardizing the placement rate
methodology to prevent an institution from manipulating or
misrepresenting the program's placement rate, and they proposed
parameters for how soon after graduation an individual must be
employed, how long an individual must be employed in a job, and what
types of jobs (i.e., in-field or out-of-field) an individual must hold,
in each case for the job to be counted.
Some of the negotiators proposed an alternative approach,
suggesting that the Department could develop a national placement rate
methodology to function as the default methodology unless another
entity, such as an accrediting agency or State, requires a more
stringent methodology. They argued that this would be less burdensome
for institutions that would have to calculate multiple rates, while
still providing meaningful information. In particular, they noted that,
because States and accrediting agencies vary widely in their
methodologies, having a default methodology would protect consumers in
situations where a non-Federal entity uses a weak placement rate
methodology or does not require a placement rate.
Although we agree that comparable placement rate information would
be valuable for prospective students, limitations in available data
preclude the development of a national placement rate methodology that
is consistent across all GE programs. The Department's NCES convened a
technical review panel (TRP) in 2011 to develop a national placement
rate methodology. The TRP determined that a single job placement rate
methodology could not be developed without further study because of
limitations in data systems and available data. The TRP suggested
requiring greater transparency about how rates are currently calculated
as an interim step for institutions disclosing these rates. See
``Report and Suggestions from IPEDS Technical Review Panel 34:
Calculating Job Placement Rates'' at http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/ipeds-summary91013.pdf for a full
discussion of the TRP's findings.
Accordingly, we propose to require an institution to disclose
placement rates for its GE programs, if it is required to do so by its
State or accrediting agency, using the methodology required by the
State or accrediting agency. This approach would provide consumers with
valuable information because such requirements are in place for many
programs using the methodologies that the respective agencies have
determined are appropriate for those programs.
In accordance with the TRP's recommendations to foster as much
transparency as possible regarding how placement rates have been
calculated, the gainful employment disclosure template that
institutions must currently use to make disclosures under Sec.
668.6(b) of the 2011 Current Rule requires an institution to provide
information about the methodology (or methodologies, if an institution
must calculate a rate for more than one entity) that it used.
Specifically, the template requires institutions to explain which
students were included in the calculation, whether or not the jobs in
which the students were placed were related to the student's field of
study, the positions that students were hired for, how long after
graduation students were hired and for how long they were employed
before they would be included in the calculation, and how students were
tracked.
We would continue to include in the proposed disclosure template a
field in which institutions would disclose their placement rate
methodology. We request comment, however, on the best way to handle
cases where an institution must calculate more than one placement rate
to satisfy the requirements of multiple entities, e.g., multiple States
or multiple accreditors. The current template allows institutions to
disclose placement rate information for up to one State and up to one
accrediting agency, though the template also provides institutions with
a way to disclose additional calculated rates. We invite comment on
whether the Department should modify the template to allow institutions
to include placement rate information required by additional entities.
Median Loan Debt
Several of the negotiators raised concerns about our proposal to
require the disclosure of median loan debt. First, some of the
negotiators believed that the Department should require institutions to
disclose the mean, instead of the median, loan debt, arguing that
consumers are more familiar with means than medians and that the mean
would be more valuable. Another negotiator suggested that if the
Department uses the higher of the mean or median loan debt in the D/E
rates calculation, then institutions should have to disclose both the
median and the mean.
Second, a number of the negotiators were concerned that the median
loan debt information would be artificially high because it would only
take into account students who received title IV, HEA program funds. In
addition to these concerns, some of the negotiators requested
clarification as to which students would be included in the various
possible median loan debt calculations and what types of loan debt
would be included.
We agree that it is important that consumers have clear, meaningful
information about loan debt. However, we disagree that it would
necessarily be more helpful to use the mean, as both mean and median
are measures of central tendency. We also do not believe that it would
be helpful to consumers to provide both the mean and the median. In
designing the disclosure template, the Department would explain what a
median is in plain language to help consumers understand the
information, and we would use consumer testing to determine the most
effective wording in this regard.
With respect to concerns that considering only the loan debt of
students receiving title IV, HEA program funds would provide
insufficient information to consumers about the amount of loan debt
students in a GE program incur, particularly at low-cost institutions
with few borrowers, we believe that these concerns may be overstated
and are outweighed by the benefits of reducing institutional burden and
ensuring that accurate loan information is disclosed. First, our
analysis indicates that, of students who borrow for enrollment in GE
programs, most receive title IV, HEA loans.\64\ Many of these students
may also be receiving private and institutional loans in addition to
their title IV, HEA loans, but we believe that the percentage of
students who borrow exclusively from private or institutional lenders
is relatively small. Second, calculating the loan debt as a median
would likely mitigate any distortion in the disclosure that could
result from not including private or institutional borrowers who do not
receive title IV, HEA program funds.
---------------------------------------------------------------------------
\64\ U.S. Department of Education, 2012 National Post-Secondary
Student Aid Study (NPSAS: 12).
---------------------------------------------------------------------------
Unlike the median loan debt calculation for the D/E rates, the
median loan debt determination for the disclosures would not include
students who had no debt or who received only title IV, HEA program
grants but no loans. We believe that this approach would result in a
more useful disclosure for consumers. For students who must
[[Page 16478]]
borrow to attend a program, it would be more informative to know how
much debt other students who borrowed had to take on. Including
students who do not have debt would distort the disclosure. In
comparison, because the D/E rates are a measure of the overall
performance of a program and not of particular individuals, it is
appropriate to take into account the debt of all students, even those
with zero debt.
The median loan debt calculation for disclosure purposes could
include the median loan debt of students who completed the program in
the most recently completed award year, withdrew from the program
during the most recently completed award year, or both. We note that
these are different cohorts of students than the cohorts of students
used in the calculation of the D/E rates. The D/E rates consider the
median loan debt only of students who completed the program during the
two- or four-year cohort period. For the proposed disclosure item, the
median loan debt would be for only those students who completed or
withdrew from the program during the most recently completed award
year. Using the most recently completed award year would ensure that
students are receiving the most current information possible, as
opposed to information that is several years old.
The 2011 Current Rule considers only the loan debt incurred by
students who completed the program. We continue to believe that this is
valuable information. However, we also believe that it is significant
for prospective students to know how much loan debt was incurred by
students who did not complete the program because those former students
are still responsible for repaying their loans even if they do not earn
a credential, so we have proposed that as a possible disclosure item.
Again, the Secretary would publish a notice in the Federal Register
specifying for which of these groups of students the median loan debt
must be disclosed. The proposed regulations would provide the Secretary
flexibility to determine, based on consumer testing and experience, the
information that would be most valuable to prospective students.
State Licensure
Several negotiators, particularly those representing consumer
advocates, State Attorneys General, and student representatives, argued
that it is critical for prospective students to know the extent to
which a program qualifies students who completed the GE program for
State licensure in a given field. The negotiators and commenters during
the public hearings in spring 2013 provided examples of cases where
students were misled to believe that if they completed a particular GE
program, they would be eligible to sit for State licensing exams or
otherwise would have met the educational prerequisites to obtain a
license in a particular State, when, in fact, they were not able to sit
for the exam or otherwise obtain a license. Along these lines,
negotiators and others have noted cases where students were misled to
believe that they would be able to obtain a position in their field of
study upon completion but later learned that the program didn't have
the proper programmatic accreditation to allow them to sit for a
licensing exam needed to practice in the field or to obtain a
certification generally preferred by employers. For example, in the
physical therapy field, students typically must graduate from a program
accredited by the Commission on Accreditation in Physical Therapy
Education in order to sit for a licensing exam (see www.capteonline.org
for more information). As another example, although licensure
requirements for dental assistants vary by State, most States require
attendance at a program accredited by the Commission on Dental
Accreditation in order to be eligible for licensure (see www.danb.org
for more information).
Although other negotiators generally supported the proposal to
require disclosure of this information, several, particularly those
from institutions with locations in multiple States and those in areas
where students often cross State lines to attend school and for
employment, were concerned about the burden associated with providing
these disclosures for every State. Further, some of the negotiators
questioned the feasibility and enforceability of requiring institutions
to determine which programmatic accreditation is generally necessary to
obtain employment in a particular field and to then disclose that
information to prospective students. Other negotiators pointed out that
students can also substitute work experience for the program
accreditation requirement, and this makes it harder to determine when
program accreditation would be considered a requirement for a GE
program.
We agree that information about licensure and programmatic
accreditation is critical information for prospective students.
Students dedicate months and years, as well as a significant amount of
money--often using up their eligibility for Federal Pell and Federal
Direct subsidized loans--to enroll in GE programs. Enrolling in a
program that does not have the necessary accreditation or meet
licensure requirements can have grave consequences for students'
ability to find jobs and repay their loans after graduation.
Accordingly, we have proposed that institutions must disclose whether
completion of the program satisfies the educational prerequisites for
professional licensure in the State in which the institution is
located. Institutions with locations in multiple States must make this
disclosure for every State in which they are located. To address
concerns about situations where students regularly cross State lines
for employment outside of the State in which the institution is
located, we have proposed that institutions must disclose whether the
program meets the licensure requirements for each of the States in the
institution's Metropolitan Statistical Area (MSA), as published by OMB.
We believe that this is a reasonable approach, as ``the general concept
behind an MSA is that of a core area containing a substantial
population nucleus, together with adjacent communities having a high
degree of economic and social integration with that core.'' \65\ This
concept seems appropriate for this context because it focuses on
economic and employment mobility. More information about MSAs is
available at www.census.gov/population/metro/. We specifically invite
comment on whether a better measure can be used to identify when GE
programs offered at institutions near State borders would be required
to meet requirements established by adjacent States.
---------------------------------------------------------------------------
\65\ www.census.gov/population/metro/about/.
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Additionally, we propose to require institutions to disclose the
programmatic accreditation needed for an individual to obtain
employment in the occupation identified by the institution. Similar to
the licensure examples provided above, if a program does not have the
proper accreditation, graduates of a program would be unable to seek
employment in their occupations. It is therefore important that
institutions perform due diligence to determine when programmatic
accreditation would be needed and to inform prospective students of
whether the program meets this requirement.
Completion, Withdrawal, and Repayment Rates, Median Loan Debt, and
Median Earnings Calculations
Several negotiators raised questions and concerns about how the
completion, withdrawal, and repayment rates, median loan debt, and
median earnings would be calculated. Please see
[[Page 16479]]
``Sec. 668.413 Calculating, issuing, and challenging completion rates,
withdrawal rates, repayment rates, median loan debt, and median
earnings'' for additional discussion of these items.
Other Possible Disclosures
A few negotiators suggested additional items that institutions
should have to disclose to prospective students, such as the amount of
money that the institution spent on marketing and recruitment for the
program, the employment rate, and the percentage of students enrolled
in an income-based repayment plan. We have not proposed to add these
disclosures because, first, we believe the proposed disclosures better
address whether a GE program, in fact, meets the gainful employment
requirement. Second, we are mindful both that we do not want to
overwhelm students with disclosures and that, under the proposed
regulations, the Secretary has the flexibility to modify the
disclosures if it is determined, for example, through consumer testing,
that such disclosures would be valuable to prospective or current
students within the context of the proposed regulations.
Timing, Format, and Method of Disclosure
Current Regulations: Section 668.6(b)(2) of the 2011 Current Rule
requires institutions to include the disclosures for each GE program in
promotional materials made available to prospective students and to
post the disclosure information on their Web sites. Specifically,
institutions must prominently provide the information in a simple and
meaningful manner on the home page of each GE program Web site, and
they must include a prominent and direct link to the disclosures from
any Web site containing general, academic, or admissions information
about the program.
Proposed Regulations: Under proposed Sec. 668.412(a), institutions
would use a template provided by the Secretary to disclose the items
identified in a notice published in the Federal Register.
Under proposed Sec. 668.412(b), institutions would be required to
update at least annually the information contained in the disclosure
template, and the deadline and procedures for doing so would be
specified by the Secretary. Additionally, institutions would have 30
days from the date that they receive notice from the Secretary that
they must provide the student warning for a GE program (see ``Sec.
668.410 Consequences of GE measures'') to update their disclosure
templates to include the warning for both enrolled and prospective
students.
Under proposed Sec. 668.412(c), institutions would be required to
provide a prominent, readily accessible, clear, conspicuous, and direct
link to the disclosure template for each GE program on any Web page
containing academic, cost, financial aid, or admissions information
about that program. In this regard, the proposed regulations would
provide the Secretary authority, beyond the remedies already available
for noncompliance with title IV, HEA regulations, to require an
institution to modify its Web page to ensure that the link to a GE
program's disclosure template satisfies the requirement that the link
be easy to find. Additionally, institutions would have the option to
publish separate disclosure templates for each location or format of a
GE program if doing so would result in clearer information for
students. Institutions choosing to publish separate disclosure
templates would have to ensure that each disclosure template clearly
identifies the applicable location or format of the GE program to which
the template refers.
Under proposed Sec. 668.412(d), in addition to publishing their
disclosures on their institutional Web sites, institutions would
generally have to include the disclosure information in all promotional
materials made available to prospective students identifying or
promoting a GE program. The promotional materials must display the
disclosure template in a prominent manner. Promotional materials would
include materials such as, but not limited to, institutional catalogs,
invitations, flyers, billboards, advertisements, and social media. The
regulations would, however, allow institutions to include the Web
address or direct link to the disclosure template where space or
airtime constraints, such as with a 30-second radio advertisement,
would preclude the full disclosure of the required information.
Institutions that provide a Web address or URL in these cases would
have to identify that URL or link as ``Important Information about the
educational debt, earnings, and completion rates of students who
attended this program'' or as specified by the Secretary in a notice
published in the Federal Register. Institutions would be responsible
for ensuring that all promotional materials, including printed
materials, about a GE program are accurate and current at the time they
are published, approved by a State agency, or broadcast.
Finally, proposed Sec. 668.411(e) would require institutions to
provide, as a separate document, a copy of the disclosure template to
any prospective student. Specifically, before the prospective student
signs an enrollment agreement, completes registration, or makes a
financial commitment to the institution, the institution would be
required to obtain written confirmation from the prospective student
that the prospective student received a copy of the disclosure
template. These disclosures need not be made to foreign students,
however, as they are not eligible to receive title IV, HEA program
funds.
Reasons: As with the 2011 Current Rule, the proposed regulations
include requirements relating to the timing, format, and method of
disclosure that are designed to increase the likelihood that
prospective and enrolled students receive and review the disclosures.
These requirements are intended to provide students with readily
accessible, understandable, and timely information about GE programs to
inform their educational and financial choices while at the same time
minimizing burden on institutions.
Updating and Distributing Disclosures
Several of the negotiators raised concerns about the timing of the
disclosures and about ensuring that the disclosures could be easily
found on an institution's Web site and in its promotional materials.
With respect to the timing of the disclosures, the negotiators
representing consumer advocates, State Attorneys General, and students
urged the Department to require institutions to update their
disclosures annually with the most current information and to add the
student warning, if required under proposed Sec. 668.410, as soon as
possible, so that students can take that information into account when
deciding where to enroll or whether to continue enrollment in the
program. These negotiators also warned of the high-pressure tactics
that predatory institutions might use to coerce prospective students to
enroll, arguing that students need to have this information before they
actually enroll in a program.
Some of the negotiators also raised concerns that some schools
would try to hide their disclosures by burying them in large amounts of
material or otherwise trying to draw a student's attention away from
them. To address this issue, the negotiators proposed requiring
institutions to provide the disclosures both in writing and orally and
prohibiting institutions from using language to undermine, denigrate,
or otherwise diminish the content of the
[[Page 16480]]
disclosures. Other negotiators, particularly those representing
institutions, challenged the feasibility of making oral disclosures to
each student for every program of every program length. They argued
that this would add significant burden for schools. In particular, they
noted that this would be difficult for institutions that might not
communicate in person with all of their students, such as those that
offer distance education programs. In response, some of the negotiators
asserted that the burden would be justified when students are taking on
significant amounts of debt, and others suggested using video or other
means such as entrance counseling to reach all students.
In the same vein, several of the negotiators urged the Department
to ensure that Web links to the disclosures be prominent, clear, and
conspicuous to ensure that prospective students would find and
understand the information. They recommended that the link to the
disclosure template be placed next to ``trigger terms'' like the
program name and in a way that students would not have to scroll down a
Web site to find it. Other negotiators, particularly those from
institutions with multiple locations, raised concerns about being
overly prescriptive about how and where an institution must include the
links to the disclosures. These negotiators noted that institutions
need flexibility to provide the information in the way that is best
suited for their programs.
We share the negotiators' general concerns about ensuring that the
required disclosures are provided to students in a timely and
meaningful way, and we are proposing several provisions to address
these concerns. First, we have proposed that institutions would have to
update their disclosures annually in accordance with procedures and
timelines established by the Secretary. Under the 2011 Current Rule,
institutions updated their disclosures by January 31 in 2013 and 2014,
and the Secretary provided institutions approximately two months to
make those changes. We anticipate that under the proposed regulations,
we would again require institutions to update their disclosures with
information from the most recently completed award year annually in
January. We note that because each award year ends on June 30,
institutions would have several months to gather the necessary
information to update their disclosures. We have also proposed that
institutions would have to update their disclosure templates to include
the student warning within 30 days of the date institutions receive
final GE measures that trigger the requirement to provide the warning.
We believe that this provides institutions sufficient time to update
their disclosures while still ensuring that students have this critical
information promptly.
Second, to address concerns about high-pressure enrollment tactics,
we are proposing that an institution must make these disclosures to a
prospective student before the student makes a financial commitment to
the institution, for example, by signing an enrollment agreement or
otherwise completing registration. Further, we are proposing that an
institution would have to provide the disclosure template as a stand-
alone document and would have to obtain written confirmation from the
prospective student that the student received the disclosure template.
In response to concerns raised by some negotiators, we note that
institutions can accept electronic means of written confirmation, and
we would provide additional guidance to institutions in this regard. We
believe that these provisions would increase the likelihood that
prospective students will have the time to read and digest the
disclosures without facing undue pressure to enroll immediately.
Third, we have used terms like ``direct,'' ``prominent,'' and
``clear and conspicuous'' to highlight the fact that students should be
able to reach the disclosures with a minimum number of clicks from the
program home page and that the link should be placed on the Web site in
a way that is obvious, eye-catching, and otherwise not difficult to
find. The Federal Trade Commission (FTC) published guidance in 2013 on
making disclosure information easy to find. In particular, the FTC
recommends placing a hyperlink to a disclosure as close as possible to
the relevant information it qualifies and to make it noticeable, to
label the hyperlink appropriately to convey the importance, relevance,
and nature of the information it leads to, and to repeat the hyperlink
as needed on lengthy Web sites or when consumers have multiple routes
through a Web site. (See the FTC's 2013 guidance at:
www.business.ftc.gov/sites/default/files/pdf/bus41-dot-com-disclosures-information-about-online-advertising.pdf.) We would expect to provide
similar guidance to facilitate compliance with these proposed
requirements.
Finally, the proposed regulations provide institutions the
flexibility to develop their disclosure templates, hyperlink pathways,
and promotional materials in ways best suited for their programs. For
example, we have proposed that institutions offering a GE program in
more than one location or format would have the option to create
separate disclosure templates for each location or format in order to
provide clearer disclosures. We note, however, that institutions
developing multiple templates for a GE program would have to ensure
that these separate disclosure templates are clearly identified and
labeled so that viewers would not be confused or misled by the
information. Similarly, we have not specified a maximum number of
``clicks'' from the program home page or other Web pages related
specifically to the program to the disclosure template in order to
allow institutions to design reasonable hyperlink pathways.
For example, it would be acceptable for institutions with multiple
locations of a program to include a pass-through page from the
program's home page to the actual disclosure templates where a student
would identify the specific campus for which the student would like the
disclosure information. In order to promote compliance, however, we
propose that the Department may require an institution to modify its
Web page if the link for the disclosure template is not prominent,
readily accessible, clear, conspicuous, and direct. This would allow
the Department to work with schools to improve their disclosures
without engaging in a lengthy and potentially adversarial program
review.
Additionally, we have given institutions flexibility as far as how
to incorporate the disclosures into their promotional materials. The
proposed regulations require that institutions include the disclosure
template or, where including the disclosure template is not feasible, a
link to the template, in all promotional materials about the GE program
made available to prospective students, including in materials like
course catalogs, information session invitations, flyers, billboards,
and advertisements. In including their disclosures, or a link to the
disclosures, institutions would be required to identify the link as
``Important information about the educational debt, earnings, and
completion rates of students who attended this program.''
We invite comment on the optimal format and placement of the
disclosure template by the institution, recognizing the variations
among institutions in Web site organization, the information conveyed,
and how the enrollment process is conducted.
[[Page 16481]]
Section 668.413 Calculating, Issuing, and Challenging Completion Rates,
Withdrawal Rates, Repayment Rates, Median Loan Debt, and Median
Earnings
Current Regulations: Section 668.6(c) of the 2011 Current Rule
provides that institutions must calculate the on-time graduation rate
for students completing the program. Because the 2011 Current Rule
specifies that the institution will calculate the on-time graduation
rate, the rule did not provide a process by which an institution would
issue or challenge the rate.
The 2011 Current Rule does not require institutions to disclose
withdrawal rates, repayment rates, or median earnings; however, it does
require institutions to calculate and disclose the GE program's median
loan debt. Under the 2011 Prior Rule, a loan repayment rate was used
not as a disclosure item but, together with debt-to-earnings ratios, to
determine the eligibility of a GE program for title IV, HEA program
funds. See ``Sec. 668.403 Gainful employment framework'' for a
discussion of the loan repayment rate under the 2011 Prior Rule.
Calculating Completion, Withdrawal, and Repayment Rates, Median Loan
Debt, and Median Earnings
Proposed Regulations: As discussed in connection with proposed
Sec. Sec. 668.411 and 668.412, under the proposed regulations, an
institution could be required to disclose completion, withdrawal, and
repayment rates, median loan debt, and median earnings for a GE
program. Using the procedures proposed in Sec. 668.413, and based on
the information that institutions would report under proposed Sec.
668.411, the Department would calculate the rates, median loan debt,
and median earnings, and provide them to institutions for disclosure.
The proposed regulations would provide an opportunity for institutions
to challenge the Secretary's completion, withdrawal, and repayment
rates and median loan debt and median earnings determinations, as
discussed under ``Issuing and Challenging Completion, Withdrawal, and
Repayment Rates, Median Loan Debt, and Median Earnings.''
Completion Rates
Under proposed Sec. 668.413(b)(1), the Secretary would calculate
four completion rates for a GE program--two based on students whose
enrollment status is full-time on the first day of the student's
enrollment in the program, and two more based on students whose
enrollment status is less-than-full-time on the first day of the
student's enrollment in the program.
For the two completion rates based on full-time students in the
enrollment cohort, we would determine the percentage of students who
completed the program within 100 percent of the length of the program
and the percentage of students who completed the program within 150
percent of the length of the program. For the two completion rates
based on less-than-full-time students in the enrollment cohort, we
would determine the percentage of students who completed the program
within 200 percent of the length of the program and within 300 percent
of the length of the program.
Withdrawal Rates
Under proposed Sec. 668.413(b)(2), the Secretary would calculate
two withdrawal rates for the program. One rate would be the percentage
of students in the enrollment cohort who withdrew from the program
within 100 percent of the length of the program. The second rate would
be the percentage of students in the enrollment cohort who withdrew
from the program within 150 percent of the length of the program. The
enrollment cohort would be comprised of the students receiving title
IV, HEA program funds who enrolled in the program at any time during
the relevant award year.
Repayment Rates
Under proposed Sec. 668.413(b)(3), the Secretary would calculate a
borrower-based loan repayment rate for borrowers with FFEL or Direct
Loans for enrollment in a GE program by adding together the ``number of
borrowers paid in full'' to the ``number of borrowers in active
repayment'' and dividing the sum by the ``number of borrowers entering
repayment.''
Number of borrowers entering repayment are those who entered
repayment during the two-year cohort period on FFEL or Direct Loans
received for enrollment in the GE program.
Number of borrowers paid in full would be, of the borrowers
entering repayment, those who have fully repaid all of their FFEL or
Direct Loans received for enrollment in the GE program. For instances
where a loan was consolidated with one or more other loans, the
consolidation would not result in the consolidated loans being viewed
as paid in full. The repayment status of the consolidation loan would
instead be used for the repayment rate calculation, as discussed more
fully below.
Number of borrowers in active repayment would be those borrowers
entering repayment who, based on a comparison of the outstanding
balance of each loan at the beginning and end of the most recently
completed award year, made loan payments sufficient to reduce by at
least one dollar the outstanding balance of each of the borrower's FFEL
loans or Direct Loans received for enrollment in the GE program (or
consolidation loans that include FFEL or Direct Loans taken out for
enrollment in the GE program).
In the calculation, a borrower who defaulted on a loan taken out
for enrollment in the GE program would not be included in the number of
borrowers in active repayment even if the loan has subsequently been
paid in full or met the definition of active repayment. That borrower
would, however, be included in the number of borrowers entering
repayment.
The Secretary would exclude from the repayment rate calculation
those borrowers who:
Have one or more FFEL or Direct Loans in a military-
related deferment status at any time during the most recently completed
award year;
Have one or more FFEL or Direct Loans under consideration,
or approved, for a discharge on the basis of the borrower's total and
permanent disability;
Were enrolled in any other eligible program at the
institution or at another institution during the most recently
completed award year; or
Have died.
The proposed regulations would also provide that the Secretary may
modify the loan repayment rate formula to calculate a repayment rate
for only those borrowers who completed the program or for only those
borrowers who withdrew from the program.
Median Loan Debt
Under proposed Sec. 668.413(b)(4), (b)(5,) and (b)(6), the
Secretary would determine and provide to institutions the median loan
debt of a GE program for students who completed the program, students
who withdrew from the program, and for both students who completed and
students who withdrew from the program during the most recently
completed award year. In calculating the median loan debt, the
Secretary would include only the GE program's former students who
received title IV, HEA program funds for enrollment in the program.
And, unlike the median loan debt used in the calculation of D/E rates,
where students who do not have title IV loans would be included, the
median loan debt used for disclosure would be based only on students
who received title IV, HEA
[[Page 16482]]
program loans, but would include all debt, including private loans,
incurred by those students related to enrollment in the program.
The median loan debt would be calculated using each student's
incurred debt, as described in proposed Sec. 668.404(d)(1), that is
title IV loans, private educational loan debt, and debt from
institutional financing.
Median Earnings
Under proposed Sec. 668.413(b)(7)-(b)(12), the Secretary would
determine and provide to institutions the median earnings of a GE
program for students who completed the program, students who withdrew
from the program, and for both students who completed and students who
withdrew from the program during the applicable cohort period.
For students who completed a program, the Secretary would determine
median earnings using generally the same process as the one used to
calculate the D/E rates for a GE program in proposed Sec. 668.405.
Specifically, the Secretary would:
Create a list from Department records of the students who
completed the program during the applicable cohort period (Sec.
668.413(b)(8)(ii)(A)(1));
Indicate which students would be removed from the list and
the specific reason for their exclusion (Sec. Sec.
668.413(b)(8)(ii)(A)(2); 668.413(b)(11));
Provide the list of students to the institution and
consider any changes to the list proposed by the institution
(Sec. Sec. 668.413(b)(8)(ii)(B); 668.413(b)(8)(iii));
Obtain from SSA or another Federal agency the median
annual earnings of the students on the list (Sec. 668.413(b)(8)(iv));
and
Notify the institution of the median annual earnings of
the students who completed the program (Sec. 668.413(c)(3)).
As with the process used to calculate D/E rates, in providing the
list of students who completed the program, the Secretary would state
which cohort period was used to select the students. Depending on the
number of students who completed the program in the two-year cohort
period the proposed regulations would use one of two different cohorts
to determine a program's median earnings. Specifically, if 30 or more
students completed the program in the two-year cohort period, the
median earnings for the program would be calculated based on the
earnings of those students. But if fewer than 30 students completed the
program during the two-year cohort period, the median earnings for the
program would be calculated based on the earnings of the students who
completed the program in the four-year cohort period.
Under proposed Sec. 668.413(b)(9), for students who withdrew from
a GE program, the Secretary would follow a similar process. Under
proposed Sec. 668.413(b)(9), the Secretary would:
Create a list from Department records of the students who
were enrolled in the program but withdrew from the program during the
applicable cohort period (Sec. 668.413(b)(9)(ii)(A)(1));
Indicate which students would be removed from the list and
the specific reason for their exclusion (Sec. Sec.
668.413(b)(9)(ii)(A)(2); 668.413(b)(11));
Provide the list of students to the institution and
consider changes to the list proposed by the institution (Sec. Sec.
668.413(b)(9)(ii)(B); 668.413(b)(9)(iii));
Obtain from SSA or another Federal agency the median
annual earnings of the students on the list (Sec. 668.413(b)(9)(iv));
and
Notify the institution of the median annual earnings for
the students who did not complete the program (Sec. 668.413(c)(3)).
The Secretary would use a similar process, as outlined previously
for calculating the median earnings of students who completed the
program, to determine the applicable cohort period for the purpose of
creating the list of students who withdrew from the program and
determining their median earnings.
To determine the median earnings of the combined group of students
who completed the program and who withdrew from the program, the
Secretary would follow the same process, but would create a combined
list of students who completed the program and students who withdrew
from the program and use that list as the basis for the calculation
(Sec. 668.413(b)(10)).
Reasons: The proposed regulations describe how the Secretary would
calculate a program's completion, withdrawal, and repayment rates,
median loan debt, and median earnings and provide the results to the
institutions. In the interest of fairness and due process, institutions
would have an opportunity to correct the information the Secretary uses
to calculate the completion, withdrawal, and repayment rates, median
loan debt, and median earnings. The corrections procedures in proposed
Sec. 668.413 mirror the related procedures in Sec. 668.405 for
calculation of the D/E rates. Please see ``Sec. 668.405 Issuing and
challenging D/E rates'' for a more detailed description of those
procedures and our reasons for proposing them.
Completion Rate
The 2011 Current Rule provides for an institution to calculate the
on-time graduation rate for its GE programs. In contrast, we are
proposing that the Secretary would calculate completion rates for an
institution's GE programs that reflect the extent to which students
completed the program within 100 percent and 150 percent of the length
of the program.
The proposed regulations address concerns raised by commenters
during the public hearings and by some of the non-Federal negotiators
during the negotiated rulemaking about whether institutions or the
Secretary would be in the better position to calculate completion
rates.
A number of non-Federal negotiators recommended that we follow the
approach in the 2011 Current Rule and provide that institutions, rather
than the Secretary, should calculate the completion rate. They noted
that, if the Secretary were to calculate the completion rate, (1)
institutions would be required to report additional information under
proposed Sec. 668.411 and (2) the calculation would be limited to
students receiving title IV, HEA program funds, in alignment with APSCU
v. Duncan. See ``Sec. 668.401 Scope and purpose'' for a general
discussion of our focus on students who receive title IV, HEA program
funds and ``Sec. 668.412 Disclosure requirements for GE programs'' for
a discussion of the various considerations regarding the group of
students (i.e., students receiving title IV, HEA program funds or all
students) on which disclosures are proposed to be based. Many of the
non-Federal negotiators believed that there would be more value for
prospective students if the completion rates included all students who
enrolled in the program and not just those who received title IV, HEA
program funds. In addition, the negotiators were concerned that if the
Secretary were to calculate completion rates, in order to provide an
appropriate due process, the Secretary would have to provide
institutions with an opportunity to challenge the calculation,
potentially delaying the inclusion of the rates on the disclosure
template.
Other negotiators strongly favored having the Secretary calculate
the completion rates to better ensure the integrity of the information
and to lessen the burden on institutions. After consideration of the
various negotiator suggestions, we believe that the benefits
[[Page 16483]]
of (1) ensuring that all completion rates are calculated consistently
and accurately across institutions and across programs; (2) reducing
the burden on institutions to calculate multiple rates; and (3)
providing the Department the opportunity to gather and analyze
completion information for all GE programs outweigh any drawbacks
associated with limiting the coverage of these disclosures to students
who received title IV, HEA program funds. Nonetheless, we invite
comment on the question of whether the Secretary or institutions should
calculate completion rates for the respective groups of students.
Committee members urged the Department to modify the completion
rate calculation to show the percentage of all students who completed
the program, rather than just the percentage of students who completed
the program on time, as is set forth in the 2011 Current Rule.
Negotiators argued that this change would provide for more meaningful
information for prospective students. In addition, some of the
negotiators raised concerns that a single completion rate indicating
the extent to which full-time students completed a program on time
would not adequately reflect the experience of part-time students, many
of whom withdraw and re-enroll multiple times before completing a
program. In this regard, some of the negotiators noted that students
often change their enrollment status during the term, and they
discussed how to include in the completion rate students who began a
program as full-time students but then switched to less-than-full-time
status. To address this concern, the negotiators suggested fixing a
student's enrollment status at a certain point, such as on the first
day of class or on a census date. The negotiators also noted that,
given the proposal to narrow the definition of ``student'' to include
only students who received title IV, HEA program funds, a completion
rate for only full-time students could dramatically reduce the
completion rate for a particular GE program. Lastly, while several
negotiators urged the Department to include additional completion rates
for part-time students, others argued that having four rates would
overwhelm students and prospective students and ultimately would not
provide meaningful information.
To address these concerns, we are proposing that the Secretary
would, using data reported by an institution, calculate and provide to
the institution for disclosure up to four different completion rates
for each of its GE programs when the Secretary identifies those
completion rates as required disclosures for a particular award year.
In calculating these rates, the Secretary would use a ``snapshot'' of a
student's enrollment status (i.e., full-time, less-than-full-time) on
the first day of the student's enrollment in the program. Although this
would not reflect changes in a student's enrollment status during the
student's entire enrollment, we believe, and some committee members
agreed, that this is a reasonable way to establish cohorts for this
purpose, as it generally reflects the intent of the student at the
beginning of his or her enrollment in the program.
To ensure that enrolled and prospective students have information
about the percentage of students who reach completion, rather than just
the percentage of students completing the program on time as is the
case with the 2011 Current Rule, and, additionally, how long students
are taking to complete the program, the calculations for full-time
students would be based on the number of full-time students who
completed the program within 100 percent of the length of the program,
and the number of full-time students who completed the program within
150 percent of the length of the program. Similarly, with respect to
less-than-full-time students, the calculations would be based on the
number of less-than-full-time students who completed the program within
200 percent of the length of the program, and the number of less-than-
full-time students who completed the program within 300 percent of the
length of the program.
We believe that calculating completion rates using these four
variations would adequately capture the experience of full-time and
part-time students, and that this information would be beneficial to
both enrolled and prospective students, as well as to institutions as
they work to improve outcomes for students. However, we are mindful of
the concerns raised by some of the committee members that multiple
completion rates might be confusing. We invite comment on how the
completion rate calculations could be simplified but still provide
meaningful information to prospective students.
Withdrawal Rate
The 2011 Current Rule does not require disclosure of a GE program's
withdrawal rates. However, we believe this information can be very
valuable to students, as discussed in ``Sec. 668.412 Disclosure
requirements for GE programs.''
As with completion rates, committee members disagreed as to whether
the withdrawal rate should be calculated by the institution or the
Department and, related to that, whether the calculation should include
only students who received title IV, HEA program funds or all
individuals who enrolled in and withdrew from the program, whether or
not they received title IV, HEA program funds. As with completion
rates, we concluded that the benefits of ensuring consistent and
accurate calculations, reducing burden on institutions, and providing
an opportunity for the Department to obtain data outweigh concerns
about limiting the disclosure to those students who received title IV,
HEA program funds. As with completion rates, however, we seek specific
comment on the question.
The negotiators had two other suggestions concerning the withdrawal
rate. First, some recommended extending the period of time over which
the rate is calculated to mirror the proposed extended completion rate
periods. Second, some of the negotiators suggested replacing the
withdrawal rate with an attrition rate to reflect the turnover of
students who enroll in a program.
We propose that there be two withdrawal rate calculations. One
would consider the percentage of students in the enrollment cohort who
withdrew from the program at any time during the length of the program,
beginning upon the student's original enrollment in the program, within
100 percent of the length of the program. The second rate would be the
percentage of students in the enrollment cohort who withdrew from the
program within 150 percent of the length of the program. We think this
second variation of the rate would provide valuable information to
students about when students withdraw from their programs. As with
other items on the disclosure template, we would conduct consumer
testing to assess how best to present these variations of withdrawal
rate.
We agree that an attrition rate would provide useful information;
however, we believe that prospective students would better understand a
withdrawal rate. That is, it would be more intuitive for consumers
looking at a GE program's disclosures to understand that the withdrawal
rate reflects how many students began the program but dropped out
before completing the program. Additionally, we think these rates would
be useful to prospective students to assess whether an institution may
have a ``churn'' problem, where many students are enrolling, but are
dropping out. Making a ``churn'' problem more visible to prospective
students may also encourage institutions to target efforts
[[Page 16484]]
and resources to improve student outcomes.
Finally, some negotiators requested clarification about how
official and unofficial student withdrawals would factor into the
withdrawal rate calculation. Operationally, the Secretary would include
in the withdrawal rate calculation any student that the institution
reported as withdrawn under proposed Sec. 668.411. Institutions must
report as withdrawn any student who officially withdrew or otherwise
met the return of title IV, HEA program funds withdrawal provisions
under Sec. 668.22, which include unofficial withdrawals.
Repayment Rate
We propose to use as a disclosure item a ``borrower-based''
repayment rate for title IV, HEA program loans that reflects whether
students entering repayment during the applicable cohort period were
able to pay down, by at least one dollar, the outstanding balance on
the Federal loans they took for enrolling in the GE program. Reducing
the outstanding balance would demonstrate that the GE program's former
students had sufficient resources to pay down at least the amount of
accruing interest on their title IV, HEA program loans taken for
enrollment in that program.
For reasons we have already discussed, we do not propose to use the
loan repayment rate as an accountability metric in the proposed
regulations as we did in the 2011 Prior Rule. Nor do we propose the
same calculation of the repayment rate that was in the 2011 Prior Rule,
which was calculated as a ``dollar-based'' rate. A dollar-based rate
measures the percentage of loan amounts that are being repaid; a
borrower-based rate measures the percentage of students who are making
payments on their loans. Of the two, we believe a borrower-based
repayment rate is easier to understand and consequently would be more
useful to prospective students trying to gain insight into whether they
would be able to repay loans they take out for enrolling in the program
and where to invest their limited eligibility for title IV, HEA program
funds. We believe the repayment rate disclosure would also help
enrolled students as they make continuing financial decisions. In
particular, it might encourage an enrolled student to reconsider the
amount they plan to take out in loans in subsequent years.
Additionally, we think this rate would be useful to institutions to
assess whether students who are taking out Federal loans are having a
difficult time repaying them and, if so, to target efforts and
resources to provide more effective loan counseling to students.
Some of the negotiators recommended indicating on the disclosure
template that the proposed loan repayment rate does not include any
private education loans or institutional debt that a borrower may have
incurred in addition to their Federal loans. Under the proposed
regulations, the loan repayment rate would include FFEL and Direct
Loans (including Graduate PLUS loans, and consolidation loans that
include a FFEL or Direct Loan received for enrollment in the GE
program). The loan repayment rate would not include Parent PLUS Loans,
Perkins Loans, private education loans, or institutional debt. Although
we believe that the calculation would be an accurate reflection of the
repayment performance of a GE program's former students, we will use
focus groups and consumer testing to determine the best way to explain
to users of the disclosure template which types of loans are included
in the repayment rate and which are not.
Other negotiators representing institutions argued that some
borrowers in an income-driven repayment plan (i.e., Income Based
Repayment, Income Contingent Repayment, Pay As You Earn) who make their
scheduled payments are actively repaying their loans, even if those
payments do not reduce the principal year-end balance, and should be
counted in the numerator of the repayment rate as being in active
repayment. Although the Department has made income-driven repayment
plans available to borrowers to assist them in managing their debt, and
borrowers may well be meeting their obligations under their repayment
plans, these plans by their nature are available only to borrowers
whose loan debt in relation to their income places them in a ``partial
financial hardship''-- information that we believe the rate should
reflect. Specifically, the income-driven repayment plans result in
considerably extended repayment, add interest cost to the borrower, and
allow cancellation of amounts not paid at potential cost to taxpayers,
the Government, and the borrower. Treating such borrowers as in active
repayment for the purpose of the repayment rate disclosed to consumers
would not provide meaningful information about a GE program's student
outcomes and, worse, may give prospective students unrealistic
expectations about the likely outcomes of their investment in such a
program. For that reason, we believe that students who are unable to
make sufficient loan payments scheduled during a year to reduce the
outstanding principal loan balance owed on their loans (principal and
accrued interest) at the end of the year by at least one dollar,
including students making payments under an income-driven repayment
plan, should not be included in the number of borrowers in active
repayment.
Several commenters recommended that the borrowers excluded under
the proposed D/E rates calculations--such as students in military
deferment status or students who are enrolled in another eligible
educational program--be excluded from the loan repayment rate
calculation, noting that the same logic would apply. We agree and
propose that the same exclusions would apply except for the exclusion
in proposed Sec. 668.404(e) for students who completed a higher
credentialed program because that exclusion is not relevant to
repayment rates. See ``Sec. 668.404 Calculating D/E rates'' for a
discussion of these exclusions.
Median Loan Debt
Under the 2011 Current Rule, institutions calculate and disclose
the median loan debt incurred by students who completed the program,
identified separately as title IV, HEA loan debt and debt from private
educational loans and institutional financing plans. We believe the
better approach, instead of each institution calculating three median
loan debt amounts for each of its GE programs, is for the Secretary to
calculate the median loan debt amounts and provide them to the
institution for disclosure.
In addition to reducing burden on institutions and ensuring
accuracy of the results, this approach is consistent with our broader
approach of basing disclosure information on students who received
title IV, HEA program funds, rather than all individuals enrolled in
the GE program.
Although we understand the negotiators' concerns, we believe that
disclosure information that reflects solely the outcomes of students
who received Federal dollars would be more relevant to similarly
situated prospective students who likely will also receive title IV,
HEA program funds. Prospective students who will need to borrow from
the title IV, HEA programs for enrollment in a GE program would know
specifically how students in similar economic circumstances have fared
in that program. See ``Sec. 668.401 Scope and purpose'' and ``Sec.
668.412 Disclosure requirements for GE programs'' for a complete
discussion of our reasons for proposing that the GE measures
calculations and disclosures be based on
[[Page 16485]]
information on only title IV, HEA program funds recipients. We also
note, as described in ``Sec. 668.412 Disclosure requirements for GE
programs,'' that we may require institutions to disclose information
about the individuals enrolled in the program during the most recently
completed award year, specifically, the percentage of those students
who incurred debt for enrollment in the program.
Median Earnings
The 2011 Current Rule does not provide for the calculation of
median earnings as a disclosure item. However, we believe that a median
earnings disclosure would allow students to better understand their
likely financial outcomes if they enroll in a GE program and either
complete the program or withdraw from the program. For the purpose of
this disclosure, median earnings for students who completed the program
would already be obtained from SSA for the purpose of calculating the
D/E rates. Please see ``Sec. 668.405 Issuing and challenging D/E
rates'' for a discussion of the process that the Secretary would use to
determine the median earnings of students who complete a GE program. A
similar process would be used for students who withdrew from the
program, and for both students who completed and students who withdrew
from the program. We have repeated the process in proposed Sec.
668.413 to make it easier for readers to understand the section without
having to refer back to previous sections in proposed subpart Q.
Issuing and Challenging Completion, Withdrawal, and Repayment Rates,
Median Loan Debt, and Median Earnings
Proposed Regulations: Under the proposed regulations, the
Department would determine and issue the completion, withdrawal, and
repayment rates, median loan debt, and median earnings for each GE
program, for disclosure by the institution. We also propose to give
institutions an opportunity to challenge the information used by the
Department in its calculation of these rates and determination of
median loan debt.
Under proposed Sec. 668.413(c), the Secretary would notify
institutions of the draft completion, withdrawal, and repayment rates
calculated under Sec. 668.413(b) and the information that the
Secretary used to calculate those rates. The Secretary would also
notify institutions of the median loan debt and median earnings for the
applicable cohort period of the students who completed each program,
the students who withdrew from each program, or both the students who
completed and the students who withdrew from each program.
Under proposed Sec. 668.413(d)(1), an institution would be
permitted to challenge the draft completion, withdrawal, and repayment
rates and draft median loan debt amounts provided by the Secretary. The
proposed procedures would mirror the procedures used for challenges to
a GE program's draft D/E rates. Specifically, the institution would
have 45 days after the Secretary notifies the institution of its draft
completion, withdrawal, and repayment rates and the median loan debt to
challenge the accuracy of the information that the Secretary used to
calculate those rates and the median loan debt by providing evidence
demonstrating that the information was incorrect. If an institution
does not challenge the draft completion, withdrawal, or repayment
rates, or median loan debt, those draft rates and median loan debt
would become the final rates and median loan debt under proposed Sec.
668.413(e). Following any challenge to the rates and median loan debt,
the Secretary would issue a notice of determination under proposed
Sec. 668.413(e) indicating whether the challenge was accepted and the
final rate or rates and the median loan debt, which the institution
would be required to disclose if specified by the Secretary. Under
proposed Sec. 668.413(e), the Secretary could also publish the final
rates and median loan debt. As with the determinations of the D/E
rates, an institution could challenge the Secretary's calculations only
once for an award year and an institution that does not timely
challenge the rates or median loan debt would waive any objections to
those rates or median loan debt as stated in the notice from the
Secretary.
Proposed Sec. 668.413(d)(2) specifies that the Secretary would not
consider any challenges to the median earnings, and proposed Sec.
668.413(e)(2) specifies that the median earnings of a program
calculated by the Secretary constitute the final median earnings for
the program. After notifying an institution of its final median
earnings for a GE program, the Secretary would be able to publish those
earnings.
Finally, proposed Sec. 668.413(f) would require that any material
that an institution submits to the Secretary to make corrections or
challenges under this section must be complete, timely, accurate, and
in a format acceptable to the Secretary. Further, any challenges under
this section would have to conform to the instructions provided to the
institution with the notice of draft rates and median loan debt under
Sec. 668.413(c).
Reasons: The proposed regulations are intended to provide
institutions, in the interest of fairness and due process, with an
adequate opportunity to challenge the completion, withdrawal, and
repayment rates and median loan debt determined by the Department. The
proposed regulations would also establish a clear administrative
process to determine when a program's completion, withdrawal, and
repayment rates, median loan debt, and median earnings information are
final and, therefore, required to be disclosed. The correction and
challenge procedures in proposed Sec. 668.413 mirror the related
procedures in Sec. 668.405 for calculation of the D/E rates. Please
see ``Sec. 668.405 Issuing and challenging D/E rates'' for a more
detailed description of those procedures and our reasons for proposing
them.
Section 668.414 Certification Requirements for GE Programs
Current Regulations:
Certification Requirements
Under Sec. 668.14, to participate in the title IV, HEA programs,
an institution must enter into a program participation agreement (PPA)
with the Secretary in which it agrees to comply with provisions
governing the title IV, HEA programs. With respect to a GE program
offered by the institution, the institution agrees in the PPA that
there is a reasonable relationship between the length of the program
and the entry-level requirements for the recognized occupation for
which the program prepares students. Under Sec. 668.14(b)(26), the
Secretary considers the relationship between the program length and
entry-level requirements to be reasonable if the number of clock hours
provided in the program does not exceed by more than 50 percent the
minimum number of clock hours that a State or Federal agency
establishes for the program training. If the number of clock hours in
the program exceeds 50 percent of that minimum, then the institution
must provide an explanation that is acceptable to the Department of why
the extra hours are justified. The institution must also be able to
establish the need for the training for students to obtain employment
in the recognized occupation for which the program prepares students.
Program Application Requirements
Under 34 CFR 600.20(d) of the 2011 Prior Rule, an institution would
establish the title IV, HEA program eligibility of a new GE program
through
[[Page 16486]]
a notice and application process. Under that process, the institution
would notify the Department at least 90 days before it intended to
provide title IV, HEA program funds to students in the program, and
would provide information regarding the market need for the program, an
explanation of how the program was reviewed by or developed in
conjunction with State or recognized oversight entities, and other
information about the program.
In reviewing an application, the Secretary would consider--
The institution's demonstrated financial responsibility
and administrative capability in operating its existing programs.
Whether the additional educational program is one of
several new programs that will replace similar programs currently
provided by the institution, as opposed to supplementing or expanding
the current programs provided by the institution.
Whether the number of additional educational programs
being added is inconsistent with the institution's historic program
offerings, growth, and operations.
Whether the process and determination by the institution
to offer an additional educational program that leads to gainful
employment in a recognized occupation is sufficient.
If the Department did not notify the institution at least 30 days
prior to the start of the program, the program would be approved by
default and the institution could disburse title IV, HEA program funds
to eligible students enrolled in the program. However, if the
Department notified the institution at least 30 days before the date
the program was supposed to begin that additional information was
needed, the institution would be required to provide the information
and address any concerns identified by the Department before the
program would be approved.
If the Secretary denied an application from an institution to offer
a new program, the denial would be based on the considerations listed
above, and the Secretary would explain the basis for the denial and
permit the institution to respond and request reconsideration. Proposed
Regulations: Under proposed Sec. 668.414, we would require an
institution to assess its GE programs to determine whether they meet
the following minimum standards (referred to as the ``certification
requirements''):
(1) Each eligible GE program it offers is included in the
institution's accreditation by its recognized accrediting agency, or,
if the institution is a public postsecondary vocational institution,
the program is approved by a recognized State agency for the approval
of public postsecondary vocational education in lieu of accreditation;
(2) Each eligible GE program it offers is programmatically
accredited, if such accreditation is required by a Federal governmental
entity or by a governmental entity in the State in which the
institution is located or by any State within the institution's MSA;
and
(3) For the State in which the institution is located and in all
other States within the institution's MSA, each eligible program it
offers satisfies the licensure or certification requirements of those
States so that a student who completes the program and seeks employment
in those States qualifies to take any licensure or certification exam
that is needed for the student to practice or find employment in an
occupation that the program prepares students to enter.
Transitional Certification
Under proposed Sec. 668.414(a), an institution would provide to
the Department no later than December 31 of the year in which these
regulations take effect, a ``transitional certification'' signed by its
most senior executive officer affirming that each of its eligible GE
programs then offered by the institution satisfies the certification
requirements. The Secretary would accept the certification as an
addendum to the institution's program participation agreement (PPA). An
institution would not provide the transitional certification if,
between July 1 and December 31 of the year in which these regulations
take effect, it makes the certification in its PPA.
PPA Certification Requirements
Under Sec. 668.414(b) of the proposed regulations, as a condition
of its continued participation in the title IV, HEA programs, an
institution would certify in its PPA with the Secretary under 34 CFR
668.14 that each of its then-eligible GE programs satisfies the
certification requirements.
Establishing Eligibility and Disbursing Funds
Under proposed Sec. 668.414(c), an institution would establish the
eligibility of a GE program by updating the list of eligible programs
maintained by the Department to include that program, as provided under
proposed 34 CFR 600.21(a)(11)(i). In accordance with the procedures for
institutional notifications under 34 CFR 600.20 and 600.21, an
institution that participates in the title IV, HEA programs would
update the information maintained by the Department to reflect changes
at the institutional level and the program level since the institution
last signed a PPA. Proposed Sec. 600.21(a)(11)(i) would expand the
existing obligation to update by requiring an institution to report any
changes it makes, or that otherwise occur, for a GE program. An
institution would report, for example, a change in the name or
credential level of an eligible GE program it currently offers, or the
addition of a GE program. When an institution updates its list of
eligible programs maintained by the Department to add a GE program
under proposed Sec. 668.414(c), the institution would affirm that the
program satisfies the certification requirements. Except for a program
that is still subject to a three-year loss of eligibility under
proposed Sec. 668.410(b)(2), after the institution updates its list of
eligible programs to include the GE program, the institution may begin
to disburse title IV, HEA program funds to students enrolled in the
program.
Reasons: As part of the accountability framework of the proposed
regulations, we propose that an institution must certify through its
PPA that its GE programs meet applicable accreditation and State and
Federal licensing requirements--the certification requirements. Through
the certification requirements, institutions would be required to
assess whether their programs meet widely accepted minimum standards to
be eligible for participation in the title IV, HEA programs. Although
the 2011 Prior Rule did not include certification requirements, we
believe that students who complete a program that does not meet these
standards would have a difficult time obtaining, or be unable to
obtain, employment in the occupation for which they received training
and, consequently, would likely struggle to repay the debt they
incurred for enrolling in that program. The certification requirements
are intended to help prevent such outcomes and are appropriate
conditions that programs must satisfy to qualify for title IV, HEA
program funds as they squarely address the debt repayment concerns
underlying the gainful employment eligibility provisions of the HEA.
The certification requirements, designed as an independent pillar
of the accountability framework, would work together with the metrics-
based standards. The certification requirements would provide a basic
initial assessment of a program's title IV, HEA eligibility. For
programs existing as of the effective date of the proposed regulations,
the transitional
[[Page 16487]]
certification, if applicable, and the certification through the
existing PPA process would establish a program's baseline eligibility
as a gainful employment program under the HEA. Thereafter, if an
institution seeks to establish or reestablish a program's eligibility,
it would do so, first, through the institutional notification
procedures under 34 CFR 600.20 and 600.21 and, subsequently, as part of
its established PPA process. Once sufficient data are available to
assess program performance using the GE measures, the accountability
metrics would be the principal method for assessing a program's
continuing eligibility for title IV, HEA program funds.
The negotiators disagreed on what kind of standards and what kind
of process, if any, the Department should use to establish eligibility
for programs existing as of the effective date of the proposed
regulations and for programs that an institution subsequently seeks to
newly establish or reestablish.
Certification Standards
Some negotiators and members of the public who attended the
negotiated rulemaking meetings raised significant concerns about
students who have been harmed by enrolling in programs that purported
to train the students to work in certain occupations but that did not
meet all governmental requirements or accrediting standards necessary
for the students to get the jobs associated with their training. The
negotiators explained that there are cases where programs lack
programmatic accreditation, leaving students who complete the program
unable to work in a particular occupation without meeting alternative
standards such as having years of experience working in lesser-skilled
and lower-paying jobs in that field.
In view of the negotiators' concerns, we believe it is reasonable
to require an institution to certify that each GE program it offers
meets any applicable State or Federal licensing and accrediting
requirements for the occupations for which the program purports to
prepare students to enter.
Some of the negotiators argued that the basis for making any
initial title IV, HEA program eligibility assessment--whether for
existing programs or new programs--should be more comprehensive. For
example, with respect to new programs, some of the negotiators proposed
that the assessment should also include, among other things,
consideration of the market need for the program, projected tuition and
fees, projected instructional expenses, projected income for students
who complete the program, the projected attrition rate, and the
projected debt-to-earnings ratios for students. Under the negotiator
proposals, projections of market need, starting income, and performance
under debt measures would be obtained through employer surveys and
State databases. Those negotiators suggested that an eligibility
determination for existing programs would consider similar matters, but
rely on actual data rather than projections.
Although we agree that many of the considerations the negotiators
proposed are relevant to whether a program would prepare students for
gainful employment, and note that market need was a factor included in
the 2011 Prior Rule, we believe that the most critical measure of title
IV, HEA program eligibility--and the measure supported by the
legislative history--is whether students will be able to pay back the
educational debt they incur to enroll in the occupational training. We
believe that this measure is best made using actual student outcomes as
calculated by the Department using the proposed accountability metrics.
Accordingly, we believe that a more limited inquiry upon implementation
of the proposed regulations and when an institution seeks to newly
establish the eligibility of a program in order to ensure that basic
requirements are met is sufficient to support the more detailed
assessment of continuing eligibility that would be made using the
accountability metrics. Further, we believe that there is less burden
on institutions, and a better investment of Department resources, if
the program's eligibility is thoroughly assessed through one, rather
than multiple processes, and by using actual student outcomes instead
of projections that may not be reliable. This approach also takes into
consideration that institutions will be providing disclosures about
these programs and their outcomes separately from the eligibility
determinations, with students benefitting from both.
Certification Process
In this regard, we have proposed that, both for programs existing
at the effective date of the proposed regulations and for programs that
an institution seeks to newly establish or reestablish, the
certifications would be incorporated into the PPA recertification
process, as it is a streamlined, administrative process with which
institutions are already familiar. This approach is consistent with
section 487(a)(21) of the HEA, which establishes requirements for an
institution's PPA, provides that an institution must meet the
requirements established by the Secretary and accrediting agencies or
associations, and requires an institution to provide evidence to the
Secretary that the institution has the authority to operate within a
State.
We expect that using an existing process for these certifications
would lessen institutional burden and facilitate compliance. Because
institutional schedules vary with respect to the PPA process, we have
proposed that institutions that are not scheduled for recertification
of their PPA within six months of the effective date of the proposed
regulations make a transitional certification for then-existing
programs. The six-month period, coupled with the period of time from
when the final regulations are published before they go into effect on
July 1 would provide time for the Department to establish and publicize
the procedures that institutions would follow to submit the
certifications, as well as provide time for institutions to ensure
their GE programs are in compliance with the certification requirements
and submit the required certifications. Given that the certification
would affirm compliance with a statutory condition for eligibility for
receipt of title IV, HEA program funds, we expect that institutions
would undertake the self-assessment in good faith and based on
appropriate due diligence.
Although we have proposed that institutions make the same basic
certifications and generally follow the same process with respect to
both programs existing as of the effective date of the proposed
regulations and programs that an institution subsequently seeks to
newly establish or reestablish, some negotiators suggested that new
programs may warrant a closer review by the Department. That is,
although negotiators recognized that it might be overly burdensome on
the Department to conduct a full review of all existing programs, some
believed the Department is obligated, once the proposed regulations are
in effect, to make an up-front, substantive eligibility determination
for new programs, and that such review would be necessary to prevent
institutions from establishing inadequate programs for limited time
periods and avoiding altogether any substantive review under the GE
measures.
The negotiators expressed differing views on the extent to which
the Department should require institutions to apply to add new GE
programs and the information the Department would require institutions
to provide in those applications. Students, consumer
[[Page 16488]]
advocates, and State Attorneys General urged the Department to develop
a robust new program approval process, arguing that institutions should
have to demonstrate for each new GE program that the projected ratio
between their planned tuition and fees and the estimated earnings of
students who complete the program would meet the GE measures. They
argued that institutions should have to provide documentation of how
they determined the expected earnings of graduates of the program and
the market viability of the program. Such documentation would include
information from likely employers stating that the program would
prepare students for positions in demand in the field and indicating
likely entry-level or expected salaries. Further, they argued that
institutions should have to demonstrate in their applications that the
new GE program would meet any applicable required, or generally
preferred, programmatic accreditation and State licensure requirements
and would adequately provide for any necessary experiential placements,
because otherwise the students who complete the program would be unable
to obtain gainful employment.
Negotiators from institutions and accrediting agencies generally
argued for a meaningful application process that would limit the burden
on institutions as much as possible. They suggested targeting the
application requirements to programs with demonstrated difficulty
passing the GE measures, or otherwise narrowing the scope of
institutions and programs that would have to apply in order to
establish title IV, HEA program eligibility for a new GE program.
Several parties recommended that the Department should avoid
duplicating processes already in place with States and accrediting
agencies, particularly in States or in fields that already have
rigorous approval processes. These negotiators suggested approaches
such as exempting institutions from the approval process if they could
demonstrate that they go through a more stringent process for another
entity, and allowing institutions to submit information that they
assemble for other non-Departmental approval processes with annotations
indicating which sections would address the GE requirements. The
negotiators also raised concerns that an approval process would limit
institutions' flexibility to quickly add new GE programs in response to
changing demands in the field or industry. Overall, these negotiators
believed that any application process should have clear and objective
standards that an institution must meet for a GE program to be
approved.
After considering widely varying options regarding which new
programs would require Department approval and the content of the
institution's application for approval, we are not proposing separate
approval requirements for new programs. At this time, we believe that
the accountability metrics are the best measures of whether a program
prepares students for gainful employment, as we are concerned that a
more rigorous approval process would require an undue amount of time
and resources from both the Department and institutions that would be
better spent on program improvements. For these reasons, instead of
establishing the eligibility of a GE program under an application
process, an institution would update its list of eligible programs
maintained by the Department to include that program. We view this list
of eligible programs as an extension of the institution's PPA because
the list defines the nature and scope of the institution's eligibility
and certification to participate in the title IV, HEA programs under 34
CFR 600.20(e). In updating its list of eligible programs to include
that program, the institution would be certifying that the program
satisfies the certification requirements, and, accordingly, the
Department would recognize that program as an eligible program within
the scope of the institution's participation. Under the proposed
regulations, an institution could not update its list of eligible
programs to include a GE program that is subject to the three-year loss
of eligibility provision under proposed Sec. 668.410(b)(2) until the
three-year period expired.
Section 668.415 Severability
Current Regulations: None.
Proposed Regulations: Proposed Sec. 668.415 would make clear that,
if any part of the proposed regulations is held invalid by a court, the
remainder would still be in effect.
Reasons: For the reasons described in ``Sec. 668.401 Scope and
purpose,'' through the proposed regulations we intend to:
Define what it means for a program to provide training
that prepares students for gainful employment in a recognized
occupation;
Establish measures that would distinguish programs that
provide quality, affordable education and training to their students
from those programs that leave students with unaffordable levels of
loan debt in relation to their earnings; and
Establish reporting and disclosure requirements that would
increase the transparency of student outcomes of GE programs so that
accurate and comparable information is disseminated to students,
prospective students, and their families, to help them make better
informed decisions about where to invest their time and money in
pursuit of a postsecondary degree or credential; the public, taxpayers,
and the Government, to help them better safeguard the Federal
investment in these programs; and institutions, to provide them
meaningful information that they could use to improve student outcomes
in these programs.
We believe that each of the proposed provisions serves one or more
important, related, but distinct, purposes. Each of the requirements
provides value to students, prospective students, and their families,
to the public, taxpayers, and the Government, and to institutions
separate from, and in addition to, the value provided by the other
requirements. To best serve these purposes, we would include this
administrative provision in the regulations to make clear that the
regulations are designed to operate independently of each other and to
convey the Department's intent that the potential invalidity of one
provision should not affect the remainder of the provisions.
Section 600.2 Definitions; Section 600.10 Date, Extent, Duration, and
Consequence of Eligibility; Section 600.20 Notice and Application
Procedures for Establishing, Reestablishing, Maintaining, or Expanding
Institutional Eligibility and Certification; Section 600.21 Updating
Application Information; Section 668.6 Reporting and Disclosure
Requirements for Programs That Prepare Students for Gainful Employment
in a Recognized Occupation; Section 668.7 Gainful Employment in a
Recognized Occupation; Section 668.8 Eligible Program; Section 668.14
Program Participation Agreement
Current Regulations: The current regulations establish requirements
for institutions to apply to participate in the title IV, HEA programs;
to continue participating beyond the expiration date of an
institution's program participation agreement; or to continue
participating when new approval is required due to a change of
ownership that results in a change of control. The current regulations
also include requirements for an institution to provide timely notice
to the Secretary when expanding its participation in title IV, HEA
programs by adding new educational
[[Page 16489]]
programs or locations. Similarly, the current regulations include
requirements to identify when an institution must first obtain approval
for a new educational program or location before disbursing title IV,
HEA program funds to students enrolled in the program or attending the
new location. Section 600.10(c) of the 2011 Prior Rule established new
notice and application requirements for institutions proposing to add
new GE programs. We discuss those specific regulations and our proposed
changes to them in ``Sec. 668.414 Certification requirements for GE
programs.'' Sections 668.6 and 668.7 are parts of the 2011 Final Rules.
Proposed Regulations: We propose to make a number of technical and
conforming changes to the current regulations, including sections of
the 2011 Current Rule, and to the regulations from the 2011 Prior Rule.
The definition in Sec. 600.2 of ``recognized occupation''
would be removed and replaced with a slightly modified definition.
Section 600.10(c) would be revised to refer to proposed
subpart Q to identify the conditions when time restrictions would exist
that prohibit an institution from establishing or reestablishing the
eligibility of a GE program.
Proposed Sec. 600.10(c)(1)-(3) would incorporate the
provisions of the proposed regulations into existing new program
approval requirements. We would also revise some of the language
concerning the need for institutions that are provisionally certified,
and institutions offering direct assessment programs, to obtain
approval for new programs without changing the applicable requirements.
We propose to revise Sec. 600.20(c)(1) to clarify that
the circumstances when an institution must apply to expand its
eligibility include the addition of new programs and new locations.
Section 600.21(a)(11) would be revised to require an
institution to update the list of programs identified in its most
recent program participation application when a GE program is
established, is voluntarily discontinued, loses eligibility, or has
other changes to the program's name, CIP code, or credential level.
Sections 668.6 and 668.7 would be removed and reserved.
Section 668.8 would be amended to replace the reference to
Sec. 668.6 in paragraph (d)(2)(iii) and (d)(3)(ii) with a reference to
proposed subpart Q.
Section 668.14(a)(26) would clarify that a GE program
offered by an institution is required to prepare students for gainful
employment in a recognized occupation.
Section 668.14(a)(26) would be revised to include a
reference to the GE program certification requirements of proposed
Sec. 668.414.
The authority citations in Sec. Sec. 600.2, 600.10,
600.20, and 600.21 would be revised.
Reasons: The proposed changes to the authority citations are
technical in nature. The other changes would be made to ensure
consistency and conformity between the proposed regulations and
existing eligibility and related requirements for title IV, HEA
programs, and to reflect the court's decision in APSCU v. Duncan.
The definition of ``recognized occupation'' in Sec. 600.2 would be
restated to clarify that this provision would be in effect under the
proposed regulations.
The proposed changes to Sec. 600.10(c) would make the existing
regulation text consistent and in conformity with the proposed
regulations. Proposed Sec. 600.10(c)(2) would provide that except as
provided in Sec. 600.20(c), an eligible institution does not have to
obtain the approval of the Secretary to establish the eligibility of
any program not previously described in proposed Sec. 600.10(c)(1).
The proposed change to Sec. 600.20(c)(1) to add a reference to new
programs is a technical change, as the current regulations refer only
to additions of locations in Sec. 600.20(c)(1), whereas Sec.
600.20(c)(1)(v) provides that the Secretary can advise an institution
by letter that it must apply for approval of new programs, as well as
additional locations, under Sec. 600.10(c). Adding the reference to
new programs in Sec. 600.20(c)(1) would make that language consistent
with the range of actions that are described in Sec. 600.20(c)(1)(i)-
(v).
The revisions to Sec. 600.21(a)(11) would require an institution
to update the list of programs it offers that was provided in its last
recertification application to the Department to include any new GE
programs it offers, to account for any changes in the status of its GE
programs, and to track any significant change in the items the
Department uses to track GE programs, such as a program's name, CIP
code, or credential level.
Sections 668.6 and 668.7, which were a part of the 2011 Final
Rules, would be removed and reserved because they were either vacated
or vacated in part by the court decision in APSCU v. Duncan, and would
be replaced by the proposed regulations.
Section 668.8(d)(2)(iii) and (d)(3)(ii) would be amended to replace
Sec. 668.6 as the reference to the requirements for GE programs with a
reference to proposed subpart Q, which would contain the requirements
for GE programs under the proposed regulations.
Section 668.14(a)(26) would be amended to change the description of
GE programs as having a stated objective to prepare students for
gainful employment in a recognized occupation to instead say that a GE
program offered by an institution is required to prepare students for
gainful employment in a recognized occupation. With this revision, this
section would more closely track the relevant statutory language in the
HEA and would be consistent with the proposed requirements for GE
programs in subpart Q.
Section 668.14(a)(26) would be revised to include a reference to
the GE program certifications in proposed Sec. 668.414.
Executive Orders 12866 and 13563
Regulatory Impact Analysis
Under Executive Order 12866, the Secretary must determine whether
this regulatory action is ``significant'' and, therefore, subject to
the requirements of the Executive order and subject to review by the
Office of Management and Budget (OMB). Section 3(f) of Executive Order
12866 defines a ``significant regulatory action'' as an action likely
to result in a rule that may--
(1) Have an annual effect on the economy of $100 million or more,
or adversely affect a sector of the economy, productivity, competition,
jobs, the environment, public health or safety, or State, local, or
tribal governments or communities in a material way (also referred to
as an ``economically significant'' rule);
(2) Create serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles stated in the
Executive order.
This proposed regulatory action is economically significant as it
is estimated to have an annual effect on the economy of more than $100
million. Therefore, this proposed action is subject to review by OMB
under section 3(f) of Executive Order 12866.
We have also reviewed these regulations under Executive Order
13563, which supplements and explicitly reaffirms the principles,
structures, and definitions governing
[[Page 16490]]
regulatory review established in Executive Order 12866. To the extent
permitted by law, Executive Order 13563 requires that an agency--
(1) Propose or adopt regulations only upon a reasoned determination
that their benefits justify their costs (recognizing that some benefits
and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society,
consistent with obtaining regulatory objectives and taking into
account--among other things and to the extent practicable--the costs of
cumulative regulations;
(3) In choosing among alternative regulatory approaches, select
those approaches that maximize net benefits (including potential
economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather
than the behavior or manner of compliance a regulated entity must
adopt; and
(5) Identify and assess available alternatives to direct
regulation, including economic incentives--such as user fees or
marketable permits--to encourage the desired behavior, or provide
information that enables the public to make choices.
Executive Order 13563 also requires an agency ``to use the best
available techniques to quantify anticipated present and future
benefits and costs as accurately as possible.'' The Office of
Information and Regulatory Affairs of OMB has emphasized that these
techniques may include ``identifying changing future compliance costs
that might result from technological innovation or anticipated
behavioral changes.''
We are issuing these regulations only on a reasoned determination
that their benefits justify their costs. In choosing among alternative
regulatory approaches, we selected those approaches that maximize net
benefits. Based on the analysis that follows, the Department believes
that these regulations are consistent with the principles in Executive
Order 13563.
We also have determined that this regulatory action would not
unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
In accordance with both Executive orders, the Department has
assessed the potential costs and benefits of this regulatory action.
The potential costs associated with this regulatory action are those
resulting from implementing statutory requirements and those we have
determined as necessary for administering the Department's programs and
activities.
Under the heading Paperwork Reduction Act of 1995, we identify and
explain burdens specifically associated with information collection
requirements.
A detailed analysis, including our Initial Regulatory Flexibility
Analysis, is found in Appendix A to this document.
Clarity of the Regulations
Executive Order 12866 and the Presidential memorandum ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following:
Are the requirements in the proposed regulations clearly
stated?
Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 668.410 Consequences of GE measures.)
Could the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in
making the proposed regulations easier to understand? If so, how?
What else could we do to make the proposed regulations
easier to understand?
To send any comments that concern how the Department could make
these proposed regulations easier to understand, see the instructions
in the ADDRESSES section.
Paperwork Reduction Act of 1995
As part of its continuing effort to reduce paperwork and respondent
burden, the Department provides the general public and Federal agencies
with an opportunity to comment on proposed and continuing collections
of information in accordance with the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public
understands the Department's collection instructions, respondents can
provide the requested data in the desired format, reporting burden
(time and financial resources) is minimized, collection instruments are
clearly understood, and the Department can properly assess the impact
of collection requirements on respondents. The table at the end of this
section summarizes the estimated burden on small entities, primarily
institutions and applicants, arising from the paperwork associated with
the proposed regulations.
Sections 668.405, 668.406, 668.408, 668.410, 668.411, 668.412,
668.413, 668.414, 668.504, 668.509, 668.510, 668.511, 668.512, 668.513,
and 668.514 contain information collection requirements. Under the PRA,
the Department has submitted a copy of these sections, related forms,
and Information Collections Requests (ICRs) to OMB for its review.
A Federal agency may not conduct or sponsor a collection of
information unless OMB approves the collection under the PRA and the
corresponding information collection instrument displays a currently
valid OMB control number. Notwithstanding any other provision of law,
no person is required to comply with, or is subject to penalty for
failure to comply with, a collection of information if the collection
instrument does not display a currently valid OMB control number.
In the final regulations, we will display the control numbers
assigned by OMB to any information collection requirements proposed in
this NPRM and adopted in the final regulations.
Discussion
Section 668.405 Issuing and Challenging D/E Rates
Requirements: Under the proposed regulations, the Secretary would
create a list of students who completed a GE program during the
applicable cohort period from data reported by the institution. The
list would indicate whether the list is of students who completed the
program in the two-year cohort period or in the four-year cohort
period, and it would also indicate which of the students on the list
would be excluded from the D/E rates calculations under proposed Sec.
668.404(e), for one of the following reasons: A military deferment, a
loan discharge for total and permanent disability, enrollment on at
least a half-time basis, completing a higher undergraduate or graduate
credentialed program, or death.
The institution would then have the opportunity, within 45 days of
receiving the student list from the Secretary, to propose corrections
to the list. After receiving the institution's proposed corrections,
the Secretary would notify the institution whether a proposed
correction is accepted and would use
[[Page 16491]]
any corrected information to create the final list.
Burden Calculation: We have estimated that the 2010-2011 and the
2011-2012 total number of students enrolled in GE programs is projected
to be 6,436,806 (the 2010-2011 total of 3,341,856 GE students plus the
2011-2012 total of 3,094,950 GE students).
We estimate that 89 percent of the total enrollment in GE programs
would be at for-profit institutions, 2 percent would be at private non-
profit institutions, and 9 percent would be at public institutions. As
indicated in connection with the 2011 Final Rules (75 FR 66933), we
estimate that 16 percent of students enrolled in GE programs would
complete their course of study. Therefore, we estimate that there would
be 916,601 students who complete their programs at for-profit
institutions (6,436,806 students times 89 percent of total enrollment
at for-profit institutions times 16 percent, the percentage of students
who complete programs) during the two-year cohort period.
On average, we estimate that it would take for-profit institutional
staff 0.17 hours (10 minutes) per student to review the list to
determine whether a student should be included or excluded under
proposed Sec. 668.404(e) and, if included, whether the student's
identity information requires correction, and then to obtain the
evidence to substantiate any inclusion, exclusion, or correction,
increasing burden by 155,822 hours (916,601 students times .17 hours)
under OMB 1845--NEW1.
We estimate that there would be 20,598 students who complete their
programs at private non-profit institutions (6,436,806 students times 2
percent of total enrollment at private non-profit institutions times 16
percent, the percentage of students who complete programs) during the
two-year cohort period.
On average, we estimate that it would take private non-profit
institutional staff 0.17 hours (10 minutes) per student to review the
list to determine whether a student should be included or excluded
under proposed Sec. 668.404(e) and, if included, whether the student's
identity information requires correction, and then to obtain the
evidence to substantiate any inclusion, exclusion, or correction,
increasing burden by 3,502 hours (20,598 students times .17 hours)
under OMB 1845--NEW1.
We estimate that there would be 92,690 students who complete their
programs at public institutions (6,436,806 students times 9 percent of
the total enrollment at public institutions times 16 percent, the
percentage of students who complete programs) during the two-year
cohort period.
On average, we estimate that it would take public institutional
staff 0.17 hours (10 minutes) per student to review the list to
determine whether a student should be included or excluded under
proposed Sec. 668.404(e) and, if included, whether the student's
identity information requires correction, and then to obtain the
evidence to substantiate any inclusion, exclusion, or correction,
increasing burden by 15,757 hours (92,690 students times .17 hours)
under OMB 1845--NEW1.
Collectively, the total number of students who complete their
programs and who would be included on the lists that would be provided
to institutions is a projected 1,029,889 students, thus increasing
burden by 175,081 hours under OMB Control Number 1845--NEW1.
Requirements: Under the proposed regulations at Sec. 668.405(f),
after finalizing the list of students, the Secretary would obtain from
SSA the mean and median earnings, in aggregate form, of those students
on the list whom SSA has matched to its earnings data for the most
recently completed calendar year for which SSA has validated earnings
information. SSA would provide the Secretary no individual data on
these students; rather, SSA would advise the Secretary of the number of
students it could not, for any reason, match against its records of
earnings. In the D/E rates calculation, the Secretary would exclude
from the loan debts of the students on the list the same number of loan
debts as SSA non-matches, starting with the highest loan debt. The
remaining debts would then be used to calculate the mean and median
earnings for the listed students. The Secretary would calculate draft
D/E rates using the higher of the mean or median annual earnings
reported by SSA under proposed Sec. 668.405(e), notify the institution
of the GE program's draft D/E rates, and provide the institution with
the individual loan data on which the rates were calculated.
Under the proposed regulations at Sec. 668.405(f), the institution
would have the opportunity, within 45 days of the Secretary's notice of
the draft D/E rates, to challenge, under procedures established by the
Secretary, the accuracy of the rates. The institution would be
permitted only to challenge the loan data used to calculate the draft
D/E rates. Because SSA does not disclose data that would enable the
Secretary to assess a challenge to reported earnings, the Secretary
would not consider any challenge to the earnings used to calculate the
draft D/E rates. The Secretary would notify the institution whether a
proposed challenge is accepted and use any corrected information from
the challenge to recalculate the GE program's draft D/E rates.
Burden Calculation: There are 9,986 programs that would be
evaluated under the proposed regulations. Our analysis estimates that
of those 9,986 programs, with respect to the D/E rates measure, 7,604
programs would be passing, 929 programs would be in the zone, and 1,453
programs would fail.
We estimate that the number of students at for-profit institutions
who complete programs that are in the zone would be 52,395 (327,468
students enrolled in zone programs times 16 percent, the percentage of
students who complete programs) and the number who complete failing
programs at for-profit institutions would be 135,118 (844,488 students
enrolled in failing programs times 16 percent, the percentage of
students who complete programs), for a total of 187,513 students
(52,395 students plus 135,118 students).
We estimate that it would take institutional staff an average of
0.25 hours (15 minutes) per student to examine the loan data and
determine whether to select a record for challenge, resulting in a
burden increase of 46,878 hours (187,513 students times .25 hours) in
OMB Control Number 1845--NEW1.
We estimate that the number of students at private non-profit
institutions who complete programs that are in the zone would be 369
(2,308 students enrolled in zone programs times 16 percent, the
percentage of students who complete programs) and the number who
complete failing programs at private non-profit institutions would be
868 (5,423 students enrolled in failing programs times 16 percent, the
percentage of students who complete programs), for a total of 1,237
students (369 students plus 868 students).
We estimate that it would take institutional staff an average of
0.25 hours (15 minutes) per student to examine the loan data and
determine whether to select a record for challenge, resulting in a
burden increase of 309 hours (1,237 students times .25 hours) in OMB
Control Number 1845--NEW1.
We estimate that the number of students at public institutions who
complete programs that are in the zone would be 100 (628 students
enrolled in zone programs times 16 percent, the percentage of students
who complete programs) and the number who complete failing programs at
public
[[Page 16492]]
institutions would be 2,109 (13,178 students enrolled in failing
programs times 16 percent, the percentage of students who complete
programs), for a total of 2,209 students (100 students plus 2,109
students).
We estimate that it would take institutional staff an average of
0.25 hours (15 minutes) per student to examine the loan data and
determine whether to select a record for challenge, resulting in a
burden increase of 552 hours (2,209 students times .25 hours) in OMB
Control Number 1845--NEW1.
Collectively, the burden for institutions to examine loan records
and to determine whether to make a draft D/E rates challenge would
increase burden by 47,739 hours under OMB Control Number 1845--NEW1.
The total increase in burden for Sec. 668.405 would be 222,820
hours under OMB Control Number 1845--NEW1.
Section 668.406 D/E Rates Alternate Earnings Appeals and Showings of
Mitigating Circumstances
Alternate Earnings Appeals
Requirements: The proposed regulations would provide an opportunity
for an institution to submit to the Secretary an alternate earnings
appeal if, using data obtained from SSA, the Secretary determined that
the program was a failing or in the zone under the D/E rates measure.
In submitting an alternate earnings appeal, the institution would seek
to demonstrate that the earnings of students who completed the GE
program in the applicable cohort period are sufficient to pass the D/E
rates measure. The institution would base its appeal on alternate
earnings evidence from either a survey conducted in accordance with
requirements established by NCES or from State-sponsored data systems.
In either instance, the alternate earnings data would be from the same
calendar year for which the Secretary obtained earnings data from SSA
for use in the D/E rates calculations. An appeal could only be filed
once for a GE program's award year's D/E rates.
An institution with a GE program that is failing or in the zone
that wishes to submit alternate earnings appeal information must notify
the Secretary of its intent to do so no earlier than the date that the
Secretary provides the institution with its draft D/E rates and no
later than three business days after the date the Secretary issues the
notice of determination of the program's D/E rates. No later than 60
days after the date the Secretary issues the notice of determination,
the institution must submit its appeal information under procedures
established by the Secretary. The appeal must include all supporting
documentation related to recalculating the D/E rates using alternate
earnings data.
Survey: If an institution wishes to submit an appeal by providing
survey results data, it would include in the universe of students that
would be subject to survey sampling all of the program's former
students who completed the program during the applicable cohort period
and who received title IV, HEA program funds.
The Secretary would publish in the Federal Register an Earnings
Survey Form developed by NCES. The Earnings Survey Form would be a
model field-tested sample survey that may be used by an institution in
accordance with the survey standards, such as a required response rate
or subsequent non-response bias analysis that the institution must meet
to guarantee the validity and reliability of the results. Although use
of the sample survey would not be required and the Earnings Survey Form
would be provided by NCES only as a service to institutions, an
institution that chooses not to use the Earnings Survey Form would be
required to conduct its survey in accordance with the published NCES
standards.
Under the proposed regulations, the institution would certify that
the survey was conducted in accordance with the requirements of the
NCES Earnings Survey Form and submit an examination-level attestation
engagement report prepared by an independent public accountant or
independent governmental auditor, as appropriate, that the survey was
conducted in accordance with the standards in the NCES Earnings Survey
Form. The attestation would be conducted in accordance with the
attestation standards contained in the GAO's Government Auditing
Standards promulgated by the Comptroller General of the United States
and with procedures for attestations contained in guides developed by
and available from the Department's Office of Inspector General.
Burden Calculation: We estimate that for-profit institutions would
have 1,364 gainful employment programs in the zone and that 910
programs would be failing for a total of 2,274 programs. We expect that
most institutions would determine that SSA data reflect accurately the
earnings of students and would therefore not elect to conduct the
survey. Accordingly, we estimate that for-profit institutions would
submit alternate earnings appeals under the survey appeal option for 10
percent of those programs, which would equal 227 appeals annually. We
estimate that conducting the survey, providing the institutional
certification, and obtaining the examination-level attestation
engagement report would total, on average, 100 hours of increased
burden, therefore burden would increase 22,700 hours (227 survey
appeals times 100 hours) under OMB Control Number 1845--NEW2.
We estimate that private-non-profit institutions would have 12
gainful employment programs in the zone and that 34 programs would be
failing for a total of 46 programs. We expect that most institutions
would determine that SSA data reflect accurately the earnings of
students and would therefore not elect to conduct the survey.
Accordingly, we estimate that private non-profit institutions would
submit alternate earnings appeals under the survey appeal option for 10
percent of those programs, which would equal 5 appeals annually. We
estimate that conducting the survey, providing the institutional
certification, and obtaining the examination-level attestation
engagement report would total, on average, 100 hours of increased
burden, therefore burden would increase 500 hours (5 survey appeals
times 100 hours) under OMB Control Number 1845--NEW2.
We estimate that public institutions would have 7 gainful
employment programs in the zone and that 55 programs would be failing
for a total of 62 programs. We expect that most institutions would
determine that SSA data reflect accurately the earnings of students and
would therefore not elect to conduct the survey. Accordingly, we
estimate that public institutions would submit alternate earnings
appeals under the survey appeal option for 10 percent of those
programs, which would equal 6 appeals annually. We estimate that
conducting the survey, providing the institutional certification, and
obtaining the examination-level attestation engagement report would
total, on average, 100 hours of increased burden, therefore burden
would increase 600 hours (6 survey appeals times 100 hours) under OMB
Control Number 1845--NEW2.
Collectively, the projected burden associated with conducting an
alternative earnings survey would increase burden by 23,800 hours under
OMB Control Number 1845--NEW2.
State data systems: An institution that wishes to submit an appeal
by providing State data would include in the list it submits to the
State or States all of the students who were included on the list
[[Page 16493]]
sent by the Secretary to the SSA under proposed Sec. 668.405(d). That
is, the institution must include the program's former students who
received title IV, HEA program funds, who completed the program during
the applicable cohort period, and who were not excluded under proposed
Sec. 668.404(e). The earnings information obtained from the State or
States would have to match 50 percent of the total number of students
included on the institution's list, and the number matched would have
to be 30 or more.
Burden Calculation: We estimate that there would be 1,364 failing
GE programs at for-profit institutions and 910 programs in the zone,
for a total of 2,274 programs. We expect that most institutions would
determine that SSA data reflect accurately the earnings of students who
completed a program and would therefore not elect to submit earnings
data from a State-sponsored system. Accordingly, we estimate that in 10
percent of those cases, institutions would obtain earnings data from a
State-sponsored system, resulting in approximately 227 appeals.
We estimate that, on average each appeal would take 20 hours,
including execution of an agreement for data sharing and privacy
protection under the Family Educational Rights and Privacy Act (20
U.S.C. 1232g) (FERPA) between the institution and the State agency,
preparing the list(s), submitting the list(s) to the appropriate State
agency, reviewing the results, calculating the proposed revised D/E
rates, and submitting those results to the Secretary. Therefore, burden
would increase by 4,540 hours (227 state system appeals times 20 hours
under OMB Control Number 1845--NEW2.
We estimate that there would be 34 failing GE programs at private
non-profit institutions and 12 programs in the zone, for a total of 46
programs. We expect that most institutions would determine that SSA
data reflect accurately the earnings of students who completed a
program and would therefore not elect to submit earnings data from a
State-sponsored system. Accordingly, we estimate that in 10 percent of
those cases, institutions would obtain earnings data from a State-
sponsored system, resulting in 5 appeals.
We estimate that, on average each appeal would take 20 hours,
including execution of an agreement for data sharing and privacy
protection under FERPA between the institution and the State agency,
preparing the list(s), submitting the list(s) to the appropriate State
agency, reviewing the results, calculating the proposed revised D/E
rates, and submitting those results to the Secretary. Therefore burden
would increase by 100 hours (5 state system appeals times 20 hours)
under OMB Control Number 1845--NEW2.
We estimate that there would be 55 failing GE programs at public
institutions and 7 programs in the zone, for a total of 62 programs. We
expect that most institutions would determine that SSA data reflect
accurately the earnings of students who completed a program and would
therefore not elect to submit earnings data from a State-sponsored
system. Accordingly, we estimate that in 10 percent of those cases
institutions would obtain earnings data from a State-sponsored system,
resulting in approximately 6 appeals. We estimate that, on average each
appeal would take 20 hours, including execution of an agreement for
data sharing and privacy protection under FERPA between the institution
and the State agency, preparing the list(s), submitting the list(s) to
the appropriate State agency, reviewing the results, calculating the
proposed revised D/E rates, and submitting those results to the
Secretary. Therefore, burden would increase by 120 hours (6 state
system appeals times 20 hours) under OMB Control Number 1845--NEW2.
Showings of Mitigating Circumstances
Requirements: If a GE program is failing or in the zone under the
D/E rates measure, an institution may avoid or mitigate the
consequences that the Secretary may otherwise impose under Sec.
668.410 by making a successful showing of mitigating circumstances with
respect to the program's most recent final D/E rates issued by the
Secretary. The institution may make a showing of mitigating
circumstances if less than 50 percent of all the individuals who
completed the program during the applicable cohort period, including
those who received and those who did not receive title IV, HEA program
funds, incurred loan debt (as defined in Sec. 668.404(d)) for
enrollment in the program. If such mitigating circumstances are shown,
the program would be deemed to pass the D/E rates measure for that
year. In submitting the showing of mitigating circumstances, the chief
executive officer of the institution would have to affirm the accuracy
of the data used to calculate the borrowing rate. Additionally, the
institution would be required to maintain those data for program review
or audit purposes.
To make a showing of mitigating circumstances for a program with D/
E rates that are failing or in the zone, an institution would calculate
the program's ``borrowing rate'' by:
Step 1. Determining the number of individuals, including
individuals who did not receive title IV, HEA program funds, who
completed the program during the applicable cohort period;
Step 2. Of all of the individuals in Step 1, determining the number
who incurred loan debt for enrollment in the program; and
Step 3. Dividing the number in Step 2 by the number in Step 1.
If the borrowing rate for the program is less than 50 percent, the
program would be deemed to pass the D/E rates measure for that year. In
submitting the showing of mitigating circumstances, the chief executive
officer of the institution would have to affirm the accuracy of the
data used to calculate the borrowing rate. In addition, the institution
would be required to maintain those data for program review or audit
purposes.
Burden Calculation: We estimate that 2 percent of the total 2,274
programs at for-profit institutions (910 zone programs plus 1,364
failing programs), or 45 programs at for-profit institutions, would
make a showing of mitigating circumstances based on a borrowing rate of
less than 50 percent and that generally this would be an automated
process. However, there would be some situations, probably at small
institutions, where the process could be a manual process, and,
therefore, we estimate the average amount of time to collect the data
and make the showing would on average be 5 hours per showing. The
estimated burden would be 225 hours (45 showings times 5 hours per
showing) under OMB Control Number 1845--NEW2.
We estimate that 5 percent of the total 46 programs at private non-
profit institutions (12 zone programs plus 34 failing programs), or 2
programs at private non-profit institutions, would make a showing of
mitigating circumstances based on borrowing rate of less than 50
percent and that generally this would be an automated process. However,
there would be some situations, probably at small institutions, where
the process could be a manual process, and, therefore, we estimate the
average amount of time to collect the data and make the showing would
on average be 5 hours per showing. The estimated burden would be 10
hours (2 showings times 5 hours per showing) under OMB Control Number
1845--NEW2.
We estimate that 50 percent of the total 62 programs at public
institutions (7 zone programs plus 55 failing programs), or 31 programs
at public
[[Page 16494]]
institutions, would make a showing of mitigating circumstances based on
a borrowing rate of less than 50 percent and that generally this would
be an automated process. However, there would be some situations,
probably at small institutions, where the process could be a manual
process, and, therefore, we estimate the average amount of time to
collect the data and make the showing would on average be 5 hours per
showing. The estimated burden would be 155 hours (45 showings times 5
hours per showing) under OMB Control Number 1845--NEW2.
Collectively, burden would increase by 5,150 hours under OMB
Control Number 1845--NEW2.
Requirements: Under the proposed regulations, to pursue an
alternate earnings appeal or to make a showing of mitigating
circumstances, the institution must notify the Secretary of its intent
to submit an appeal or make a showing no later than three business days
after the Secretary issues the final D/E rates. This notification must
be made no earlier than the date the Secretary provides the institution
with draft D/E rates and no later than three business days after the
Secretary issues the final D/E rates.
Burden Calculation: We estimated above that for-profit institutions
would have annually 227 alternate earnings survey appeals, 227 State-
sponsored data system appeals, and 45 showings of mitigating
circumstances for a total of 499 appeals and showings. We estimate that
completing and submitting a notice of intent to submit an appeal or
make a showing increases burden, on average, by 0.25 hours per
submission or 125 hours (499 submissions times 0.25 hours) under OMB
Control 1845--NEW2.
We estimated above that private non-profit institutions would have
annually 5 alternate earnings survey appeals, 5 State-sponsored data
system appeals, and 2 showings of mitigating circumstances for a total
of 12 appeals and showings. We estimate that completing and submitting
a notice of intent to submit an appeal or make a showing increases
burden, on average, by 0.25 hours per submission or 3 hours (12
submissions times 0.25 hours) under OMB Control 1845--NEW2.
We estimated above that public institutions would have annually 6
alternate earnings survey appeals, 6 State-sponsored data system
appeals, and 31 showings of mitigating circumstances for a total of 43
appeals and showings. We estimate that completing and submitting a
notice of intent to submit an appeal or make a showing increases
burden, on average, by 0.25 hours per submission or 11 hours (43
submissions times 0.25 hours) under OMB Control 1845--NEW2.
Collectively, the projected burden associated with completing and
submitting a notice of intent would increase burden by 139 hours under
OMB Control Number 1845--NEW2.
The total increase in burden for Sec. 668.406 would be 29,089
hours under OMB Control Number 1845--NEW2.
Section 668.408 Issuing and Challenging pCDR
The burden associated with issuing and challenging pCDR is located
in Subpart R as indicated below.
Section 668.410 Consequences of GE Measures
Requirements: Under proposed Sec. 668.410(a), if we notify an
institution that a GE program could become ineligible based on a final
GE measure for the next award or fiscal year, within 30 days the
institution would have to provide a written warning directly to each
student enrolled in the program. To the extent practicable, an
institution would have to provide this warning in other languages for
enrolled students for whom English is not their first language.
In the warning, an institution would be required to describe the
options available to the student to continue his or her education in
the event that the program loses its eligibility for title IV, HEA
program funds. Specifically, the warning would inform the student of
whether the institution will allow the student to transfer to another
program at the institution; continue to provide instruction in the
program to allow the student to complete the program; or refund the
tuition, fees, and other required charges paid by, or on behalf of, the
student for attending the program.
Under proposed Sec. 668.410(a)(1), an affected institution must
provide a written warning (a) by hand-delivering it individually, (b)
through a group presentation, or (c) via email.
Burden Calculation: We estimate that the written warnings would be
hand-delivered to 10 percent of the affected students, delivered
through a group presentation to another 10 percent of the affected
students, and delivered through the student's primary email address
used by the institution to the remaining 80 percent.
Based upon 2009-2010 reported data, 2,703,851 students were
enrolled at for-profit institutions. Of that number, we estimate that
327,468 students were enrolled in zone programs and 844,488 students
were enrolled in failing programs at for-profit institutions. Thus, the
total number of warnings would have to be provided to 1,171,956
students enrolled in GE programs at for-profit institutions.
Of the 1,171,956 projected number of warnings to be provided to
enrolled students at for-profit institutions, we estimate that 117,196
students (1,171,956 students times 10 percent) would receive the
warning individually and that it would take on average 0.17 hours (10
minutes) per warning to print the warning, locate the student, and
deliver the warning to each affected student. This would increase
burden by 19,923 hours (117,196 students times 0.17 hours) under OMB
Control Number 1845--NEW1.
Of the 1,171,956 projected warnings to be provided to enrolled
students at for-profit institutions, we estimate that 117,196 students
(1,171,956 students times 10 percent) would receive the warning at a
group presentation and that it would take on average 0.33 hours (20
minutes) per warning to print the warning, conduct the presentation,
and answer questions about the warning to each affected student. This
would increase burden by 38,675 hours (117,196 times 0.33 hours) under
OMB Control Number 1845--NEW1.
Of the 1,171,956 projected warnings to be provided to enrolled
students at for-profit institutions, we estimate that 937,564 students
(1,171,956 students times 80 percent) would receive the warning via
email and that it would take on average 0.017 hours (1 minute) per
warning to send the warning to each affected student. This would
increase burden by 15,939 hours (937,564 students times 0.017 hours)
under OMB Control Number 1845--NEW1.
Based upon 2009-2010 reported data, 57,700 students were enrolled
at private non-profit institutions. Of that number of students, we
estimate that 2,308 students would be enrolled in zone programs and
5,423 students would be enrolled in failing programs at private non-
profit institutions. Thus, the total number of warnings would have to
be provided to 7,731 students (2,308 students plus 5,423 students)
enrolled in GE programs at private non-profit institutions.
Of the 7,731 projected number of warnings to be provided to
enrolled students at non-profit institutions, we estimate that 773
students (7,731 students times 10 percent) would receive the warning
individually and that it would take on average 0.17 hours (10 minutes)
per warning to print the warning, locate the student, and deliver the
warning to each affected student. This would increase burden by 131
hours (773 students times 0.17 hours)
[[Page 16495]]
under OMB Control Number 1845--NEW1.
Of the 7,731 projected warnings to be provided to enrolled students
at non-profit institutions, we estimate that 773 students (7,731
students times 10 percent) would receive the warning at a group
presentation and that it would take on average 0.33 hours (20 minutes)
per warning to print the warning, conduct the presentation, and answer
questions about the warning to each affected student. This would
increase burden by 255 hours (773 times 0.33 hours) under OMB Control
Number 1845--NEW1.
Of the 7,731 projected warnings to be provided to enrolled students
at non-profit institutions, we estimate that 6,185 students (7,731
students times 80 percent) would receive the warning via email and that
it would take on average 0.017 hours (1 minute) per warning to send the
warning to each affected student. This would increase burden by 105
hours (6,185 students times 0.017 hours) under OMB Control Number
1845y--NEW1.
Based upon 2009-2010 reported data, 276,234 students were enrolled
at public institutions. Of that number of students, we estimate that
628 students would be enrolled in zone programs and 13,178 students
would be enrolled in failing programs at public institutions. Thus, the
total number of warnings would have to be provided to 13,806 students
(628 students plus 13,178 students) enrolled in GE programs at public
institutions.
Of the 13,806 projected number of warnings to be provided to
enrolled students at public institutions, we estimate that 1,381
students (13,806 students times 10 percent) would receive the warning
individually and that it would take on average 0.17 hours (10 minutes)
per warning to print the warning, locate the student, and deliver the
warning to each affected student. This would increase burden by 235
hours (13,806 students times 0.17 hours) under OMB Control Number
1845--NEW1.
Of the 13,806 projected warnings to be provided to enrolled
students at public institutions, we estimate that 1,381 students
(13,806 students times 10 percent) would receive the warning at a group
presentation and that it would take on average 0.33 hours (20 minutes)
per warning to print the warning, conduct the presentation, and answer
questions about the warning to each affected student. This would
increase burden by 456 hours (1,381 times 0.33 hours) under OMB Control
Number 1845--NEW1.
Of the 13,806 projected warnings to be provided to enrolled
students at public institutions, we estimate that 11,044 students
(13,806 students times 80 percent) would receive the warning via email
and that it would take on average 0.017 hours (1 minute) per warning to
send the warning to each affected student. This would increase burden
by 188 hours (11,044 students times 0.017 hours) under OMB Control
Number 1845--NEW1.
Collectively, providing the warnings would increase burden by
75,907 hours under OMB Control Number 1845--NEW1.
Students would also be affected by the warnings. On average, given
the alternatives available to institutions, we estimate that it would
take each student 0.17 hours (10 minutes) to read the warning and ask
any questions.
Burden would increase by 199,233 hours (1,171,956 students times
0.17 hours) for the students who would receive warnings from for-profit
institutions under one of the three delivery options, under OMB Control
Number 1845--NEW1.
Burden would increase by 1,314 hours (7,731 students times 0.17
hours) for the students who would receive warnings from private non-
profit institutions under one of the three delivery options, under OMB
Control Number 1845--NEW1.
Burden would increase by 2,347 hours (13,806 students times 0.17
hours) for the students who would receive warnings from public
institutions under one of the three delivery options, under OMB Control
Number 1845--NEW1.
Collectively, students reading the warning would increase burden by
202,894 hours under OMB Control Number 1845--NEW1.
Requirements: Under proposed Sec. 668.410(a)(2), institutions must
provide a written warning about a possible loss of eligibility for
title IV, HEA program funds directly to prospective students prior to
their signing an enrollment agreement, registering, or making any
financial commitment to the institution. To the extent practicable, an
institution would have to provide this warning in other languages for
enrolled students for whom English is not their first language.
Burden Calculation: Most institutions would have to contact, or be
contacted by, a larger number of prospective students to yield
institutions' desired net enrollments. The magnitude of this activity
would be different depending on the type and control of the
institution, as detailed below.
We estimate that the number of prospective students that must
contact or be contacted by for-profit institutions as a result of a
failed program would be 6 times the number of expected enrollments. As
noted above, we estimate that 1,171,956 students (327,468 students
enrolled in zone programs plus 844,488 students enrolled in failing
programs) would be enrolled in failing or zone programs at for-profit
institutions. Therefore, for-profit institutions would be required to
provide 7,031,736 warnings (1,171,956 times 6), with an estimated per
student time of 0.10 hours (6 minutes) to deliver, increasing burden by
703,174 hours (7,031,736 prospective students times 0.10 hours) under
OMB Control Number 1845--NEW1.
We estimate that the number of prospective students that must
contact or be contacted by private non-profit institutions as a result
of a failed program or zone program would be 1.8 times the number of
expected enrollments. As noted above, we estimate that 7,731 students
(2,308 students enrolled in zone programs plus 5,423 students enrolled
in failing programs) would be enrolled in failing programs or zone
programs at private non-profit institutions. Therefore, private non-
profit institutions would be required to provide 13,916 warnings (7,731
students times 1.8), with an estimated per student time of 0.10 hours
(6 minutes) to deliver, increasing burden by 1,392 hours (13,916
prospective students times 0.10 hours) under OMB Control Number 1845--
NEW1.
We estimate that the number of prospective students that must
contact or be contacted by public institutions as a result of a failed
program or zone program would be 1.5 times the number of expected
enrollments. As noted above we estimate that 13,806 students (628
students enrolled in zone programs plus 13,178 students enrolled in
failing programs) would be enrolled in failing programs and zone
programs at public institutions. Therefore, public institutions would
be required to provide 20,709 warnings (13,806 students times 1.5),
with an estimated per student time of 0.10 hours (6 minutes) to
deliver, increasing burden by 2,071 hours (20,709 prospective students
times 0.10 hours) under OMB Control Number 1845--NEW1.
Collectively, burden would increase by 706,637 hours under OMB
Control Number 1845--NEW1.
The prospective students would also be affected by the warnings. On
average, given the alternatives available to institutions, we estimate
that it would take each student 0.08 hours (5 minutes)
[[Page 16496]]
to read the warning and ask any questions.
Burden would increase by 562,539 hours (7,031,736 times 0.08 hours)
for the prospective students who would receive warnings from for-profit
institutions, under OMB Control Number 1845--NEW1.
Burden would increase by 1,113 hours (13,916 times 0.08 hours) for
the prospective students who would receive warnings from private non-
profit institutions, under OMB Control Number 1845--NEW1.
Burden would increase by 1,657 hours (20,709 times 0.08 hours) for
the prospective students who would receive warnings from public
institutions, under OMB Control Number 1845--NEW1.
Collectively, prospective students reading the warning would
increase burden by 565,309 hours under OMB Control Number 1845--NEW1.
Requirements: Under proposed Sec. 668.410(a)(2)(ii)(B), if more
than 30 days have passed from the date the initial warning is provided,
the prospective student must be provided an additional warning and may
not enroll until three days later. We estimate that half of the number
of prospective students would not enroll within 30 days of the initial
warning and therefore would require a second warning.
Burden Calculation: We estimate that 50 percent of students
enrolling in a failing program do so more than 30 days after receiving
the initial prospective student warning. Burden would increase by
281,269 hours for the 3,515,868 (7,031,736 prospective students times
50 percent times .08 hours) students for whom for-profit institutions
would provide subsequent warnings.
Burden would increase by 557 hours for the 6,958 (13,916
prospective students times 50 percent times .08 hours) students for
whom private non-profit institutions would provide subsequent warnings.
Burden would increase by 828 hours for the 10,355 (20,709
prospective students times 50 percent times .08 hours) students for
whom public institutions would provide subsequent warnings.
Collectively, subsequent warning notices would increase burden by
282,654 hours under OMB Control Number 1845--NEW1.
Similarly, it would take the recipients of subsequent warnings time
to read the second warning. Burden would increase by 281,269 hours for
the 3,515,868 (7,031,736 prospective students times 50 percent times
.08 hours) students to read the subsequent warnings from for-profit
institutions, OMB Control Number 1845--NEW1.
Burden would increase by 557 hours for the 6,958 (13,916
prospective students times 50 percent times .08 hours) students to read
the subsequent warnings from private non-profit institutions.
Burden would increase by 828 hours for the 10,355 (20,709
prospective students times 50 percent times .08 hours) students to read
the subsequent warnings from public institutions.
Collectively, burden to students to read the subsequent warnings
would increase by 282,654 hours under OMB Control Number 1845--NEW1.
The total increase in burden for Sec. 668.410 would be 2,116,055
hours under OMB Control Number 1845--NEW1
Section 668.411 Reporting Requirements for GE Programs
Requirements: Under the proposed regulations in Sec. 668.411,
institutions would report, for each student enrolled in a GE program
during an award year who received title IV, HEA program funds for
enrolling in that program: (1) Information needed to identify the
student and the institution the student attended; (2) the name, CIP
code, credential level, and length of the GE program; (3) whether the
GE program is a medical or dental program whose students are required
to complete an internship or residency; (4) the date the student began
initial attendance in the GE program; (5) the student's attendance
dates and attendance status in the GE program during the award year;
and (6) the student's enrollment status as of the first day of the
student's enrollment in the GE program.
Further, if the student completed or withdrew from the GE program
during the award year, the institution would report: (1) The date the
student completed or withdrew; (2) the total amount the student
received from private education loans for attendance in the GE program
that the institution is, or should reasonably be, aware of; (3) the
total amount of institutional debt the student owes any party after
completing or withdrawing from the GE program; and (4) the amount for
tuition and fees and books, supplies, and equipment included in the
student's cost of attendance for each award year in which the student
was enrolled in the GE program, or a higher amount if assessed by the
institution to the student.
No later than July 31 of the year the regulations take effect,
institutions would be required to report this information for the
second through seventh award years prior to that date. For medical and
dental programs that require an internship or residency, institutions
would need to include the eighth award year prior to July 31. For all
subsequent award years, institutions would report not later than
October 1 following the end of the award year, unless the Secretary
establishes a later date in a notice published in the Federal Register.
The proposed regulations would give the Secretary the flexibility to
identify additional reporting items, or to specify a reporting deadline
later than October 1, in a notice published in the Federal Register.
Finally, the proposed regulations would require institutions to
provide the Secretary with an explanation of why any missing
information is not available.
Burden Calculation: There are 2,526 for-profit institutions that
offer one or more GE programs. We estimate that, on average, it would
take 6 hours for each of those institutions to modify or develop manual
or automated systems for reporting under Sec. 668.411. Therefore
burden would increase for these institutions by 15,156 hours (2,526
institutions times 6 hours).
There are 318 private non-profit institutions that offer one or
more GE programs. We estimate that, on average, it would take 6 hours
for each of those institutions to modify or develop manual or automated
systems for reporting under Sec. 668.411. Therefore burden would
increase for these institutions by 1,908 hours (318 institutions times
6 hours).
There are 1,117 public institutions that offer one or more GE
programs. We estimate that, on average, it would take 6 hours for each
of those institutions to modify or develop manual or automated systems
for reporting under Sec. 668.411. Therefore burden would increase for
these institutions by 6,702 hours (1,117 institutions times 6 hours).
Collectively, burden to develop systems for reporting would
increase by 23,766 hours (under OMB Control Number 1845--NEW1.
Requirements: Proposed Sec. 668.411(b) requires that, by no later
than July 31 of the year the regulations take effect, institutions
report this information for the second through seventh award years
prior to that date. For medical and dental programs that require an
internship or residency, institutions would need to include the eighth
award year prior to July 31.
Burden Calculation: According to our analysis of previously
reported GE program enrollment data, there were 2,703,851 students
enrolled in GE
[[Page 16497]]
programs offered by for-profit institutions during the 2009-2010 award
year. Based on budget baseline estimates as provided in the general
background information, we estimate that enrollment in GE programs at
for-profit institutions for 2008-2009 was 2,219,280. Going forward, we
estimate that enrollment in GE programs at for-profit institutions for
2010-2011 was 2,951,154, for 2011-2012 enrollment was 2,669,084, for
2012-2013 enrollment was 2,426,249, and for 2013-2014 enrollment would
be 2,227,230. This results in a total of 15,196,848.
We estimate that on average, the reporting of GE program
information by for-profit institutions would take 0.03 hours (2
minutes) per student as we anticipate that, for most for-profit
institutions, reporting would be an automated process. Therefore, GE
reporting by for-profit institutions would increase burden by 455,905
hours (15,196,848 students times .03 hours) in OMB Control Number
1845--NEW1.
According to our analysis of previously reported GE program
enrollment data, there were 57,700 students enrolled in GE programs
offered by private non-profit institutions during the 2009-2010 award
year. Based on budget baseline estimates as provided in the general
background information, we estimate that enrollment in GE programs at
private non-profit institutions for 2008-2009 was 49,316. Going
forward, we estimate that enrollment in GE programs at private non-
profit institutions for 2010-2011 was 67,509, for 2011-2012 was 73,585,
for 2012-2013 was 70,641, and for 2013-2014 would be 65,697. This
results in a total of 384,448.
We estimate that on average, the reporting of GE program
information by private non-profit institutions would take 0.03 hours (2
minutes) per student as we anticipate that, for most private non-profit
institutions, reporting would be an automated process. Therefore, GE
reporting by private non-profit institutions would increase burden by
11,533 hours (384,448 students times .03 hours) in OMB Control Number
1845--NEW1.
According to our analysis of previously reported GE program
enrollment data, there were 276,234 students enrolled in GE programs
offered by public institutions during the 2009-2010 award year. Based
on budget baseline estimates as provided in the general background
information, we estimate that enrollment in GE programs at public
institutions for 2008-2009 was 236,097. Going forward, we estimate that
enrollment in GE programs at public institutions for 2010-2011 was
323,194, for 2011-2012 was 352,281, for 2012-2013 was 338,190, and for
2013-2014 would be 314,517. This results in a total of 1,840,513.
We estimate that on average, the reporting of GE program
information by public institutions would take 0.03 hours (2 minutes)
per student as we anticipate that, for most public institutions,
reporting would be an automated process. Therefore, GE reporting by
public institutions would increase burden by 55,215 hours (1,840,513
students times .03 hours) in OMB Control Number 1845--NEW1.
Collectively, we estimate that burden upon institutions to meet the
initial reporting requirements under proposed Sec. 668.411 would
increase burden by 522,653 hours in OMB Control Number 1845--NEW1.
The total increase in burden for Sec. 668.411 would be 546,419
hours under OMB Control Number 1845--NEW1.
Section 668.412 Disclosure Requirements for GE Programs
Requirements: The proposed Sec. 668.412 would expand the number of
items that we may require an institution to disclose and increase the
Department's flexibility to tailor the disclosure in a way that would
be most useful to students and minimize burden to institutions.
These disclosure items could include:
(1) The primary occupations (by name and SOC code) that the GE
program prepares students to enter, along with links to the
corresponding occupational profiles on O*Net;
(2) the GE program's completion and withdrawal rates;
(3) the length of the program;
(4) the number of clock or credit hours, as applicable, in the
program;
(5) the total number of students enrolled in the program during the
most recently completed award year;
(6) the loan repayment rate for any one or all of the following
groups: All students who attended the program, students who completed
the program, or students who withdrew from the program;
(7) the total cost of tuition and fees, books, supplies, and
equipment that students would incur for completing the program within
the length of the program;
(8) the placement rate for the program, if the institution is
required to calculate a placement rate by its accrediting agency or
State;
(9) of the individuals enrolled in the program during the most
recently completed award year, the percentage who incurred debt for
enrollment in the program;
(10) as provided by the Secretary, the median loan debt incurred by
any or all of the following groups: Students who completed the program
during the most recently completed award year, students who withdrew
from the program during the most recently completed award year, or both
those groups of students;
(11) the median earnings of any one or all of the following groups:
Students who completed the program during the two-year period used to
calculate the most recent D/E rates for the program, students who were
in withdrawn status at the end of the two-year period used to calculate
the most recent D/E rates for the program, or all of the students who
completed during the two-year period used to calculate the most recent
D/E rates and students who were in withdrawn status at the end of that
two-year period;
(12) the pCDR for the most recently completed fiscal year;
(13) the most recent annual earnings rate as calculated by the
Secretary under proposed Sec. 668.404;
(14) if applicable, whether completion of the program satisfies the
educational prerequisites for professional licensure in the State in
which the program is offered and in any other State included in the
institution's Metropolitan Statistical Area (MSA) (according to the OMB
guidelines);
(15) if applicable, the programmatic accreditation required by the
applicable State, or States, for an individual to obtain employment in
the occupation for which the program prepares a student; and
(16) a link to the College Navigator Web site.
The Secretary would conduct consumer testing to determine how to
make the disclosures as meaningful as possible. After we have the
results of the consumer testing, each year the Secretary would identify
which of these items institutions must include in their disclosures,
along with any other information that must be included, and publish
those requirements in a notice in the Federal Register.
Institutions must update their GE program disclosure information
annually. They must make it available in their promotional materials
and make it available on any Web page containing academic, cost,
financial aid, or admissions information about a GE program.
Burden Calculation: We estimate that of the 37,589 GE programs that
reported enrollments in the past, 12,250 programs would be offered by
for-profit institutions. We estimate that, annually,
[[Page 16498]]
the amount of time it would take to collect the data from institutional
records, from information provided by the Secretary, and from the
institution's accreditor or State, and the amount of time it would take
to ensure that promotional materials either include the disclosure
information or provide a Web address or direct link to the information
would be, on average, 4 hours per program. Additionally, we estimate
that revising the institution's Web pages used to disseminate academic,
cost, financial aid, or admissions information to also contain the
disclosure information about the program would, on average, increase
burden by an additional 1 hour per program. Therefore, burden would
increase by 5 hours per program for a total of 61,250 hours of
increased burden in OMB Control Number 1845--NEW1 (12,250 programs
times 5 hours per program).
We estimate that of the 37,589 GE programs that reported
enrollments in the past, 2,343 programs would be offered by private
non-profit institutions. We estimate that, annually, the amount of time
it would take to collect the data from institutional records, from
information provided by the Secretary, and from the institution's
accreditor or State, and the amount of time it would take to ensure
that promotional materials either include the disclosure information or
provide a Web address or direct link to the information would be, on
average, 4 hours per program. Additionally, we estimate that revising
the institution's Web pages used to disseminate academic, cost,
financial aid, or admissions information about the program to also
contain the disclosure information would, on average, increase burden
by an additional 1 hour per program. Therefore, burden would increase
by 5 hours per program for a total of 11,715 hours of increased burden
in OMB Control Number 1845--NEW1 (2,343 programs times 5 hours per
program).
We estimate that of the 37,589 GE programs that reported
enrollments in the past, 22,996 programs would be offered by public
institutions. We estimate that the amount of time it would take to
collect the data from institutional records, from information provided
by the Secretary, and from the institution's accreditor or State, and
the amount of time it would take to ensure that promotional materials
either include the disclosure information or provide a Web address or
direct link to the information would be, on average, 4 hours per
program. Additionally, we estimate that revising the institution's Web
pages used to disseminate academic, cost, financial aid, or admissions
information about the program to also contain the disclosure
information would, on average, increase burden by an additional 1 hour
per program. Therefore, on average, burden would increase by 5 hours
per program for a total of 114,980 hours of increased burden in OMB
Control Number 1845--NEW1 (22,996 programs times 5 hours per program).
Collectively, we estimate that burden would increase by 187,945
hours in OMB Control Number 1845--NEW1.
Under proposed Sec. 668.412(e), an institution must provide, as a
separate document, a copy of the disclosure information to a
prospective student. Before a prospective student signs an enrollment
agreement, completes registration at, or makes a financial commitment
to the institution, the institution must obtain written confirmation
from the prospective student that he or she received the copy of the
disclosure information.
We estimate that the enrollment in the 12,250 GE programs offered
by for-profit institutions for 2013-2014 is 2,227,230. As noted
earlier, most institutions would have to contact, or be contacted by, a
larger number of prospective students to yield institutions' desired
net enrollments.
We estimate that the number of prospective students that must
contact or be contacted by for-profit institutions as a result of a
failed program would be 6 times the number of expected enrollment. As
noted above, we estimate that 13,363,380 (2,227,230 students for 2013-
2014 times 6) students would be enrolled in GE programs at for-profit
institutions. Therefore, for-profit institutions would be required to
provide 13,363,380 disclosures to prospective students. On average, we
estimate that it would take institutional staff 0.03 hours (2 minutes)
per prospective student to provide a copy of the disclosure
information. We also estimate that, on average, it would take
institutional staff 0.10 hours (6 minutes) to obtain written
confirmation and answer any questions from each prospective student.
Therefore we estimate that the total burden associated with providing
the disclosure information and obtaining written confirmation by for-
profit institutions would be 0.13 hours (8 minutes) per prospective
student. Burden would increase by 1,737,239 hours for for-profit
institutions (13,363,380 prospective students times 0.13 hours) under
OMB Control Number 1845--NEW1.
We estimate that the burden on each prospective student would be
0.08 hours (5 minutes) to read the disclosure information and provide
written confirmation of receipt. Burden would increase by 1,069,070
hours for prospective students at for-profit institutions (13,363,380
prospective students times 0.08 hours) under OMB Control Number 184--
NEW1.
We estimate that the enrollment in the 2,343 GE programs offered by
private non-profit institutions for 2013-2014 is 65,697. As noted
earlier, most institutions would have to contact, or be contacted by, a
larger number of prospective students to yield their enrollments.
We estimate that the number of prospective students that must
contact or be contacted by private non-profit institutions as a result
of a failed program would be 1.8 times the number of expected
enrollment. As noted above we estimate that 65,697 students would be
enrolled in GE programs at private non-profit institutions. Therefore,
private non-profit institutions would be required to provide 118,255
disclosures (65,697 times 1.8) to prospective students. On average, we
estimate that it would take institutional staff 0.03 hours (2 minutes)
per prospective student to provide a copy of the disclosure
information. We also estimate that, on average, it would take
institutional staff 0.10 hours (6 minutes) to obtain written
confirmation and answer any questions from each prospective student.
Therefore we estimate that the total burden associated with providing
the disclosure information and obtaining written confirmation by
private-non-profit institutions would be 0.13 hours (8 minutes) per
prospective student. Burden would increase by 15,373 hours for private
non-profit institutions (118,255 prospective students times 0.13 hours)
under OMB Control Number 1845--NEW1.
We estimate that the burden on each prospective student would be
0.08 hours (5 minutes) to read the disclosure information and provide
written confirmation of receipt. Burden would increase by 9,460 hours
for prospective students at private non-profit institutions (118,255
prospective students times 0.08 hours) under OMB Control Number 184--
NEW1.
We estimate that the enrollment in the 22,996 GE programs offered
by public institutions for 2013-2014 is 314,517. As noted earlier, most
institutions would have to contact, or be contacted by, a larger number
of prospective students to yield their enrollments.
We estimate that the number of prospective students that must
contact or be contacted by public institutions as a result of a failed
program would be 1.5
[[Page 16499]]
times the number of expected enrollment. As noted above we estimate
that 314,517 students would be enrolled in GE programs at public
institutions. Therefore, public institutions would be required to
provide 471,776 disclosures (314,517 times 1.5) to prospective
students. On average, we estimate that it would take institutional
staff 0.03 hours (2 minutes) per prospective student to provide a copy
of the disclosure information. We also estimate that, on average, it
would take institutional staff 0.10 hours (6 minutes) to obtain written
confirmation and answer any questions from each prospective student.
Therefore we estimate that the total burden associated with providing
the disclosure information and obtaining written confirmation by public
institutions would be 0.13 hours (8 minutes) per prospective student.
Burden would increase by 61,331 hours for public institutions (471,776
prospective students times 0.13 hours) under OMB Control Number 1845--
NEW1.
We estimate that the burden on each prospective student would be
0.08 hours (5 minutes) to read the disclosure information and provide
written confirmation of receipt. Burden would increase by 37,742 hours
for prospective students at public institutions (471,776 prospective
students times 0.08 hours) under OMB Control Number 1845--NEW1.
Collectively, burden would increase by 2,930,215 hours under OMB
Control Number 1845--NEW1.
The total increase in burden for Sec. 668.412 would be 3,118,160
hours under OMB Control Number 1845--NEW1.
Section 668.413 Calculating, Issuing, and Challenging Completion Rates,
Withdrawal Rates, Repayment Rates, Median Loan Debt, and Median
Earnings
Requirements: As discussed in connection with proposed Sec.
668.412, an institution would be required to disclose, among other
information, completion and withdrawal rates, repayment rates, and
median loan debt and median earnings for a GE program. Using the
procedures proposed in Sec. 668.413 and based partially on the
information that an institution would report under proposed Sec.
668.411, the Secretary would calculate and make available to the
institution for disclosure: Completion rates, withdrawal rates,
repayment rates, median loan debt, and median earnings for a GE
program.
An institution would have an opportunity to correct the list of
students who completed a GE program and the list of students who
withdrew from a GE program prior to the Secretary sending the lists to
SSA for earnings information.
For the median earnings calculation under proposed Sec.
668.413(b)(8), (b)(9), and (b)(10), after the Secretary provides a list
of the relevant students (those who completed and those who withdrew)
to the institution, the institution may provide evidence showing that a
student should be included on the list or removed from the list as a
result of meeting the definitions of an exclusion under proposed Sec.
668.413(b)(11). The institution may also correct or update a student's
identity information or attendance information on the listing.
Burden Calculation: For the 12,250 for-profit institutions, we
estimate, on average, that it would take institutional staff 2 hours to
review each of the two lists to determine whether a student should be
included or excluded under proposed Sec. 668.404(e) and, if included,
whether the student's identity information or attendance information
requires correction, and then to obtain the evidence to substantiate
any inclusion, exclusion, or correction. Burden would increase by
49,000 hours (12,250 programs times 2 lists times 2 hours) under OMB
Control Number 184--NEW1.
For the 2,343 private non-profit institutions, we estimate, on
average, that it would take institutional staff 2 hours to review each
of the two lists to determine whether a student should be included or
excluded under proposed Sec. 668.404(e) and, if included, whether the
student's identity information or attendance information requires
correction, and then to obtain the evidence to substantiate any
inclusion, exclusion, or correction. Burden would increase by 9,372
hours (2,343 programs times 2 lists times 2 hours) under OMB Control
Number 184--NEW1.
For the 22,996 private public institutions, we estimate, on
average, that it would take institutional staff 2 hours to review each
of the two lists to determine whether a student should be included or
excluded under proposed Sec. 668.404(e) and, if included, whether the
student's identity information or attendance information requires
correction, and then to obtain the evidence to substantiate any
inclusion, exclusion, or correction. Burden would increase by 91,984
hours (22,996 programs times 2 lists times 2 hours) under OMB Control
Number 184--NEW1.
Collectively, burden would increase by 150,356 hours under OMB
Control Number 1845--NEW1.
Under proposed Sec. 668.413(d)(1), an institution may challenge
the Secretary's calculation of the draft completion rates, withdrawal
rates, repayment rates, and median loan debt.
The Secretary would develop the completion rates, withdrawal rates,
repayment rates, and median loan debt lists for each of the estimated
12,250 GE programs at for-profit institutions. For the purpose of
challenging the completion, withdrawal, and repayment rates and median
loan debt we estimate that, on average, it would take institutional
staff 20 hours per program to review all five of the lists (full-time
students for completion rates, part-time students for completion rates,
students who withdrew, students who entered repayment for the repayment
rate, and students included in the median loan debt calculation),
compare the data to institutional records, and determine whether there
are student records that must be included or excluded under Sec.
668.413(b)(8). Therefore, burden would increase by 245,000 hours
(12,250 programs times 20 hours for five lists) under OMB Control
Number 1845--NEW1.
The Secretary would develop the completion rates, withdrawal rates,
repayment rates, and median loan debt lists for each of the estimated
2,343 GE programs at private non-profit institutions. For the purpose
of challenging the completion, withdrawal, and repayment rates and
median loan debt we estimate that, on average, it would take
institutional staff 20 hours per program to review all five of the
lists (full-time students for completion rates, part-time students for
completion rates, students who withdrew, students who entered repayment
for the repayment rate, and students included in the median loan debt
calculation), compare the data to institutional records, and determine
whether there are student records that must be included or excluded
under Sec. 668.413(b)(8). Therefore, burden would increase by 46,860
hours (2,343 programs times 20 hours for five lists) under OMB Control
Number 1845--NEW1.
The Secretary would develop the completion rates, withdrawal rates,
repayment rates, and median loan debt lists for each of the estimated
22,996 GE programs at public institutions. For the purpose of
challenging the completion, withdrawal, and repayment rates and median
loan debt we estimate that, on average, it would take institutional
staff 20 hours per program to review all five of the lists (full-time
students for completion rates, part-time students for completion rates,
students who withdrew, students who entered
[[Page 16500]]
repayment for the repayment rate, and students included in the median
loan debt calculation), compare the data to institutional records, and
determine whether there are student records that must be included or
excluded under Sec. 668.413(b)(8). Therefore, burden would increase by
459,920 hours (22,996 times 20 hours) under OMB Control Number 1845--
NEW1.
Collectively, burden would increase by 751,780 under OMB Control
Number 1845--NEW1.
The total increase in burden for Sec. 668.413 would be 902,136
under OMB Control Number 1845--NEW1
Section 668.414 Certification Requirements for GE Programs
Requirements: Under proposed Sec. 668.414(a) each institution
participating in the title IV, HEA programs would be required to
provide a ``transitional certification'' to supplement its current
program participation agreement (PPA). The transitional certification
would be submitted no later than December 31 of the year in which the
proposed regulations take effect. The transitional certification would
be signed by the institution's most senior executive officer and apply
to all of the institution's GE programs eligible for title IV, HEA
program funds. Under proposed Sec. 668.414(d), the certification would
provide that each GE program meets certain requirements (PPA
certification requirements), specifically that each GE program is:
Approved by a recognized accrediting agency, is included
in the institution's accreditation, or is approved by a recognized
State agency for the approval of public postsecondary vocational
education in lieu of accreditation;
Programmatically accredited, if required by a Federal
governmental entity in the State in which the institution is located or
by any State within the institution's MSA; and
Satisfies licensure or certification requirements in the
State where the institution is located and in all other States within
the institution's MSA so that a student who completes the program and
seeks employment in those States qualifies to take any licensure or
certification exam that is needed for the student to practice or find
employment in the occupation that the program prepares students to
enter.
Under proposed Sec. 668.414(b) an institution would be required to
certify each time it executes a new PPA that any GE programs it offers
meet the PPA certification requirements.
Burden Calculation: We estimate that it would take the 2,526 for-
profit institutions that offer GE programs 0.5 hours to draft a
certification statement and obtain the signature of the institution's
senior executive for submission to the Department. This would increase
burden by 1,263 hours under OMB Control Number 1845--NEW1 (2,526
institutions times 0.5 hours).
We estimate that it would take the 318 private non-profit
institutions that offer GE programs 0.5 hours to draft a certification
statement and obtain the signature of the institution's senior
executive for submission to the Department. This would increase burden
by 159 hours under OMB Control Number 1845--NEW1 (318 institutions
times 0.5 hours).
We estimate that it would take the 1,117 public institutions that
offer GE programs 0.5 hours to draft a certification statement and
obtain the signature of the institution's senior executive for
submission to the Department. This would increase burden by 559 hours
under OMB Control Number 1845--NEW1 (1,117 institutions times 0.5
hours).
The total increase in burden for Sec. 668.414 would be 1,981 hours
under OMB Control Number 1845--NEW1.
Subpart R--Program Cohort Default Rates
Requirements: Under proposed subpart R, the Secretary would
calculate a GE program's cohort default rate using a structure that
would generally mirror the structure of the institutional cohort
default rate (iCDR) regulations in subpart N of part 668 of the
regulations. Thus, depending on the pCDR of a program, an institution
would have the opportunity to submit a challenge, request an
adjustment, or appeal the pCDR. Detailed information about each of
these opportunities and our burden assessments follow. Common to all
requests for challenges, adjustments, or appeals is that institutions
would receive a loan record detail report (LRDR) provided by the
Department.
Burden Calculation: As noted in the preamble discussion in ``Sec.
668.408 Issuing and Challenging pCDR,'' the proposed pCDR regulations
in subpart R would generally mirror the structure of the institutional
cohort default rate (iCDR) regulations in subpart N of part 668 of the
regulations. However, because subpart R is specific to GE programs the
consequences of a GE program's pCDR are different than are for iCDRs
under the iCDR regulations in subpart N. For this reason (pCDR not the
same as iCDR) the burden assessments that follow recognize that
institutions will have the option of submitting challenges, requests
for adjustments, and certain appeals for all of their GE programs in
every year for which we calculate a pCDR, but will in all likelihood
exercise those rights only in those instances in which we calculate a
failing (or close to failing) pCDR rate for the second or third
consecutive year. For purposes of our burden assessments, we consider a
close to failing pCDR to be one that is between 20 percent and 29.9
percent.
Of the 6,815 GE programs that we estimate would be evaluated for
pCDR, we estimate that 943 programs would be failing programs (pCDR of
30 percent or more) and therefore have the highest likelihood of having
pCDR challenges, adjustments, or appeals. In addition, we considered
that half of the 1,840 GE programs with a pCDR rate of 20 percent to
29.9 percent would also make challenges, request adjustments, or submit
appeals, adding another 920 programs to the 943 that failed for a total
of 1,863 programs. We estimate that 92 percent of the 1,863 would be GE
programs at for-profit institutions, 3 percent would be GE programs at
private non-profit institutions, and 5 percent would be GE programs at
public institutions.
We used an analysis of the FY 2011 institutional CDR data to
estimate the percentage of the possible 1,863 programs where a
challenge, adjustment request, or appeal may be submitted. Those
percentages varied by the type of challenge, adjustment, or appeal, as
indicated in each of the regulatory sections that follow and are used
to project the distribution of pCDR challenges, adjustments, and
appeals.
Section 668.504 Draft Cohort Program Default Rates and Your Ability To
Challenge Before Official Program Cohort Default Rates Are Issued
Requirements:
Incorrect Data Challenges: Under proposed 668.504(b), the
institution may challenge the accuracy of the data included on the LRDR
by sending an incorrect data challenge to the relevant data manager(s)
within 45 days of receipt of the LRDR from the Department. The
challenge would include a description of the information in the LRDR
that the institution believes is incorrect along with supporting
documentation.
Burden Calculation: Based upon FY 2011 submissions, there were 353
institutional CDR challenges for incorrect data of a total of 510
challenges, requests for adjustments, and appeals, a 69 percent
submission
[[Page 16501]]
rate. Therefore 69 percent of the projected 1,863 challenges,
adjustments, and appeals, or 1,285, are projected to be challenges for
incorrect data.
Based on data provided earlier, we estimate that out of the likely
1,285 submissions, 1,182 (92 percent) would be from for-profit
institutions. We estimate that the average institutional staff time
needed to review a GE program's LRDR for each of these 1,182 programs
and to gather and prepare incorrect data challenges would be 4 hours
(1.5 hours for list review and 2.5 hours for documentation submission).
This would increase burden by 4,728 hours.
Based on data provided earlier, we estimate that out of the likely
1,285 submissions, 39 (3 percent) would be from private non-profit
institutions. We estimate that the average institutional staff time
needed to review a GE program's LRDR for each of these 39 programs and
to gather and prepare the challenges would be 4 hours (1.5 hours for
list review and 2.5 hours for documentation submission). This would
increase burden by 156 hours.
Based on data provided earlier, we estimate that, out of the likely
1,285 submissions, 64 (5 percent) would be from public institutions. We
estimate that the average institutional staff time needed to review a
GE program's LRDR for each of these 64 programs and to gather and
prepare the challenges would be 4 hours (1.5 hours for list review and
2.5 hours for documentation submission). This would increase burden by
256 hours.
Collectively, this would increase burden by 5,140 hours under OMB
Control Number NEW3.
Participation Rate Index Challenges: Under proposed 668.504(c),
institutions may challenge a program's anticipated loss of title IV,
HEA program eligibility, if the institution's participation rate would
be equal to or less than 0.0625 for any of the three pCDR fiscal years
that where the pCDR is 30 percent or greater. A participation rate
index challenge (and a participation rate index appeal for final rates,
discussed below) could be submitted if the number of students who
received title IV, HEA program loans during a one-year period was only
a small percentage of those who were eligible to borrow.
Burden Calculation: Based upon FY 2011 submissions, there were 2
participation rate index challenges of the total 510 challenges,
requests for adjustments, and appeals 0.4 percent. Therefore we project
that there will be 4 participation rate challenges (0.4 percent of the
projected 943 challenges, adjustments, and appeals). Note that we use
943 and not 1,863 because that number includes 920 programs with rates
between 20.0 percent and 29.9 percent and only programs subject to loss
of eligibility can submit a participation rate index challenge.
Further, based upon GE program distribution percentages, we project
that all 4 participation rate index challenges would be from for-profit
institutions. Therefore, all of the estimated burden below would be to
for-profit institutions and none to private non-profit or public
institutions.
On average, we estimate that gathering and submitting the
information for each participation rate challenge would take 2.0 hours
per submission. Therefore, burden would increase by 8 hours (4
participation rate index challenges times 2 hours per submission) under
OMB Control Number 1845--NEW3.
The total increase in burden for Sec. 668.504 would be 5,148 hours
under OMB Control Number 1845--NEW3.
Section 668.509 Uncorrected Data Adjustments
Requirements: An institution may request an uncorrected data
adjustment for the most recent cohort of borrowers used to calculate a
GE program's most recent official pCDR, if in response to the
institution's incorrect data challenge, a data manager agreed to change
data but the changes were not reflected in the official pCDR.
Burden Calculation: Based upon FY 2011 submissions, there were 116
uncorrected data adjustments of the total 510 challenges, requests for
adjustments, and appeals. Therefore, 23 percent of the projected 943
challenges, adjustments, and appeals (based on possible loss of
eligibility) or 217 are projected to be uncorrected data adjustments.
We estimate that the average institutional staff time needed is 1 hour
for list review and 0.5 hours for documentation submission, for a total
of 1.5 hours.
We estimate that 200 (92 percent) of the 217 projected uncorrected
data adjustments will be from for-profit institutions. Therefore,
burden would increase at for-profit institutions by 300 hours (200
adjustments times 1.5 hours) under OMB Control Number 1845--NEW3.
We estimate that 6 (3 percent) of the 217 projected uncorrected
data adjustments would be from private non-profit institutions.
Therefore, burden would increase at private non-profit institutions by
9 hours (6 adjustments times 1.5 hours) under OMB Control Number 1845--
NEW3.
We estimate that 11 (5 percent) of the 217 projected uncorrected
data adjustments would be from public institutions. Therefore, burden
would increase at public institutions by 17 hours (11 adjustments times
1.5 hours) under OMB Control Number 1845--NEW3.
The total increase in burden for Sec. 668.509 would be 326 hours
under OMB Control Number 1845--NEW3.
Section 668.510 New Data Adjustments
Requirements: An institution could request a new data adjustment
for the most recent cohort of borrowers used to calculate the most
recent official pCDR for a GE program, if a comparison of the LRDR for
the draft rates and the LRDR for the official rates show that data have
been newly included, excluded, or otherwise changed and the errors are
confirmed by the data manager.
Burden Calculation: Based upon FY 2011 submissions, there were 12
new data adjustments of the total 510 challenges, requests for
adjustments, and appeals. Therefore, 2 percent of the projected 943
challenges, adjustments, and appeals (based on possible sanction) or 19
are projected to be new data adjustments. We estimate that the average
institutional staff time needed is 3 hours for list review and 1 hour
for documentation submission, for a total of 4 hours.
We estimate that 17 (92 percent) of the 19 projected new data
adjustments would be from for-profit institutions. Therefore, burden
would increase at for-profit institutions by 68 hours (17 adjustments
times 4 hours) under OMB Control Number 1845--NEW3.
We estimate that 1 (3 percent) of the 19 projected new data
adjustments would be from private non-profit institutions. Therefore,
burden would increase at private non-profit institutions by 4 hours (1
adjustment times 4 hours) under OMB Control Number 1845--NEW3.
We estimate that 1 (5 percent) of the 19 projected new data
adjustments would be from public institutions. Therefore, burden would
increase at public institutions by 4 hours under (1 adjustment times 4
hours) OMB Control Number 1845--NEW3.
The total increase in burden for Sec. 668.510 would be 76 hours
under OMB Control Number 1845--NEW3.
Section 668.511 Erroneous Data Appeals
Requirements: An institution could appeal the calculation of a pCDR
upon which a sanction under Sec. 668.410 would be based. The
institution could do so if
[[Page 16502]]
it disputes the accuracy of data that was previously challenged under
Sec. 668.504(b) (challenge for incorrect data); if a comparison of the
LRDR that we provided for the draft rate and the official rate shows
that data have been newly included, excluded, or otherwise changed; or
if the institution disputes the accuracy of that data. The institution
must send a request for verification of data to the applicable data
manager(s) within 15 days of receipt of the notice of sanction or
provisional certification, and it must include a description of the
incorrect information and all supporting documentation.
Burden Calculation: Based upon the fact that in FY 2011 there were
no institutional CDR erroneous data appeals, we have no basis to
establish erroneous data appeals burden for pCDRs.
Section 668.512 Loan Servicing Appeals
Requirements: An institution could appeal the calculation of a pCDR
on the basis of improper loan servicing or collection only if the
borrower did not make a payment on the loan and the institution can
prove that the servicer failed to perform required loan servicing or
collections activities.
Burden Calculation: Based upon FY 2011 submissions, there were 19
loan servicing appeals of the total 510 challenges, requests for
adjustments, and appeals. Therefore, 4 percent or 38 of the projected
943 challenges, adjustments, and appeals are projected to be loan
servicing appeals. We estimate that, on average, to gather, analyze,
and submit the necessary documentation, each appeal would take 3 hours.
We estimate that 35 (92 percent) of the 38 projected loan servicing
appeals would be from for-profit institutions. Therefore, burden would
increase at for-profit institutions by 105 hours (35 servicing appeals
times 3 hours) under OMB Control Number 1845--NEW3.
We estimate that 1 (3 percent) of the 38 projected loan servicing
appeals would be from private non-profit institutions. Therefore,
burden would increase at private non-profit institutions by 3 hours (1
servicing appeal times 3 hours) under OMB Control Number 1845--NEW3.
We estimate that 2 (5 percent) of the 38 projected loan servicing
appeals would be from public institutions. Therefore, burden would
increase at public institutions by 6 hours (2 servicing appeals times 3
hours) under OMB Control Number 1845--NEW3.
The total increase in burden for Sec. 668.512 would be 114 hours
under OMB Control Number 1845--NEW3.
Section 668.513 Economically Disadvantaged Appeals
Requirements: An institution could appeal a notice of a sanction
under Sec. 668.410 or a notice of a second successive official pCDR
that is equal to or greater than 30 percent if an independent auditor
certifies that the low income rate for the GE program is two-thirds or
more and the program is a degree program with a completion rate of 70
percent or more or, if the program is not a degree program, its
placement rate is 44 percent or more.
Burden Calculation: Based upon FY 2011 submissions, there were 6
economically disadvantaged appeals of the total 510 challenges,
requests for adjustments, and appeals. Therefore 9 (1 percent) of the
projected 943 challenges, adjustments, and appeals are projected to be
economically disadvantaged appeals. We estimate that preparing and
submitting an economically disadvantaged appeal would take an
institution 5 hours for each program.
We estimate that 8 (92 percent) of the 9 projected economically
disadvantaged appeals would be from for-profit institutions. Therefore,
burden would increase at for-profit institutions by 40 hours (8
programs times 5 hours) under OMB Control Number 1845--NEW3.
We do not project any economically disadvantaged appeals from the
private non-profit institutions.
We estimate that 1 (5 percent) of the 9 projected economically
disadvantaged appeals would be from public institutions. Therefore,
burden would increase at public institutions by 5 hours (1 program
times 5 hours) under OMB Control Number 1845--NEW3.
The total increase in burden for Sec. 668.513 would be 45 hours
under OMB Control Number 1845--NEW3.
Section 668.514 Participation Rate Index Appeals
Requirements: An institution could appeal a notice of a program's
loss of title IV, HEA program eligibility under Sec. 668.410 based
upon two pCDRs of 30 percent or greater if the participation rate index
for that GE program is equal to or less than 0.0625 for any of those
three program cohort's fiscal years. A participation rate index appeal
(and a participation rate index challenge for draft rates, discussed
above) could be submitted if the number of students who received title
IV, HEA program loans during a one-year period was only a small
percentage of those who were eligible to borrow.
Burden Calculation: Based upon FY 2011 submissions, there were 2
participation rate index appeals of the total 510 challenges, requests
for adjustments, and appeals. Therefore 0.4 percent of the projected
943 challenges, adjustments, and appeals or 4 are projected to be
participation rate index appeals. On average, we estimate that
gathering and submitting the information for each appeal would take 2
hours per submission.
We estimate that all 4 projected participation rate index appeals
would be from for-profit institutions. Therefore, the total increase in
burden for Sec. 668.514 would be 8 hours (4 participation rate index
appeals times 2 hours) under OMB Control Number 1845--NEW3.
Section 668.515 Average Rates Appeals
Requirements: Before notifying the institution of the official pCDR
for a GE program, we would make an initial determination about whether
the GE program qualifies for an average rates appeal. An average rates
appeal would be allowed if the number of borrowers who entered
repayment in the cohort period is less than 30. In such cases, the
program's pCDR is calculated based on the total of the program's former
students who entered repayment in the cohort year and in the two
previous cohort years.
If we determine that the GE program qualifies, we would notify the
institution of that determination at the same time that we notify the
institution of the official pCDR. A GE program would not be subject to
a sanction under Sec. 668.410 if we determine that the GE program
meets the requirements for an average rates appeal.
If the institution disagrees with our initial determination, that
is, the institution wants the program to be made ineligible or subject
to sanction and not be granted the appeal, the institution would send
the Department notification. No institutions have ever rejected our
provision of this appeal. Therefore, there is no burden associated with
average rates appeals.
Section 668.516 Thirty-or-fewer Borrowers Appeals
Requirements: An institution could appeal a notice of sanction of a
GE program under Sec. 668.410 if the total number of borrowers who
comprise the pCDR cohorts for the three years at issue was 30 or fewer
borrowers.
Before notifying the institution of the official pCDR, we would
make an initial determination about whether the GE program qualifies
for a thirty-or-fewer
[[Page 16503]]
borrowers appeal. A GE program would not become subject to a sanction
under Sec. 668.410 if we determine that the GE program meets the
requirements for a thirty-or-fewer borrowers appeal. If we determine
that the program qualifies, we would notify the institution of that
determination at the same time that we notify the institution of the
official pCDR. If the institution disagrees with our initial
determination, that is, the institution wants the program to be subject
to sanction and not granted the appeal, the institution would send the
Department notification. No institution has ever rejected our provision
of this appeal; therefore there is no burden associated with this
appeal.
Consistent with the discussion above, the following chart describes
the sections of the proposed regulations involving information
collections, the information being collected, and the collections that
the Department will submit to OMB for approval and public comment under
the PRA, and the estimated costs associated with the information
collections. The monetized net costs of the increased burden on
institutions and borrowers, using wage data developed using BLS data,
available at www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $209,859,517, as
shown in the chart below. This cost was based on an hourly rate of
$36.55 for institutions and $16.30 for students.
Collection of Information
----------------------------------------------------------------------------------------------------------------
OMB control No. and
Regulatory section Information collection estimated burden [change in Estimated
burden] costs
----------------------------------------------------------------------------------------------------------------
668.405--Issuing and challenging D/E The proposed regulations OMB 1845--NEW1 This would $8,144,071
rates. would provide institutions be a new collection. We
an opportunity to correct estimate that the burden
information about students would increase by 222,820
who have completed their hours.
programs and who are on
the list provided by the
Department to the
institution.
668.406--D/E rates alternate earnings The proposed regulations OMB 1845--NEW2 This would 1,063,203
appeals and showings of mitigating would allow institutions be a new collection. We
circumstances. to make an alternate estimate that the burden
earnings appeal to the D/E would increase by 29,089
rates, or a showing of hours.
mitigating circumstances,
when the final D/E rates
are failing or in the zone
under the D/E rates
measure.
668.410--Consequences of GE measures..... The proposed regulations OMB 1845--NEW1 This would 56,061,956
would provide that for any be a new collection. We
year the Secretary estimate that the burden
notifies the institution for institutions would
that a GE program could increase by 1,065,198
become ineligible based on hours. We estimate that
a final GE measure for the the burden would increase
next award or fiscal year for individuals by
the institution must 1,050,857 hours.
provide written warnings.
668.411--Reporting requirement for GE The proposed regulations OMB 1845--NEW1 This would 19,971,614
programs. would require information be a new collection. We
the institution must estimate that the burden
report to the Department would increase by 546,419
about students in GE hours.
programs.
668.412--Disclosure requirement for GE The proposed regulations OMB 1845--NEW1 This would 91,364,240
programs. would require certain be a new collection. We
information about GE estimate that the burden
programs to be disclosed for institutions would
by institutions to increase by 2,001,898
enrolled and prospective hours. We estimate that
students. the burden for individuals
would increase by
1,116,272 hours.
668.413--Calculating, issuing, and The proposed regulations OMB 1845--NEW1 This would 32,973,071
challenging completion rates, withdrawal allow institutions to be a new collection. We
rates, repayment rates, median loan challenge the rates and estimate that the burden
debt, and median earnings. median earnings calculated would increase by 902,136
by the Department. hours.
668.414--Certification and application The proposed regulations OMB 1845--NEW1 This would 72,406
requirement for GE programs. would add a requirement be a new collection. We
that institutions certify estimate that the burden
that GE programs it offers would increase by 1,981
are approved or accredited hours.
by an accrediting agency
or the State.
668.504--Draft program cohort default The proposed regulations OMB 1845--NEW3 This would 188,159
rates and challenges. would allow an institution be a new collection. We
to challenge the draft estimate that the burden
program cohort default would increase by 5,148
rates. hours.
668.509--Uncorrected data adjustments.... The proposed regulations OMB 1845--NEW3 This would 11,915
would allow institutions be a new collection. We
to request a data estimate that the burden
adjustment when agreed- would increase by 326
upon data changes were not hours.
reflected in the official
program cohort default
rate.
668.510--New data adjustments............ The proposed regulations OMB 1845--NEW3 This would 2,778
would allow an institution be a new collection. We
to request a new data estimate that the burden
adjustment if a comparison would increase by 76 hours.
of the draft and final
LRDR show that data have
been included, excluded,
or otherwise changed and
the errors are confirmed
by the data manager.
668.511--Erroneous data appeals.......... The proposed regulations OMB 1845--NEW3 This would 0
allow an institution to be a new collection. We
appeal the program cohort estimate that the burden
default rate calculation would increase by 0 hours.
when the accuracy was
previously challenged on
the basis of incorrect
data.
[[Page 16504]]
668.512--Loan Servicing Appeals.......... The proposed regulations OMB 1845--NEW3 This would 4,167
allow an institution to be a new collection. We
appeal on the basis of estimate that the burden
improper loan servicing or would increase by 114
collection where the hours.
institution can prove that
the servicer failed to
perform required servicing
or collections activities.
668.513--Economically disadvantaged The proposed regulations OMB 1845--NEW3 This would 1,645
appeals. would allow institutions be a new collection. We
to appeal a notice of estimate that the burden
ineligibility based upon would increase by 45 hours.
an auditors certification
that the GE program has a
low income rate, a high
completion rate, and a
placement rate of 44
percent or more.
668.514--Participation rate index appeals The proposed regulations OMB 1845--NEW3 We estimate 292
would allow institutions that the burden would
to appeal loss of increase by 8 hours.
eligibility if the
participation rate was
less than 0.0625 percent
for any of the three most
recent program cohort
default rates.
----------------------------------------------------------------------------------------------------------------
The total burden hours and change in burden hours associated with
each OMB Control number affected by the proposed regulations follows:
------------------------------------------------------------------------
Total proposed Proposed change
Control No. burden hours in burden hours
------------------------------------------------------------------------
1845--NEW1........................ 6,907,571 + 6,907,571
1845--NEW2........................ 29,089 29,0890
1845--NEW3........................ 5,717 5,717
-------------------------------------
Total......................... 6,942,377 = 6,942,377
------------------------------------------------------------------------
Intergovernmental Review
These programs are not subject to Executive Order 12372 and the
regulations in 34 CFR part 79.
Assessment of Educational Impact
In accordance with section 411 of the General Education Provisions
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on
whether the proposed regulations would require transmission of
information that any other agency or authority of the United States
gathers or makes available.
Accessible Format: Individuals with disabilities can obtain this
document in an accessible format (e.g., braille, large print,
audiotape, or compact disc) on request to the person listed under FOR
FURTHER INFORMATION CONTACT.
Electronic Access to This Document: The official version of this
document is the document published in the Federal Register. Free
Internet access to the official edition of the Federal Register and the
Code of Federal Regulations is available via the Federal Digital System
at: www.gpo.gov/fdsys. At this site you can view this document, as well
as all other documents of this Department published in the Federal
Register, in text or Adobe Portable Document Format (PDF). To use PDF
you must have Adobe Acrobat Reader, which is available free at the
site.
You may also access documents of the Department published in the
Federal Register by using the article search feature at:
www.federalregister.gov. Specifically, through the advanced search
feature at this site, you can limit your search to documents published
by the Department.
(Catalog of Federal Domestic Assistance Number: 84.007 FSEOG; 84.032
Federal Family Education Loan Program; 84.033 Federal Work-Study
Program; 84.038 Federal Perkins Loan Program; 84.063 Federal Pell
Grant Program; 84.069A LEAP; 84.268 William D. Ford Federal Direct
Loan Program; 84.376 ACG/Smart; 84.379 TEACH Grant Program; 84.069B
Grants for Access and Persistence Program)
List of Subjects
34 CFR Part 600
Colleges and universities, Foreign relations, Grant programs--
education, Loan programs--education, Reporting and recordkeeping
requirements, Selective Service System, Student aid, Vocational
education.
34 CFR Part 668
Administrative practice and procedure, Aliens, Colleges and
universities, Consumer protection, Grant programs--education, Loan
programs--education, Reporting and recordkeeping requirements,
Selective Service System, Student aid, Vocational education.
Dated: March 14, 2014.
Arne Duncan,
Secretary of Education.
For the reasons discussed in the preamble, the Secretary of
Education proposes to amend parts 600 and 668 of title 34 of the Code
of Federal Regulations as follows:
PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT
OF 1965, AS AMENDED
0
1. The authority citation for part 600 continues to read as follows:
Authority: 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b,
and 1099c, unless otherwise noted.
0
2. Section 600.2 is amended by:
0
A. Revising the definition of ``Recognized occupation.''
0
B. Revising the authority citation at the end of the section.
The revisions read as follows:
Sec. 600.2 Definitions.
* * * * *
Recognized occupation: An occupation that is--
(1) Identified by a Standard Occupational Classification (SOC) code
established by the Office of Management and Budget (OMB) or an
Occupational Information Network O*Net-SOC code established by the
Department of Labor, which is available at
[[Page 16505]]
www.onetonline.org or its successor site; or
(2) Determined by the Secretary in consultation with the Secretary
of Labor to be a recognized occupation.
* * * * *
(Authority: 20 U.S.C. 1001, 1002, 1071, et seq., 1078-2, 1088, 1091,
1094, 1099b, 1099c, 1141; 26 U.S.C. 501(c))
0
3. Section 600.10 is amended by:
0
A. Revising paragraphs (c)(1), (c)(2), and (c)(3)(i).
0
B. Revising the authority citation at the end of the section.
The revisions read as follows:
Sec. 600.10 Date, extent, duration, and consequence of eligibility.
* * * * *
(c) Educational programs. (1) An eligible institution that seeks to
establish the eligibility of an educational program must--
(i) For a gainful employment program under 34 CFR part 668, subpart
Q of this chapter, update its application under Sec. 600.21, and meet
any time restrictions that prohibit the institution from establishing
or reestablishing the eligibility of the program as may be required
under 34 CFR 668.414;
(ii) Pursuant to a requirement regarding additional programs
included in the institution's program participation agreement under 34
CFR 668.14, obtain the Secretary's approval; and
(iii) For a direct assessment program under 34 CFR 668.10, and for
a comprehensive transition and postsecondary program under 34 CFR
668.232, obtain the Secretary's approval.
(2) Except as provided under Sec. 600.20(c), an eligible
institution does not have to obtain the Secretary's approval to
establish the eligibility of any program that is not described in
paragraph (c)(1)(i), (ii), or (iii) of this section.
(3) * * *
(i) Fails to obtain the Secretary's approval for an educational
program identified in paragraph (c)(1) of this section; or
* * * * *
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, and 1141)
0
4. Section 600.20 is amended by:
0
A. Revising the introductory text of paragraph (c)(1).
0
B. Revising the authority citation at the end of the section.
The revisions read as follows:
Sec. 600.20 Notice and application procedures for establishing,
reestablishing, maintaining, or expanding institutional eligibility and
certification.
* * * * *
(c) * * *
(1) Add an educational program or a location at which the
institution offers or will offer 50 percent or more of an educational
program if one of the following conditions applies, otherwise it must
report to the Secretary under Sec. 600.21:
* * * * *
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, and 1099c)
0
5. Section 600.21 is amended by:
0
A. Adding paragraph (a)(11).
0
B. Revising the authority citation at the end of the section.
The revisions read as follows:
Sec. 600.21 Updating application information.
(a) * * *
(11) For any gainful employment program under 34 CFR part 668,
subpart Q, for which the institution--
(i) Establishes the eligibility or reestablishes the eligibility of
a new program;
(ii) Discontinues the program's eligibility under 34 CFR 668.410;
(iii) Ceases to provide the program for at least 12 consecutive
months;
(iv) Loses program eligibility under Sec. 600.40; or
(v) Changes the program's name, CIP code, as defined in 34 CFR
668.402, or credential level.
* * * * *
(Authority: 20 U.S.C. 1094, 1099b)
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
0
6. The authority citation for part 668 continues to read as follows:
Authority: 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b,
and 1099c, unless otherwise noted.
Sec. 668.6 [Removed and Reserved]
0
7. Remove and reserve section 668.6.
Sec. 668.7 [Removed and Reserved]
0
8. Remove and reserve section 668.7.
Sec. 668.8 [Amended]
0
9. Section 668.8 is amended by:
0
A. In paragraph (d)(2)(iii), removing the reference to ``Sec. 668.6''
and adding, in its place, a reference to ``subpart Q of this part''.
0
B. In paragraph (d)(3)(iii), removing the reference to ``Sec. 668.6''
and adding, in its place, a reference to ``subpart Q of this part''.
0
10. Section 668.14 is amended by revising paragraph (a)(26) to read as
follows:
Sec. 668.14 Program participation agreement.
(a) * * *
(26) If an educational program offered by the institution is
required to prepare a student for gainful employment in a recognized
occupation, the institution must--
(i) Demonstrate a reasonable relationship between the length of the
program and entry level requirements for the recognized occupation for
which the program prepares the student. The Secretary considers the
relationship to be reasonable if the number of clock hours provided in
the program does not exceed by more than 50 percent the minimum number
of clock hours required for training in the recognized occupation for
which the program prepares the student, as established by the State in
which the institution is located, if the State has established such a
requirement, or as established by any Federal agency;
(ii) Establish the need for the training for the student to obtain
employment in the recognized occupation for which the program prepares
the student; and
(iii) Provide for that program the certification required in Sec.
668.414.
* * * * *
0
11. Add subpart Q to read as follows:
Subpart Q--Gainful Employment (GE) Programs
Sec.
668.401 Scope and purpose.
668.402 Definitions.
668.403 Gainful employment framework.
668.404 Calculating D/E rates.
668.405 Issuing and challenging D/E rates.
668.406 D/E rates alternate earnings appeals and showings of
mitigating circumstances.
668.407 Calculating pCDR.
668.408 Issuing and challenging pCDR.
668.409 Final determination of GE measures.
668.410 Consequences of GE measures.
668.411 Reporting requirements for GE programs.
668.412 Disclosure requirements for GE programs.
668.413 Calculating, issuing, and challenging completion rates,
withdrawal rates, repayment rates, median loan debt, and median
earnings.
668.414 Certification requirements for GE programs.
668.415 Severability.
Subpart Q--Gainful Employment (GE) Programs
Sec. 668.401 Scope and purpose.
This subpart applies to an educational program offered by an
eligible institution that prepares students for gainful employment in a
recognized occupation, and establishes the rules and procedures under
which--
(a) The Secretary determines that the program is eligible for title
IV, HEA program funds;
(b) An institution reports information about the program to the
Secretary; and
[[Page 16506]]
(c) An institution discloses information about the program to
students and prospective students.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1231a)
Sec. 668.402 Definitions.
The following definitions apply to this subpart.
Annual earnings rate. The percentage of a GE program's annual loan
payment compared to the annual earnings of the students who completed
the program, as calculated under Sec. 668.404.
Classification of instructional program (CIP) code. A taxonomy of
instructional program classifications and descriptions developed by the
U.S. Department of Education's National Center for Education Statistics
(NCES). The CIP code for a program is six digits. For the purpose of
this subpart, programs that are ``substantially similar'' to one
another share the first four digits of a CIP code.
Cohort period. The two-year cohort period or the four-year cohort
period during which those students who complete a program are
identified in order to assess their loan debt and earnings for the
purpose of calculating the D/E rates for the program for an award year.
Credential level. The level of the academic credential awarded by
an institution to students who would complete the program. For purposes
of this subpart, the undergraduate credential levels are: Less than one
year undergraduate certificate or diploma, one year or longer but less
than two years undergraduate certificate or diploma, two years or
longer undergraduate certificate or diploma, associate degree, and
bachelor's degree; and the graduate credential levels are post-
baccalaureate certificate (including postgraduate certificates),
graduate certificate, master's degree, doctoral degree, and first-
professional degree (e.g., MD, DDS, JD).
Debt-to-earnings rates (D/E rates). The discretionary income rate
and annual earnings rate as calculated under Sec. 668.404.
Discretionary income rate. The percentage of a GE program's annual
loan payment compared to the discretionary income of the students who
completed the program, as calculated under Sec. 668.404.
Four-year cohort period. The cohort period covering four
consecutive award years that are--
(1) The third, fourth, fifth, and sixth award years prior to the
award year for which the D/E rates are calculated pursuant to Sec.
668.404. For example, if D/E rates are calculated for award year 2014-
2015, the four-year cohort period is award years 2008-2009, 2009-2010,
2010-2011, and 2011-2012; or
(2) For a program whose students are required to complete a medical
or dental internship or residency, the sixth, seventh, eighth, and
ninth award years prior to the award year for which the D/E rates are
calculated. For example, if D/E rates are calculated for award year
2014-2015, the four-year cohort period is award years 2005-2006, 2006-
2007, 2007-2008, and 2008-2009. For this purpose, a required medical or
dental internship or residency is a supervised training program that--
(i) Requires the student to hold a degree as a doctor of medicine
or osteopathy, or a doctor of dental science;
(ii) Leads to a degree or certificate awarded by an institution of
higher education, a hospital, or a health care facility that offers
post-graduate training; and
(iii) Must be completed before the student may be licensed by a
State and board certified for professional practice or service.
Gainful employment program (GE program). An educational program
offered by an institution under Sec. 668.8(c)(3) or (d) and identified
by a combination of the institution's six-digit Office of Postsecondary
Education ID (OPEID) number, the program's six-digit CIP code as
assigned by the institution or determined by the Secretary, and the
program's credential level.
GE measures. The debt-to-earnings rates and the program cohort
default rate as described in this subpart.
Length of the program. The amount of time in weeks, months, or
years that is specified in the institution's catalog, marketing
materials, or other official publications for a student to complete the
requirements needed to obtain the degree or credential offered by the
program.
Metropolitan Statistical Area (MSA). The Metropolitan Statistical
Area as published by the U.S. Office of Management and Budget and
available at www.census.gov/population/metro/ or its successor site.
Poverty Guideline. The Poverty Guideline for a single person in the
continental United States as published by the U.S. Department of Health
and Human Services and available at http://aspe.hhs.gov/poverty or its
successor site.
Program cohort default rate (pCDR). The percentage of a GE
program's students who defaulted on their loans, as calculated under
Sec. 668.407.
Prospective student. An individual who has contacted an eligible
institution for the purpose of requesting information about enrolling
in a GE program or who has been contacted directly by the institution
or indirectly through advertising about enrolling in a GE program.
Student. An individual who received title IV, HEA program funds for
enrolling in the applicable GE program.
Title IV loan. A loan authorized under the Federal Perkins Loan
Program (Perkins Loan), the Federal Family Education Loan Program (FFEL
Loan), or the William D. Ford Direct Loan Program (Direct Loan).
Two-year cohort period. The cohort period covering two consecutive
award years that are--
(1) The third and fourth award years prior to the award year for
which the D/E rates are calculated pursuant to Sec. 668.404. For
example, if D/E rates are calculated for award year 2014-2015, the two-
year cohort period is award years 2010-2011 and 2011-2012; or
(2) For a program whose students are required to complete a medical
or dental internship or residency, the sixth and seventh award years
prior to the award year for which the D/E rates are calculated. For
example, if D/E rates are calculated for award year 2014-2015, the two-
year cohort period is award years 2007-2008 and 2008-2009. For this
purpose, a required medical or dental internship or residency is a
supervised training program that--
(i) Requires the student to hold a degree as a doctor of medicine
or osteopathy, or as a doctor of dental science;
(ii) Leads to a degree or certificate awarded by an institution of
higher education, a hospital, or a health care facility that offers
post-graduate training; and
(iii) Must be completed before the student may be licensed by a
State and board certified for professional practice or service.
(Authority: 20 U.S.C. 1001, 1002, 1088)
Sec. 668.403 Gainful employment program framework.
(a) General. A program provides training that prepares students for
gainful employment in a recognized occupation if the program--
(1) Satisfies the applicable certification requirements in Sec.
668.414; and
(2) Is not an ineligible program under the provisions for the D/E
rates measure described in paragraph (b)(1) or the provisions for the
pCDR measure described in paragraph (b)(2) of this section.
(b) GE measures. (1) Debt-to-earnings rates (D/E rates). For each
award year
[[Page 16507]]
and for each eligible GE program offered by an institution, the
Secretary calculates two D/E rates, the discretionary income rate and
the annual earnings rate, using the procedures in Sec. Sec. 668.404
through 668.406.
(2) Program cohort default rate (pCDR). For each fiscal year and
for each eligible GE program offered by an institution, the Secretary
calculates the pCDR using the procedures in Sec. 668.407.
(c) Outcomes of GE measures. (1) D/E rates. (i) A GE program is
``passing'' the D/E rates measure if--
(A) Its discretionary income rate is less than or equal to 20
percent; or
(B) Its annual earnings rate is less than or equal to eight
percent.
(ii) A GE program is ``failing'' the D/E rates measure if--
(A) Its discretionary income rate is greater than 30 percent or the
income for the denominator (discretionary earnings) of the rate is
negative or zero; and
(B) Its annual earnings rate is greater than 12 percent or the
denominator (annual earnings) of the rate is zero.
(iii) A GE program is ``in the zone'' for the purpose of the D/E
rates measure if it is not a passing GE program and its--
(A) Discretionary income rate is greater than 20 percent but less
than or equal to 30 percent; or
(B) Annual earnings rate is greater than eight percent but less
than or equal to 12 percent.
(iv) For the purpose of the D/E rates measure, a GE program becomes
ineligible if the program--
(A) Is failing the D/E rates measure in two out of any three
consecutive award years for which the program's D/E rates are
calculated; or
(B) Is failing the D/E rates measure or is in the zone for four
consecutive award years for which the program's D/E rates are
calculated.
(2) pCDR. (i) A GE program is ``passing'' the pCDR measure if its
pCDR for the most recent fiscal year is less than 30 percent.
(ii) A GE program is ``failing'' the pCDR measure if its pCDR for
the most recent fiscal year is 30 percent or greater.
(iii) For the purpose of the pCDR measure, a GE program is
ineligible if it fails the pCDR measure for three consecutive fiscal
years.
(Authority: 20 U.S.C. 1001, 1002, 1088)
Sec. 668.404 Calculating D/E rates.
(a) General. Except as provided in paragraph (f) of this section,
for each award year, the Secretary calculates D/E rates for a GE
program as follows:
(1) Discretionary income rate = annual loan payment/(the higher of
the mean or median annual earnings--(1.5 x Poverty Guideline)).
(2) Annual earnings rate = annual loan payment/the higher of the
mean or median annual earnings.
(b) Annual loan payment. The Secretary calculates the annual loan
payment for a GE program by--
(1) Determining the median loan debt of the students who completed
the program during the applicable cohort period, based on the lesser
of--
(i) The loan debt incurred by each student as determined under
paragraph (d) of this section; and
(ii) The total amount of tuition and fees the institution assessed
each student for enrollment in the program and the total amount for
books, equipment, and supplies, as reported in Sec. 668.411(a)(1)(iv)
and (v).
(2) Amortizing the median loan debt--
(i)(A) Over a 10-year repayment period for a program that leads to
an undergraduate certificate, a post-baccalaureate certificate, an
associate degree, or a graduate certificate;
(B) Over a 15-year repayment period for a program that leads to a
bachelor's degree or a master's degree; or
(C) Over a 20-year repayment period for a program that leads to a
doctoral or first-professional degree;
(ii) Using an annual interest rate that is the average of the
statutorily determined annual interest rate on Federal Direct
Unsubsidized Loans made during the six-year period prior to the end of
the applicable cohort period, which includes the applicable cohort
period, where--
(A) For a program that leads to an undergraduate certificate, an
associate degree, a bachelor's degree, or a post-baccalaureate
certificate, the average interest rate is based on the rate of a
Federal Direct Unsubsidized Loan made to an undergraduate student; and
(B) For a program that leads to a master's degree, a graduate
certificate, or a doctoral or first-professional degree, the average
interest rate is based on the rate of a Federal Direct Unsubsidized
Loan made to a graduate student.
Note to paragraph (b)(2)(ii): For example, if the two-year
cohort period is award years 2010-2011 and 2011-2012, the interest
rate would be the average of the interest rates for the years from
2006-2007 through 2011-2012.
(c) Annual earnings. (1) The Secretary obtains from the Social
Security Administration (SSA) or another Federal agency, under Sec.
668.405, the most currently available mean and median annual earnings
of the students who completed the GE program during the applicable
cohort period and who are not excluded under paragraph (e) of this
section; and
(2) The Secretary uses the higher of the mean or median annual
earnings to calculate the D/E rates.
(d) Loan debt. In determining the loan debt for a student, the
Secretary--
(1) Includes--
(i) The amount of title IV loans that the student borrowed for
enrollment in the GE program (Federal PLUS Loans made to parents of
dependent students, Direct PLUS Loans made to parents of dependent
students, and Direct Unsubsidized Loans that were converted from TEACH
Grants are not included);
(ii) Any private education loans as defined in 34 CFR 601.2,
including private education loans made by the institution, that the
student borrowed for enrollment in the program and that were required
to be reported by the institution under Sec. 668.411; and
(iii) Any credit extended by or on behalf of the institution for
enrollment in the GE program that the student is obligated to repay
after the student's completion of the program, regardless of who holds
the debt, even if that obligation is excluded from the definition of
``private education loan,'' in 34 CFR 601.2;
(2) Attributes all of the loan debt incurred by the student for
enrollment in any--
(i) Undergraduate GE program at the institution to the highest
credentialed undergraduate GE program subsequently completed by the
student at the institution as of the end of the most recently completed
award year prior to the calculation of the draft D/E rates under this
section;
(ii) Graduate GE program at the institution to the highest
credentialed graduate GE program completed by the student at the
institution as of the end of the most recently completed award year
prior to the calculation of the draft D/E rates under this section; and
(iii) Post-baccalaureate GE program, graduate certificate GE
program, or graduate degree GE program at the institution to the
highest credentialed graduate degree GE program completed by the
student at the institution as of the end of the most recently completed
award year prior to the calculation of the draft D/E rates under this
section; and
(3) Excludes any loan debt incurred by the student for enrollment
in programs at other institutions. However, the Secretary may include
loan debt incurred by the student for enrolling in GE programs at other
institutions if the institution and the other institutions are
[[Page 16508]]
under common ownership or control, as determined by the Secretary in
accordance with 34 CFR 600.31.
(e) Exclusions. The Secretary excludes a student from both the
numerator and the denominator of the D/E rates calculation if the
Secretary determines that--
(1) One or more of the student's title IV loans were in a military-
related deferment status at any time during the calendar year for which
the Secretary obtains earnings information under paragraph (c) of this
section;
(2) One or more of the student's title IV loans are under
consideration by the Secretary, or have been approved, for a discharge
on the basis of the student's total and permanent disability, under 34
CFR 674.61, 682.402, or 685.212;
(3) The student was enrolled in any other eligible program at the
institution or at another institution during the calendar year for
which the Secretary obtains earnings information under paragraph (c) of
this section;
(4) For undergraduate GE programs, the student completed a higher
credentialed undergraduate program at the institution subsequent to
completing the program as of the end of the most recently completed
award year prior to the calculation of the draft D/E rates under this
section;
(5) For post-baccalaureate, graduate certificate, or graduate
degree GE programs, the student completed a higher credentialed
graduate GE program at the institution subsequent to completing the
program as of the end of the most recently completed award year prior
to the calculation of the draft D/E rates under this section; or
(6) The student died.
(f) D/E rates not calculated. The Secretary does not calculate D/E
rates for a GE program if--
(1) After applying the exclusions in paragraph (e) of this section,
fewer than 30 students completed the program during the two-year cohort
period and fewer than 30 students completed the program during the
four-year cohort period; or
(2) SSA does not provide the mean and median earnings for the
program as provided under paragraph (c) of this section.
(g) Transition period. (1) If a GE program would be failing or in
the zone based on its draft D/E rates calculated in accordance with
paragraphs (a) through (f) of this section for any of the first four
award years for which the Secretary calculates D/E rates, the Secretary
calculates transitional draft D/E rates for the program by using--
(i) The median loan debt of the students who completed the program
during the most recently completed award year prior to the calculation
of the D/E rates; and
(ii) The earnings used to calculate the draft D/E rates under
paragraph (c) of this section.
(2) For the award years listed in paragraph (g)(1), the Secretary
determines the final D/E rates for the program by using the lower of
the draft D/E rates calculated under paragraphs (a) through (f) of this
section or the transitional draft D/E rates calculated under this
paragraph (g).
(3) The institution may challenge the transitional draft D/E rates
under the procedures in Sec. 668.405 and may appeal the transitional
final D/E rates under Sec. 668.406.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.405 Issuing and challenging D/E rates.
(a) Overview. For each award year, the Secretary determines the D/E
rates for a GE program at an institution by--
(1) Creating a list of the students who completed the program
during the applicable cohort period and providing the list to the
institution, as provided in paragraph (b) of this section;
(2) Allowing the institution to correct the information about the
students on the list, as provided in paragraph (c) of this section;
(3) Obtaining from SSA or another Federal agency the mean and
median annual earnings of the students on the list, as provided in
paragraph (d) of this section;
(4) Calculating draft D/E rates and providing them to the
institution, as provided in paragraph (e) of this section;
(5) Allowing the institution to challenge the median loan debt used
to calculate the draft D/E rates, as provided in paragraph (f) of this
section;
(6) Calculating final D/E rates and providing them to the
institution, as provided in paragraph (g) of this section; and
(7) Allowing the institution to appeal the final D/E rates as
provided in Sec. 668.406.
(b) Creating the list of students. (1) The Secretary selects the
students to be included on the list by--
(i) Identifying the students who completed the program during the
applicable cohort period from the data provided by the institution
under Sec. 668.411; and
(ii) Indicating which students would be removed from the list under
Sec. 668.404(e) and the specific reason for the exclusion.
(2) The Secretary provides the list to the institution and states
which cohort period was used to select the students.
(c) Institutional corrections to the list. (1) The Secretary
presumes that the list of students and the identity information for
those students are correct unless, as set forth in procedures
established by the Secretary, the institution provides evidence to the
contrary satisfactory to the Secretary. The institution bears the
burden of proof that the list is incorrect.
(2) No later than 45 days after the date the Secretary provides the
list to the institution, the institution may--
(i) Provide evidence showing that a student should be included on
or removed from the list pursuant to Sec. 668.404(e); or
(ii) Correct or update a student's identity information and the
student's program attendance information.
(3) After the 45-day period expires, the institution may no longer
seek to correct the list of students or revise the identity or program
information of those students included on this list that the Secretary
uses to determine the D/E rates for the program.
(4) The Secretary considers the evidence provided by the
institution and either accepts the correction or notifies the
institution of the reasons for not accepting the correction. If the
Secretary accepts the correction, the Secretary uses the corrected
information to create the final list. The Secretary notifies the
institution which students are included on the final list and the
applicable cohort period used to create the final list.
(d) Obtaining earnings data. The Secretary submits the final list
to SSA or another Federal agency. For purposes of this section, SSA
returns to the Secretary--
(1) The mean and median annual earnings of the students on the list
whom SSA has matched to SSA earnings data, in aggregate and not in
individual form; and
(2) The number, but not the identities, of students on the list
that SSA could not match.
(e) Calculating draft D/E rates. (1) The Secretary uses the higher
of the mean or median annual earnings provided by SSA to calculate
draft D/E rates for a GE program, as provided in Sec. 668.404.
(2) If SSA reports that it was unable to match one or more of the
students on the final list, the Secretary does not include in the
calculation of the median loan debt the same number of students with
the highest loan debts as the number of students whose earnings SSA did
not match. For example, if SSA is unable to match three students out of
100 students, the Secretary orders by
[[Page 16509]]
amount the debts of the 100 listed students and excludes from the D/E
rates calculation the three largest loan debts.
(3)(i) The Secretary notifies the institution of the draft D/E
rates for the program and provides the mean and median annual earnings
obtained from SSA and the individual student loan information used to
calculate the rates, including the loan debt that was used in the
calculation for each student.
(ii) The draft D/E rates and the data described in paragraphs (b)
through (e) of this section are not considered public information.
(f) Institutional challenges to draft D/E rates. (1) The Secretary
presumes that the loan debt information used to calculate the median
loan debt for the program under Sec. 668.404 is correct unless the
institution provides evidence, as provided in paragraph (f)(2) of this
section, that the information is incorrect. The institution bears the
burden of proof to show that the loan debt information is incorrect,
and to show how it should be corrected.
(2) No later than 45 days after the Secretary notifies an
institution of the draft D/E rates for a program, the institution may
challenge the accuracy of the loan debt information that the Secretary
used to calculate the median loan debt for the program under Sec.
668.404 by submitting evidence, in a format and through a process
determined by the Secretary, that demonstrates that the median loan
debt calculated by the Secretary is incorrect.
(3) In a challenge under this section, the Secretary does not
consider--
(i) Any objection to the mean or median annual earnings that SSA
provided to the Secretary;
(ii) More than one challenge to the student-specific data on which
draft D/E rates are based for a program for an award year; or
(iii) Any challenge that is not timely submitted.
(4) The Secretary considers the evidence provided by an institution
challenging the median loan debt and notifies the institution of
whether the challenge is accepted or the reasons why the challenge is
not accepted.
(5) If the information from an accepted challenge changes the
median loan debt of the program, the Secretary recalculates the
program's draft D/E rates.
(6) Except as provided under Sec. 668.406, an institution that
does not timely challenge the draft D/E rates for a program waives any
objection to those rates.
(g) Final D/E rates. (1) After expiration of the 45-day period and
subject to resolution of any challenge under paragraph (f) of this
section, a program's draft D/E rates constitute its final D/E rates.
(2) The Secretary informs the institution of the final D/E rates
for each of its GE programs by issuing the notice of determination
described in Sec. 668.409(a).
(3) After the Secretary provides the notice of determination to the
institution, the Secretary may publish the final D/E rates for the
program.
(h) Conditions for corrections and challenges. An institution must
ensure that any material that it submits to make any correction or
challenge under this section is complete, timely, accurate, and in a
format acceptable to the Secretary and consistent with any instructions
provided to the institution with the notice of its draft D/E rates and
the notice of determination.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.406 D/E rates alternate earnings appeals and showings of
mitigating circumstances.
(a) Alternate earnings appeals. (1) General. If a GE program is
failing or in the zone under the D/E rates measure, an institution may
file an alternate earnings appeal to request recalculation of the
program's most recent final D/E rates issued by the Secretary.
(2) Basis for appeals. (i) The institution may use alternate
earnings from an institutional survey conducted under paragraph (a)(3),
or from a State-sponsored data system under paragraph (a)(4) of this
section, to recalculate the program's final D/E rates and file an
appeal if--
(A) For a program that was failing the D/E rates measure, the
program's recalculated rates are passing or in the zone; or
(B) For a program that was in the zone for the purpose of the D/E
rates measure, the program's recalculated rates are passing.
(ii) In recalculating the final D/E rates, the institution must--
(A) For the numerator, use the annual loan payment used in the
calculation of the final D/E rates; and
(B) For the denominator, use the higher of the mean or median
alternate earnings. The alternate earnings must be from the same
calendar year for which the Secretary obtained earnings data from SSA
to calculate the final D/E rates under Sec. 668.404.
(3) Survey requirements for appeals. An institution must--
(i) In accordance with the standards included on an Earning Survey
Form developed by NCES, conduct a survey, to obtain annual earnings
information, of all the students (as defined in Sec. 668.402) who
completed the program during the same cohort period that the Secretary
used to calculate the final D/E rates under Sec. 668.404. The
Secretary will publish in the Federal Register the Earnings Survey Form
that will include a field-tested sample survey as well as the survey
standards. An institution is not required to use the Earnings Survey
Form but must adhere to the survey standards included in the form in
conducting a survey under this section.
(ii) Submit to the Secretary as part of its appeal--
(A) A certification signed by the institution's chief executive
officer attesting that the survey was conducted in accordance with the
survey standards in the Earnings Survey Form, and that the mean or
median earnings used to recalculate the D/E rates was accurately
determined from the survey results;
(B) An examination-level attestation engagement report prepared by
an independent public accountant or independent governmental auditor,
as appropriate, that the survey was conducted in accordance with the
requirements set forth in the NCES Earnings Survey Form. The
attestation must be conducted in accordance with the attestation
standards contained in the Government Accountability Office's
Government Auditing Standards promulgated by the Comptroller General of
the United States (available at www.gao.gov/yellowbook/overview or its
successor site), and with procedures for attestations contained in
guides developed by and available from the Department of Education's
Office of Inspector General; and
(C) Supporting documentation requested by the Secretary.
(4) State-sponsored data system requirements for appeals. An
institution must--
(i) Obtain annual earnings data from one or more State-sponsored
data systems by submitting a list of the students (as defined in Sec.
668.402) who completed the GE program in the applicable cohort period
to the administrator of each State-sponsored data system used for the
appeal;
(ii) Demonstrate that annual earnings data were obtained for more
than 50 percent of the students on the list, and that the number of
students for whom earnings data were obtained is 30 or more; and
(iii) Submit as part of its appeal--
(A) A certification signed by the institution's chief executive
officer attesting that it accurately used the State-provided earnings
data to recalculate the D/E rates; and
[[Page 16510]]
(B) Supporting documentation requested by the Secretary.
(5) Appeals procedure. (i) For any appeal under this section, in
accordance with procedures established by the Secretary and provided in
the notice of draft D/E rates under Sec. 668.405 and the notice of
determination under Sec. 668.409, the institution must--
(A) Notify the Secretary of its intent to submit an appeal no
earlier than the date that the Secretary provides the institution the
draft D/E rates under Sec. 668.405(f), but no later than three
business days after the date the Secretary issues the notice of
determination under Sec. 668.409(a) informing the institution of the
final D/E rates under Sec. 668.405(g); and
(B) Submit the recalculated D/E rates, all certifications, and
specified supporting documentation related to the appeal no later than
60 days after the date the Secretary issues the notice of
determination.
(ii) An institution that timely submits an appeal that meets the
requirements of this section is not subject to any consequences under
Sec. 668.410 based on the D/E rates under appeal while the Secretary
considers the appeal. If the Secretary has published final D/E rates
under Sec. 668.405(g), the program's final D/E rates will be annotated
to indicate that they are under appeal.
(iii) An institution that does not submit a timely appeal waives
its right to appeal the GE program's failing or zone D/E rates for the
relevant award year.
(6) Appeals determinations. (i) Appeals denied. If the Secretary
denies an appeal, the Secretary notifies the institution of the reasons
for denying the appeal, and the program's final D/E rates previously
issued in the notice of determination under Sec. 668.409(a) remain the
final D/E rates for the program for the award year.
(ii) Appeals granted. If the Secretary grants the appeal, the
Secretary notifies the institution that the appeal is granted, that the
recalculated D/E rates are the new final D/E rates for the program for
the award year, and of any consequences of the recalculated rates under
Sec. 668.410. If the Secretary has published final D/E rates under
Sec. 668.405(g), the program's published rates will be updated to
reflect the new final D/E rates.
(b) Showings of mitigating circumstances. (1) General. If a GE
program is failing or in the zone under the D/E rates measure, an
institution may avoid or mitigate the consequences that the Secretary
may otherwise impose under Sec. 668.410 by making a successful showing
of mitigating circumstances with respect to the program's most recent
final D/E rates issued by the Secretary.
(2) Basis for showing. The institution may make a showing of
mitigating circumstances if less than 50 percent of all the individuals
who completed the program during the applicable cohort period,
including those who received and those who did not receive title IV,
HEA program funds, incurred loan debt (as defined in Sec. 668.404(d))
for enrollment in the program, referred to in this section as the
``borrowing rate.''
(3) Showing requirements. An institution must--
(i) Calculate the borrowing rate by--
(A) Identifying the individuals (including those who received title
IV, HEA program funds and those who did not) who were enrolled in the
program on at least a half-time basis at any time during the applicable
cohort period, and who completed the program during the applicable
cohort period;
(B) Determining which of the individuals identified under paragraph
(b)(3)(i)(A) of this section incurred loan debt (as defined in Sec.
668.404(d)) for enrollment in the program; and
(C) Dividing the number of individuals who incurred loan debt under
paragraph (b)(3)(i)(B) by the total number of individuals identified
under paragraph (b)(3)(i)(A) of this section; and
(ii) Submit as part of its showing--
(A) A certification signed by its chief executive officer
identifying the borrowing rate and attesting to its accuracy; and
(B) Supporting documentation requested by the Secretary.
(4) Showing procedure. (i) For any showing under this section, in
accordance with procedures established by the Secretary and provided in
the notice of draft D/E rates under Sec. 668.405 and the notice of
determination under Sec. 668.409, the institution must--
(A) Notify the Secretary of its intent to make a showing of
mitigating circumstances no earlier than the date that the Secretary
provides the institution the draft D/E rates under Sec. 668.405(f),
but no later than three business days after the date the Secretary
issues the notice of determination under Sec. 668.409(a) informing the
institution of the final D/E rates under Sec. 668.405(g); and
(B) Submit its borrowing rate calculations, all certifications, and
specified supporting documentation related to the showing no later than
60 days after the date the Secretary issues the notice of
determination.
(ii) An institution that timely submits a showing of mitigating
circumstances that meets the requirements of this section is not
subject to any consequences under Sec. 668.410 based on the D/E rates
for the year in which the showing is made while the Secretary considers
the showing. If the Secretary has published final D/E rates under Sec.
668.405(g), the program's final D/E rates will be annotated to indicate
that the institution has filed to make a showing of mitigating
circumstances.
(iii) An institution that does not make a timely showing of
mitigating circumstances for a GE program waives its right to make such
a showing for the relevant award year in any subsequent determination
with respect to the GE program.
(5) Showing determinations. (i) Showings denied. If the Secretary
denies a showing of mitigating circumstances, the Secretary notifies
the institution of the reasons for denying the showing, and the
program's final D/E rates previously issued in the notice of
determination under Sec. 668.409(a) remain the final D/E rates for the
program for the award year.
(ii) Showings accepted. If the Secretary accepts the showing of
mitigating circumstances, the Secretary notifies the institution that
the showing is accepted and that the program is deemed to have passed
the D/E rates measure for the relevant year. If the Secretary has
published final D/E rates under Sec. 668.405(g), the program's
published rates will remain the same, but will be annotated to indicate
that the program's showing of mitigating circumstances was accepted.
(c) Conditions for alternate earnings appeals and showings of
mitigating circumstances. An institution must ensure that any material
that it submits to make any appeal or showing of mitigating
circumstances under this section is complete, timely, accurate, and in
a format acceptable to the Secretary and consistent with any
instructions provided to the institution with the notice of
determination.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.407 Calculating pCDR.
For each fiscal year, the Secretary calculates the pCDR of a GE
program using the same methodology the Secretary uses to calculate the
institutional cohort default rate (institutional CDR) pursuant to
section 435(a) of the HEA. The methodology and the procedures used for
calculating pCDR are set forth in subpart R of this part.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
[[Page 16511]]
Sec. 668.408 Issuing and challenging pCDR.
For each fiscal year, the Secretary notifies the institution of the
pCDR for the program determined under subpart R of this part. The
institution may challenge or appeal the pCDR under the procedures for
challenges and appeals set forth in subpart R of this part.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.409 Final determination of GE measures.
(a) Notice of determination. For each award year for the D/E rates
measure and fiscal year for the pCDR measure for which the Secretary
calculates a GE measure for a GE program, the Secretary issues a notice
of determination informing the institution of the following:
(1) For the D/E rates--
(i) The final rates for the program as determined under Sec.
668.404, Sec. 668.405, and, if applicable, Sec. 668.406;
(ii) The final determination by the Secretary of whether the
program is passing, failing, in the zone, or ineligible, as described
in Sec. 668.403, and the consequences of that determination;
(iii) Whether the program could become ineligible based on its
final D/E rates for the next award year for which D/E rates are
calculated for the program;
(iv) Whether the institution is required to provide the student
warning under Sec. 668.410(a); and
(v) If the program's final D/E rates are failing or in the zone,
instructions on how it may make an alternate earnings appeal or make a
showing of mitigating circumstances pursuant to Sec. 668.406.
(2) For the pCDR--
(i) The official pCDR for the program as determined under Sec.
668.505 or, if changed by adjustment or appeal, as determined under
Sec. 668.508(e)(3);
(ii) The instructions for requesting adjustment to or appealing an
official pCDR as provided in Sec. 668.508;
(iii) The final determination of the Secretary of whether the
program is passing, failing, or ineligible, as described in Sec.
668.403, and the consequences of that determination; and
(iv) Whether the institution is required to provide the student
warning under Sec. 668.410(a).
(b) Effective date of Secretary's final determination. The
Secretary's determination as to a GE measure is effective on the date
that is specified in the notice of determination. The determination,
including, as applicable, the determination with respect to an appeal
or showing of mitigating circumstances under Sec. 668.406, constitutes
the final decision of the Secretary with respect to that GE measure and
the Secretary provides for no further appeal of that determination.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.410 Consequences of GE measures.
(a) Student warning. For any year for which the Secretary notifies
an institution that a GE program could become ineligible based on a
final GE measure for the next award or fiscal year, the institution--
(1) Must provide a written warning directly to each student
enrolled in the program no later than 30 days after the date of the
Secretary's notice of determination under Sec. 668.409. ``Directly''
means by hand-delivering the warning to the student individually or as
part of a group presentation, or sending the warning to the primary
email address used by the institution for communicating with the
student about the program. The Secretary will conduct consumer testing
to determine how to make the student warning as meaningful as possible.
Unless otherwise specified by the Secretary in a notice published in
the Federal Register, the warning must--
(i) State that: ``You may not be able to use federal student grants
or loans to pay for this institution's program next year because the
program is currently failing standards established by the U.S.
Department of Education. The Department set these standards to help
ensure that you are able to find gainful employment in a recognized
occupation, and are not burdened by loan debt you may not be able to
repay. A program that doesn't meet these standards may lose the ability
to provide students with access to federal financial aid to pay for the
program.
(ii) Describe the options available to the student to continue his
or her education at the institution, or at another institution, in the
event that the program loses its eligibility for title IV, HEA program
funds; and
(iii) Indicate whether or not the institution will--
(A) Allow the student to transfer to another program at the
institution;
(B) Continue to provide instruction in the program to allow the
student to complete the program; and
(C) Refund the tuition, fees, and other required charges paid to
the institution by, or on behalf of, the student for enrollment in the
program.
(2) For each prospective student--
(i) At the time the prospective student first contacts, or is
contacted by, the institution about the GE program, must provide a
written warning directly to the student. The Secretary will conduct
consumer testing to determine how to make the student warning as
meaningful as possible. Unless otherwise specified by the Secretary in
a notice published in the Federal Register, the warning must state:
``You may not be able to use federal student grants or loans to pay for
this institution's program in the future because the program is
currently failing standards established by the U.S. Department of
Education. The Department set these standards to help ensure that
students are able to find gainful employment in a recognized occupation
and are not burdened by debt they struggle to repay. A program in
violation of these standards may lose the ability to provide students
with access to federal financial aid to pay for the program.''; and
(ii) May not enroll, register, or enter into a financial commitment
with the prospective student in the program earlier than--
(A) Three business days after the warning was first provided to the
prospective student; or
(B) If more than 30 days have passed from the date the warning is
first provided to the prospective student, three business days after
the institution provides another warning as required by paragraph
(a)(2)(i) of this section.
(3) To the extent practicable, must provide alternatives to
English-language warnings for those students and prospective students
for whom English is not their first language.
(b) Restrictions. (1) Ineligible program. Except as provided in
Sec. 668.26(d), an institution may not disburse title IV, HEA program
funds to students enrolled in an ineligible program.
(2) Period of ineligibility. An institution may not seek to
reestablish the eligibility of a failing or zone program that it
discontinued voluntarily, reestablish the eligibility of an ineligible
program, or establish the eligibility of a program that is
substantially similar to the discontinued or ineligible program, until
three years following the date on which the program became ineligible
or the institution discontinued the failing or zone program.
(3) Restoring eligibility. An ineligible program, or a failing or
zone program that an institution voluntarily discontinues, remains
ineligible until the institution establishes the eligibility of that
program under Sec. 668.414(b). For this purpose, an institution
voluntarily discontinues a failing or zone program on the date the
institution provides written notice to the Secretary that it
relinquishes title IV, HEA program eligibility of that program.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, 1099c)
[[Page 16512]]
Sec. 668.411 Reporting requirements for GE programs.
(a) In accordance with procedures established by the Secretary, an
institution must report--
(1) For each student enrolled in a GE program during an award year
who received title IV, HEA program funds for enrolling in that
program--
(i) Information needed to identify the student and the institution;
(ii) The name, CIP code, credential level, and length of the
program;
(iii) Whether the program is a medical or dental program whose
students are required to complete an internship or residency, as
described in Sec. 668.402;
(iv) The date the student initially enrolled in the program;
(v) The student's attendance dates and attendance status (e.g.,
enrolled, withdrawn, or completed) in the program during the award
year; and
(vi) The student's enrollment status (e.g., full-time, three-
quarter time, half-time, less than half-time) as of the first day of
the student's enrollment in the program;
(2) If the student completed or withdrew from the GE program during
the award year--
(i) The date the student completed or withdrew from the program;
(ii) The total amount the student received from private education
loans, as described in Sec. 668.404(d)(1)(ii), for enrollment in the
program that the institution is, or should reasonably be, aware of;
(iii) The total amount of institutional debt, as described in Sec.
668.404(d)(1)(iii), the student owes any party after completing or
withdrawing from the program;
(iv) The total amount of tuition and fees assessed the student for
the student's entire enrollment in the program; and
(v) The total amount of the allowances for books, supplies, and
equipment included in the student's title IV Cost of Attendance (COA)
for each award year in which the student was enrolled in the program,
or a higher amount if assessed the student by the institution; and
(3) As described in a notice published by the Secretary in the
Federal Register, any other information the Secretary requires the
institution to report.
(b)(1) An institution must report the information required under
paragraph (a) of this section no later than--
(i) July 31, following the date these regulations take effect, for
the second through seventh award years prior to that date;
(ii) For medical and dental programs that require an internship or
residency, July 31, following the date these regulations take effect
for the second through eighth award years prior to that date; and
(iii) For subsequent award years, October 1, following the end of
the award year, unless the Secretary establishes a later date in a
notice published in the Federal Register.
(2) For any award year, if an institution fails to provide all or
some of the information in paragraph (a) of this section to the extent
required, the institution must provide to the Secretary an explanation,
acceptable to the Secretary, of why the institution failed to comply
with any of the reporting requirements.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1231a)
Sec. 668.412 Disclosure requirements for GE programs.
(a) Disclosure template. An institution must use the disclosure
template provided by the Secretary to disclose information about each
of its GE programs to enrolled and prospective students. The Secretary
will conduct consumer testing to determine how to make the disclosure
template as meaningful as possible. The Secretary identifies the
information that must be included in the template in a notice published
in the Federal Register. That information may include, but is not
limited to:
(1) The primary occupations (by name and SOC code) that the program
prepares students to enter, along with links to occupational profiles
on O*NET (www.onetonline.org) or its successor site.
(2) As calculated by the Secretary under Sec. 668.413, the
program's completion rates for full-time and less-than-full-time
students and the program's withdrawal rates.
(3) The length of the program in calendar time (i.e., weeks,
months, years).
(4) The number of clock or credit hours, as applicable, in the
program.
(5) The total number of individuals enrolled in the program during
the most recently completed award year.
(6) As calculated by the Secretary under Sec. 668.413, the loan
repayment rate for any one or all of the following groups of students
who entered repayment on title IV loans during the two-year cohort
period:
(i) All students who enrolled in the program.
(ii) Students who completed the program.
(iii) Students who withdrew from the program.
(7) The total cost of tuition and fees, and the total cost of
books, supplies, and equipment that a student would incur for
completing the program within the length of the program.
(8) The placement rate for the program, if the institution is
required by its accrediting agency or State to calculate a placement
rate.
(9) Of the individuals enrolled in the program during the most
recently completed award year, the percentage who incurred debt for
enrollment in the program.
(10) As calculated by the Secretary, the median loan debt as
determined under Sec. 668.404(d) of any one or all of the following
groups of title IV, HEA loan program borrowers:
(i) Those students who completed the program during the most
recently completed award year.
(ii) Those students who withdrew from the program during the most
recently completed award year.
(iii) All of the students described in paragraphs (a)(10)(i) and
(ii) of this section.
(11) As provided by the Secretary, the median earnings of any one
or all of the following groups of students:
(i) Students who completed the program during the applicable cohort
period used by the Secretary to calculate the most recent D/E rates for
the program under this subpart.
(ii) Students who were in withdrawn status at the end of the
applicable cohort period used by the Secretary to calculate the most
recent D/E rates for the program under this subpart.
(iii) All of the students described in paragraph (a)(11)(i) and
(ii) of this section.
(12) As calculated by the Secretary under Sec. 668.407, the most
recent pCDR.
(13) As calculated by the Secretary under Sec. 668.404, the most
recent annual earnings rate.
(14) With respect to the occupations for which the program prepares
students as disclosed by the institution under paragraph (a)(1) of this
section, whether completion of the program satisfies any applicable
educational prerequisites for professional licensure in the State in
which the institution is located and in any other State included in the
institution's Metropolitan Statistical Area.
(15) If applicable, whether the program holds the programmatic
accreditation necessary for an individual to obtain employment in the
occupation for which the program prepares the student.
(16) A link to the U.S. Department of Education's College Navigator
Web site, or its successor site.
(b) Disclosure updates. (1) In accordance with procedures and
[[Page 16513]]
timelines established by the Secretary, the institution must update at
least annually the information contained in the disclosure template
with the most recent data available for each of its GE programs.
(2) Within 30 days of receiving notice from the Secretary that the
institution must provide a student warning for the program under Sec.
668.410(a), the institution must update the disclosure template to
include the warning for both enrolled and prospective students.
(c) Web link to disclosure information. (1) On any Web page
containing academic, cost, financial aid, or admissions information
about a GE program, the institution must provide a prominent, readily
accessible, clear, conspicuous, and direct link to the disclosure
template for that program.
(2) An institution that offers a GE program in more than one
location or format (e.g., full-time, part-time, accelerated, differing
lengths) may publish a separate disclosure template for each location
or format if doing so would result in clearer disclosures under
paragraph (a). An institution that chooses to publish separate
disclosure templates for each location or format must ensure that each
disclosure template clearly identifies the applicable location or
format.
(3) In addition to other actions the Secretary may take, the
Secretary may require the institution to modify its Web page if the
link for the disclosure template is not prominent, readily accessible,
clear, conspicuous, and direct.
(d) Promotional materials. (1) All promotional materials that an
institution makes available to prospective students that identify a GE
program by name or otherwise promote the program must include--
(i) The disclosure template in a prominent manner; or
(ii) Where space or airtime constraints would preclude the
inclusion of the disclosure template, the Web address (URL) of, or the
direct link to, the disclosure template, provided that the institution
identifies the URL or link as ``Important Information about the
educational debt, earnings, and completion rates of students who
attended this program'' or as otherwise specified by the Secretary in a
notice published in the Federal Register.
(2) Promotional materials include, but are not limited to, an
institution's catalogs, invitations, flyers, billboards, and
advertising on or through radio, television, print media, the Internet,
and social media.
(3) The institution must ensure that all promotional materials,
including printed materials, about a GE program are accurate and
current at the time they are published, approved by a State agency, or
broadcast.
(e) Direct distribution to prospective students. (1) An institution
must provide, as a separate document, a copy of the disclosure template
to a prospective student.
(2) Before the prospective student signs an enrollment agreement,
completes registration, or makes a financial commitment to the
institution, the institution must obtain written confirmation from the
prospective student that the prospective student received a copy of the
disclosure template.
(Authority: 20 U.S.C. 1001, 1002, 1088)
Sec. 668.413 Calculating, issuing, and challenging completion rates,
withdrawal rates, repayment rates, median loan debt, and median
earnings.
(a) General. Under the procedures in this section, the Secretary
determines the completion rates, withdrawal rates, repayment rates,
median loan debt, and median earnings an institution must disclose
under Sec. 668.412 for each of its GE programs, notifies the
institution of that information, and provides the institution an
opportunity to challenge the calculations.
(b) Calculating completion rates, withdrawal rates, repayment
rates, median loan debt, and median earnings.
(1) Completion rates. The Secretary calculates the completion rates
of a GE program. For the purpose of this calculation, the ``enrollment
cohort'' is comprised of the students who enrolled in the program at
any time during the relevant award year. The Secretary calculates
completion rates as follows:
(i) For students whose enrollment status is full-time on the first
day of the student's enrollment in the program:
[[Page 16514]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.040
(ii) For students whose enrollment status is less than full-time on
the first day of the student's enrollment in the program:
[GRAPHIC] [TIFF OMITTED] TP25MR14.041
[[Page 16515]]
(2) Withdrawal rate. The Secretary calculates two withdrawal rates
of a GE program. For the purpose of this calculation, the ``enrollment
cohort'' is comprised of the students receiving title IV, HEA program
funds who enrolled in the program at any time during the relevant award
year. The Secretary calculates withdrawal rates as follows:
(i) The percentage of students in the enrollment cohort who
withdrew from the program within 100 percent of the length of the
program;
(ii) The percentage of students in the enrollment cohort who
withdrew from the program within 150 percent of the length of the
program.
(3) Loan repayment rate. For an award year, the Secretary
calculates a loan repayment rate for borrowers not excluded under
paragraph (b)(3)(vi) of this section who enrolled in a GE program as
follows:
[GRAPHIC] [TIFF OMITTED] TP25MR14.042
(i) Number of borrowers entering repayment. The total number of
borrowers who entered repayment during the two-year cohort period on
FFEL or Direct Loans received for enrollment in the program.
(ii) Number of borrowers paid in full. Of the number of borrowers
entering repayment, the number who have fully repaid all FFEL or Direct
Loans received for enrollment in the program.
(iii) Number of borrowers in active repayment. Of the number of
borrowers entering repayment, the number who, during the most recently
completed award year, made loan payments sufficient to reduce by at
least one dollar the outstanding balance of each of the borrower's FFEL
or Direct Loans received for enrollment in the program, including
consolidation loans that include a FFEL or Direct Loan received for
enrollment in the program, by comparing the outstanding balance of each
loan at the beginning and end of the award year.
(iv) Loan defaults. A borrower who defaulted on a FFEL or Direct
Loan is not included in the numerator of the loan repayment rate
formula even if that loan has been paid in full or meets the definition
of being in active repayment.
(v) Repayment rates for borrowers who completed or withdrew. The
Secretary may modify the formula in this paragraph to calculate
repayment rates for only those borrowers who completed the program or
for only those borrowers who withdrew from the program.
(vi) Exclusions. For the award year the Secretary calculates the
loan repayment rate for a program, the Secretary excludes a borrower
from the repayment rate calculation if the Secretary determines that--
(A) One or more of the borrower's FFEL or Direct loans were in a
military-related deferment status at any time during the most recently
completed award year;
(B) One or more of the borrower's FFEL or Direct loans are either
under consideration by the Secretary, or have been approved, for a
discharge on the basis of the borrower's total and permanent
disability, under 34 CFR 682.402 or 685.212;
(C) The borrower was enrolled in any other eligible program at the
institution or at another institution during the most recently
completed award year; or
(D) The borrower died.
(4) Median loan debt for students who completed the GE program. For
the most recently completed award year, the Secretary calculates a
median loan debt for the students described in Sec. 668.412(a)(10)(i),
who completed the program during the award year. The median is
calculated on debt described in Sec. 668.404(d)(1).
(5) Median loan debt for students who withdrew from the GE program.
For the most recently completed award year, the Secretary calculates a
median loan debt for the students described in Sec.
668.412(a)(10)(ii), who enrolled in a GE program and who withdrew from
the program during the award year. The median is calculated on debt
described in Sec. 668.404(d)(1).
(6) Median loan debt for students who completed and withdrew from
the GE program. For the most recently completed award year, the
Secretary calculates a median loan debt for the students described in
Sec. 668.412(a)(10)(iii) who enrolled in a GE program and who
completed the GE program during the award year and those students who
withdrew from the GE program during the award year. The median is
calculated on debt described in Sec. 668.404(d)(1).
(7) Median earnings. The Secretary calculates the median earnings
of a GE program as described in paragraphs (b)(8) through (b)(12) of
this section.
(8) Median earnings for students who completed the GE program. (i)
The Secretary determines the median earnings for the students who
completed the GE program during the applicable cohort period by--
(A) Creating a list of the students who completed the program
during the applicable cohort period and providing it to the
institution, as provided in paragraph (b)(8)(ii) of this section;
(B) Allowing the institution to correct the information about the
students on the list, as provided in paragraph (b)(8)(iii) of this
section;
(C) Obtaining from SSA or another Federal agency the median annual
earnings of the students on the list, as provided in paragraph
(b)(8)(iv) of this section; and
(D) Notifying the institution of the median annual earnings for the
students on the list.
(ii) Creating the list of students. (A) The Secretary selects the
students to be included on the list by--
(1) Identifying the students who were enrolled in the program and
completed the program during the applicable cohort period from the data
provided by the institution under Sec. 668.411; and
(2) Indicating which students would be removed from the list under
paragraph (b)(11) of this section and the specific reason for the
exclusion.
(B) The Secretary provides the list to the institution and states
which cohort period was used to select the students.
(iii) Institutional corrections to the list. (A) The Secretary
presumes that the list of students and the identity information for
those students are correct unless the institution provides evidence to
the contrary that is satisfactory to the Secretary. The institution
bears the burden of proof that the list is incorrect.
(B) No later than 45 days after the date the Secretary provides the
list to the institution, the institution may--
(1) Provide evidence showing that a student should be included on
or removed from the list pursuant to
[[Page 16516]]
paragraph (b)(11) of this section or otherwise; or
(2) Correct or update a student's identity information and the
student's program attendance information provided for a student on the
list.
(C) After the 45-day period expires, the institution may no longer
seek to correct the list of students or revise the identity or program
information of those students included on this list that the Secretary
uses to determine the median earnings for students who completed the
program.
(D) The Secretary considers the evidence provided by the
institution and either accepts the correction or notifies the
institution of the reasons for not accepting the correction. If the
Secretary accepts the correction, the Secretary uses the corrected
information to create the final list. The Secretary notifies the
institution which students are included on the final list and the
applicable cohort period used to create the list.
(iv) Obtaining earnings data. The Secretary submits the final list
to SSA. For purposes of this section, SSA returns to the Secretary--
(A) The median earnings of the students on the list whom SSA has
matched to SSA earnings data, in aggregate and not in individual form;
and
(B) The number, but not the identities, of students on the list
that SSA could not match.
(9) Median earnings for students who withdrew from the program. (i)
The Secretary determines the median earnings for the students who
withdrew from the program during the applicable cohort period by--
(A) Creating a list of the students who were enrolled in the
program but withdrew from the program during the applicable cohort
period and providing it to the institution, as provided in paragraph
(b)(9)(ii) of this section;
(B) Allowing the institution to correct the information about the
students on the list, as provided in paragraph (b)(9)(iii) of this
section;
(C) Obtaining from SSA or another Federal agency the median annual
earnings of the students on the list, as provided in paragraph
(b)(9)(iv) of this section; and
(D) Notifying the institution of the median annual earnings for the
students on the list.
(ii) Creating the list of students. (A) The Secretary selects the
students to be included on the list by--
(1) Identifying the students who were enrolled in the program but
withdrew from the program during the applicable cohort period from the
data provided by the institution under Sec. 668.411; and
(2) Indicating which students would be removed from the list under
paragraph (b)(11) of this section and the specific reason for the
exclusion.
(B) The Secretary provides the list to the institution and states
which cohort period was used to select the students.
(iii) Institutional corrections to the list. (A) The Secretary
presumes that the list of students and the identity information for
those students are correct unless the institution provides evidence to
the contrary that is satisfactory to the Secretary, in a format and
process determined by the Secretary. The institution bears the burden
of proof that the list is incorrect.
(B) No later than 45 days after the date the Secretary provides the
list to the institution, the institution may--
(1) Provide evidence showing that a student should be included on
or removed from the list pursuant to paragraph (b)(11) of this section
or otherwise; or
(2) Correct or update a student's identity information and the
student's program attendance information provided for a student on the
list.
(C) After the 45-day period expires, the institution may no longer
seek to correct the list of students or revise the identity or program
information of those students included on this list that the Secretary
uses to determine the median earnings for students who withdrew from
the program.
(D) The Secretary considers the evidence provided by the
institution and either accepts the correction or notifies the
institution of the reasons for not accepting the correction. If the
Secretary accepts the correction, the Secretary uses the corrected
information to create the final list. The Secretary notifies the
institution which students are included on the final list and the
applicable cohort period used to create the list.
(iv) Obtaining earnings data. The Secretary submits the final list
to SSA. For purposes of this section SSA returns to the Secretary--
(A) The median earnings of the students on the list whom SSA has
matched to SSA earnings data, in aggregate and not in individual form;
and
(B) The number, but not the identities, of students on the list
that SSA could not match.
(10) Median earnings for students who completed and withdrew from
the program. The Secretary calculates the median earnings for both the
students who completed the program during the applicable cohort period
and students who withdrew from the program during the applicable cohort
period in accordance with paragraphs (b)(8) and (b)(9) of this section.
(11) Exclusions from median earnings calculations. The Secretary
excludes a student from the calculation of the median earnings of a GE
program if the Secretary determines that--
(i) One or more of the student's title IV loans were in a military-
related deferment status at any time during the calendar year for which
the Secretary obtains earnings information under this section;
(ii) One or more of the student's title IV loans are under
consideration by the Secretary, or have been approved, for a discharge
on the basis of the student's total and permanent disability, under 34
CFR 674.61, 682.402 or 685.212;
(iii) The student was enrolled in any other eligible program at the
institution or at another institution during the calendar year for
which the Secretary obtains earnings information under this section; or
(iv) The student died.
(12) Median earnings not calculated. The Secretary does not
calculate the median earnings for a GE program if SSA does not provide
the median earnings for the program.
(c) Notification to institutions. The Secretary notifies the
institution of the--
(1) Draft completion, withdrawal, and repayment rates calculated
under paragraph (b)(1) through (b)(3) of this section and the
information the Secretary used to calculate those rates.
(2) Median loan debt of the students who completed the program, as
described in paragraph (b)(4), the students who withdrew from the
program, as described in paragraph (b)(5), and both the students who
completed and withdrew from the program, as described in paragraph
(b)(6) of this section, in each case during the applicable cohort
period.
(3) Median earnings of the students who completed the program, as
described in paragraph (b)(8), the students who withdrew from the
program, as described in paragraph (b)(9), or both the students who
completed the program and the students who withdrew from the program,
as described in paragraph (b)(10) of this section, in each case during
the applicable cohort period.
(d) Challenges to completion rates, withdrawal rates, repayment
rates, median loan debt, and median earnings. (1) Completion rates,
withdrawal rates, repayment rates, and median loan debt. (i) No later
than 45 days after the Secretary notifies an institution of a GE
[[Page 16517]]
program's draft completion rate, withdrawal rate, repayment rate, and
median loan debt, the institution may challenge the accuracy of the
information that the Secretary used to calculate the draft rates and
the draft median loan debt by submitting, in a form prescribed by the
Secretary, evidence satisfactory to the Secretary demonstrating that
the information was incorrect.
(ii) The Secretary considers any evidence provided by the
institution challenging the accuracy of the information the Secretary
used to calculate the rates and the median loan debt and notifies the
institution whether the challenge is accepted or the reasons the
challenge is not accepted. If the Secretary accepts the challenge, the
Secretary uses the corrected data to calculate the rates or median loan
debt.
(iii) An institution may challenge the Secretary's calculation of
the completion rates, withdrawal rates, repayment rates, and median
loan debt only once for an award year. An institution that does not
timely challenge the rates or median loan debt waives any objection to
the rates or median loan debt as stated in the notice.
(2) Median earnings. The Secretary does not consider any challenges
to the median earnings calculated under this section.
(e) Final rates, median loan debt, and median earnings. (1)
Completion rates, withdrawal rates, repayment rates, and median loan
debt. (i) After expiration of the 45-day period, and subject to
resolution of any challenge under paragraph (d)(1) of this section, a
program's draft completion rate, withdrawal rate, repayment rate, and
median loan debt constitute the final rates and median loan debt for
that program.
(ii) The Secretary informs the institution of the final completion
rate, withdrawal rate, repayment rate, and median loan debt for each of
its GE programs by issuing a notice of determination.
(iii) After the Secretary provides the notice of determination, the
Secretary may publish the final completion rate, withdrawal rate,
repayment rate, and median loan debt.
(2) Median earnings. The median earnings of a program calculated by
the Secretary under this section constitute the final median earnings
for that program. After the Secretary provides the institution with the
notice in paragraph (c) of this section, the Secretary may publish the
final median earnings for the program.
(f) Conditions for challenges. An institution must ensure that any
material that it submits to make any corrections or challenge under
this section is complete, timely, accurate, and in a format acceptable
to the Secretary as described in this subpart and, with respect to
challenges under paragraph (d)(1) of this section, consistent with any
instructions provided to the institution with the notice of its draft
completion, withdrawal, and repayment rates and median loan debt.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.414 Certification requirements for GE programs.
(a) Transitional certification for existing programs. (1) Except as
provided in paragraph (a)(2) of this section, an institution must
provide to the Secretary no later than December 31 of the year in which
this regulation takes effect, in accordance with procedures established
by the Secretary, a certification signed by its most senior executive
officer that each of its currently eligible GE programs meets the
requirements of paragraph (d) of this section. The Secretary accepts
the certification as an addendum to the institution's program
participation agreement (PPA).
(2) If an institution makes the certification in its PPA pursuant
to paragraph (b) of this section between July 1 and December 31 of the
year in which this regulation takes effect, it is not required to
provide the transitional certification under this paragraph.
(b) PPA certification. As a condition of its continued
participation in the title IV, HEA programs, an institution must
certify in its PPA with the Secretary under Sec. 668.14 that each of
its currently eligible GE programs meets the requirements of paragraph
(d) of this section.
(c) Establishing eligibility and disbursing funds. (1) An
institution establishes the eligibility for title IV, HEA program funds
of a GE program by updating the list of the institution's eligible
programs maintained by the Department to include that program, as
provided under 34 CFR 600.21(a)(11)(i). By updating the list of the
institution's eligible programs, the institution affirms that the
program satisfies the certification requirements in paragraph (d) of
this section. Except as provided in paragraph (c)(2) of this section,
after the institution updates its list of eligible programs, the
institution may disburse title IV, HEA program funds to students
enrolled in that program.
(2) An institution may not update its list of eligible programs to
include a GE program, or a substantially similar program, that was
subject to the three-year loss of eligibility under Sec.
668.410(b)(2), until that three-year period expires.
(d) GE program eligibility certifications. An institution
certifies, at the time and in the form specified in this section, that:
(1) Each eligible GE program it offers is approved by a recognized
accrediting agency or is otherwise included in the institution's
accreditation by its recognized accrediting agency, or, if the
institution is a public postsecondary vocational institution, the
program is approved by a recognized State agency for the approval of
public postsecondary vocational education in lieu of accreditation;
(2) Each eligible GE program it offers is programmatically
accredited, if such accreditation is required by a Federal governmental
entity or by a governmental entity in the State in which the
institution is located or by any State within the institution's MSA;
and
(3) For the State in which the institution is located and in all
other States within the institution's MSA, each eligible program it
offers satisfies the licensure or certification requirements of those
States so that a student who completes the program and seeks employment
in those States qualifies to take any licensure or certification exam
that is needed for the student to practice or find employment in an
occupation that the program prepares students to enter.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, 1099c)
Sec. 668.415 Severability.
If any provision of this subpart or its application to any person,
act, or practice is held invalid, the remainder of the subpart or the
application of its provisions to any person, act, or practice shall not
be affected thereby.
(Authority: 20 U.S.C. 1001, 1002, 1088)
0
12. Add subpart R to read as follows:
Subpart R--Program Cohort Default Rate
Sec.
668.500 Purpose of this subpart.
668.501 Definitions of terms used in this subpart.
668.502 Calculating and applying program cohort default rates.
668.503 Determining program cohort default rates for GE programs at
institutions that have undergone a change in status.
668.504 Draft program cohort default rates and your ability to
challenge before official program cohort default rates are issued.
668.505 Notice of the official program cohort default rate of a GE
program.
[[Page 16518]]
668.506 Consequences of program cohort default rates on the GE
program's eligibility to participate in the title IV, HEA programs.
668.507 Preventing evasion of the consequences of program cohort
default rates.
668.508 General requirements for adjusting official program cohort
default rates and for appealing their consequences.
668.509 Uncorrected data adjustments.
668.510 New data adjustments.
668.511 Erroneous data appeals.
668.512 Loan servicing appeals.
668.513 Economically disadvantaged appeals.
668.514 Participation rate index appeals.
668.515 Average rates appeals.
668.516 Thirty-or-fewer borrowers appeals.
668.517 [Reserved]
Subpart R--Program Cohort Default Rate
Sec. 668.500 Purpose of this subpart.
General. The program cohort default rate is a measure we use to
determine the eligibility of a GE program under subpart Q of this part.
This subpart describes how program cohort default rates are calculated,
some of the consequences of program cohort default rates, and how you
may request changes to your program cohort default rates or appeal
their consequences. Under this subpart, you submit a ``challenge''
after you receive your draft program cohort default rate, and you
request an ``adjustment'' or ``appeal'' after your official program
cohort default rate is published.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.501 Definitions of terms used in this subpart.
We use the following definitions in this subpart:
(a) Cohort. Your cohort is a group of borrowers used to determine
your program cohort default rate. The method for identifying the
borrowers in a cohort is provided in Sec. 668.502(b).
(b) Data manager. (1) For FFELP loans held by a guaranty agency or
lender, the guaranty agency is the data manager.
(2) For FFELP loans that we hold, we are the data manager.
(3) For Direct Loan Program loans, the Direct Loan Servicer, as
defined in 34 CFR 685.102, is the data manager.
(c) Days. In this subpart, ``days'' means calendar days.
(d) Default. A borrower is considered to be in default for program
cohort default rate purposes under the rules in Sec. 668.502(c).
(e) Draft program cohort default rate. Your draft program cohort
default rate is a rate we issue, for your review, before we issue your
official program cohort default rate. A draft program cohort default
rate is used only for the purposes described in Sec. 668.504.
(f) Entering repayment. (1) Except as provided in paragraphs (f)(2)
and (f)(3) of this section, loans are considered to enter repayment on
the dates described in 34 CFR 682.200 (under the definition of
``repayment period'') and in 34 CFR 685.207, as applicable.
(2) A Federal SLS loan is considered to enter repayment--
(i) At the same time the borrower's Federal Stafford loan enters
repayment, if the borrower received the Federal SLS loan and the
Federal Stafford loan during the same period of continuous enrollment;
or
(ii) In all other cases, on the day after the student ceases to be
enrolled at an institution on at least a half-time basis in an
educational program leading to a degree, certificate, or other
recognized educational credential.
(3) For the purposes of this subpart, a loan is considered to enter
repayment on the date that a borrower repays it in full, if the loan is
paid in full before the loan enters repayment under paragraphs (f)(1)
or (f)(2) of this section.
(g) Fiscal year. A fiscal year begins on October 1 and ends on the
following September 30. A fiscal year is identified by the calendar
year in which it ends.
(h) GE program. An educational program offered by an institution
under Sec. 668.8(c)(3) or (d) and identified by a combination of the
institution's six-digit Office of Postsecondary Education ID (OPEID)
number, the program's six-digit CIP code as assigned by the institution
or determined by the Secretary, and the program's credential level, as
defined in Sec. 668.402.
(i) Loan record detail report. The loan record detail report is a
report that we produce. It contains the data used to calculate your
draft or official program cohort default rate.
(j) Official program cohort default rate. Your official program
cohort default rate is the program cohort default rate that we publish
for you under Sec. 668.505.
(k) We. We are the Department, the Secretary, or the Secretary's
designee.
(l) You. You are an institution. We consider each reference to
``you'' to apply separately to the institution with respect to each of
its GE programs.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.502 Calculating and applying program cohort default rates.
(a) General. This section describes the four steps that we follow
to calculate and apply your program cohort default rate for a fiscal
year:
(1) First, under paragraph (b) of this section, we identify the
borrowers in your GE program's cohort for the fiscal year. If the total
number of borrowers in that cohort is fewer than 30, we also identify
the borrowers in your cohorts for the 2 most recent prior fiscal years.
(2) Second, under paragraph (c) of this section, we identify the
borrowers in the cohort (or cohorts) who are considered to be in
default by the end of the second fiscal year following the fiscal year
those borrowers entered repayment. If more than one cohort will be used
to calculate your program cohort default rate, we identify defaulted
borrowers separately for each cohort.
(3) Third, under paragraph (d) of this section, we calculate your
program cohort default rate.
(4) Fourth, we apply your program cohort default rate to your
program at all of your locations--
(i) As you exist on the date you receive the notice of your
official program cohort default rate; and
(ii) From the date on which you receive the notice of your official
program cohort default rate until you receive our notice that the
program cohort default rate no longer applies.
(b) Identify the borrowers in a cohort. (1) Except as provided in
paragraph (b)(3) of this section, your cohort for a fiscal year
consists of all of your current and former students who, during that
fiscal year, entered repayment on any Federal Stafford Loan, Federal
SLS Loan, Direct Subsidized Loan, or Direct Unsubsidized Loan that they
received to enroll in the GE program, or on the portion of a loan made
under the Federal Consolidation Loan Program or the Federal Direct
Consolidation Loan Program that is used to repay those loans.
(2) A borrower may be included in more than one of your cohorts and
may be included in the cohorts of more than one institution in the same
fiscal year.
(3) A TEACH Grant that has been converted to a Federal Direct
Unsubsidized Loan is not considered for the purpose of calculating and
applying program cohort default rates.
(c) Identify the borrowers in a cohort who are in default. (1)
Except as provided in paragraph (c)(2) of this section, a borrower in a
cohort for a fiscal year is considered to be in default if, before the
end of the second fiscal year following the fiscal year the borrower
entered repayment--
(i) The borrower defaults on any FFELP loan that was used to
include the borrower in the cohort or on any Federal Consolidation Loan
Program loan that repaid a loan that was used to include the borrower
in the cohort (however, a borrower is not considered to be in default
on a FFELP loan unless a claim
[[Page 16519]]
for insurance has been paid on the loan by a guaranty agency or by us);
(ii) The borrower fails to make an installment payment, when due,
on any Direct Loan Program loan that was used to include the borrower
in the cohort or on any Federal Direct Consolidation Loan Program loan
that repaid a loan that was used to include the borrower in the cohort,
and the borrower's failure persists for 360 days;
(iii) You or your owner, agent, contractor, employee, or any other
affiliated entity or individual make a payment to prevent a borrower's
default on a loan that is used to include the borrower in that cohort;
or
(iv) The borrower fails to make an installment payment, when due,
on a Federal Stafford Loan that is held by the Secretary or a Federal
Consolidation Loan that is held by the Secretary and that was used to
repay a Federal Stafford Loan, if such Federal Stafford Loan or Federal
Consolidation Loan was used to include the borrower in the cohort, and
the borrower's failure persists for 360 days.
(2) A borrower is not considered to be in default based on a loan
that is, before the end of the second fiscal year following the fiscal
year in which it entered repayment--
(i) Rehabilitated under 34 CFR 682.405 or 34 CFR 685.211(e); or
(ii) Repurchased by a lender because the claim for insurance was
submitted or paid in error.
(d) Calculate the program cohort default rate. Except as provided
in Sec. 668.503, if there are--
(1)(i) Thirty or more borrowers in your cohort for a fiscal year,
your program cohort default rate is the percentage that is calculated
by--
(ii) Dividing the number of borrowers in the cohort who are in
default, as determined under paragraph (c), by the number of borrowers
in the cohort, as determined under paragraph (b) of this section.
(2)(i) Fewer than 30 borrowers in your cohort for a fiscal year,
your program cohort default rate is the percentage that is calculated
by--
(ii) Dividing the total number of borrowers in that program cohort
and in the two most recent prior program cohorts who are in default, as
determined for each program cohort under paragraph (c) of this section,
by the total number of borrowers in that program cohort and the two
most recent prior program cohorts, as determined for each program
cohort under paragraph (b).
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.503 Determining program cohort default rates for GE programs
at institutions that have undergone a change in status.
(a) General. (1) If you undergo a change in status identified in
this section, the program cohort default rate of a GE program you offer
is determined under this section.
(2) In determining program cohort default rates under this section,
the date of a merger, acquisition, or other change in status is the
date the change occurs.
(3) A change in status may affect your GE program's eligibility to
participate in title IV, HEA programs under Sec. 668.506 or Sec.
668.507.
(4) If the program cohort default rate of a program offered by
another institution is applicable to you under this section with
respect to a program you offer, you may challenge, request an
adjustment, or submit an appeal for the program cohort default rate
under the same requirements that would be applicable to the other
institution under Sec. Sec. 668.504 and 668.508.
(b) Acquisition or merger of institutions. If you offer a GE
program and your institution acquires, or was created by the merger of,
one or more institutions that participated independently in the title
IV, HEA programs immediately before the acquisition or merger and that
offered the same GE program, as identified by its 6-digit CIP code and
credential level--
(1) Those program cohort default rates published for a GE program
offered by any of these institutions before the date of the acquisition
or merger are attributed to the GE program after the merger or
acquisition; and
(2) Beginning with the first program cohort default rate published
after the date of the acquisition or merger, the program cohort default
rates for that GE program are determined by including in the
calculation under Sec. 668.502 the borrowers who were enrolled in that
GE program from each institution that offered that program and that was
involved in the acquisition or merger.
(c) [Reserved]
(d) Branches or locations becoming institutions. If you are a
branch or location of an institution that is participating in the title
IV, HEA programs, and you become a separate, new institution for the
purposes of participating in those programs--
(1) The program cohort default rates published for a GE program
before the date of the change for your former parent institution are
also applicable to that GE program when you offer that program;
(2) Beginning with the first program cohort default rate published
after the date of the change, the program cohort default rates for a GE
program for the next three fiscal years are determined by including the
applicable borrowers who were enrolled in the GE program from your
institution and from your former parent institution (including all of
its locations) in the calculation under Sec. 668.502; and
(3) [Reserved].
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.504 Draft program cohort default rates and your ability to
challenge before official program cohort default rates are issued.
(a) General. (1) We notify you of the draft program cohort default
rate of a GE program before the official program cohort default rate of
the GE program is calculated. Our notice includes the loan record
detail report for the draft program cohort default rate.
(2) Regardless of the number of borrowers included in the program
cohort, the draft program cohort default rate of a GE program is always
calculated using data for that fiscal year alone, using the method
described in Sec. 668.502(d)(1).
(3) The draft program cohort default rate of a GE program and the
loan record detail report are not considered public information and may
not be otherwise voluntarily released to the public by a data manager.
(4) Any challenge you submit under this section and any response
provided by a data manager must be in a format acceptable to us. This
acceptable format is described in materials that we provide to you. If
your challenge does not comply with these requirements, we may deny
your challenge.
(b) Incorrect data challenges. (1) You may challenge the accuracy
of the data included on the loan record detail report by sending a
challenge to the relevant data manager, or data managers, within 45
days after you receive the data. Your challenge must include--
(i) A description of the information in the loan record detail
report that you believe is incorrect; and
(ii) Documentation that supports your contention that the data are
incorrect.
(2) Within 30 days after receiving your challenge, the data manager
must send you and us a response that--
(i) Addresses each of your allegations of error; and
(ii) Includes the documentation that supports the data manager's
position.
(3) If your data manager concludes that draft data in the loan
record detail report are incorrect, and we agree, we use the corrected
data to calculate your program cohort default rate.
[[Page 16520]]
(4) If you fail to challenge the accuracy of data under this
section, you cannot contest the accuracy of those data in an
uncorrected data adjustment, under Sec. 668.509, or in an erroneous
data appeal, under Sec. 668.511.
(c) Participation rate index challenges. (1)(i) [Reserved]
(ii) You may challenge an anticipated loss of eligibility based on
three consecutive program cohort default rates of 30 percent or
greater, if your participation rate index is equal to or less than
0.0625 for any of those three program cohorts' fiscal years.
(iii) [Reserved]
(2) For a participation rate index challenge, your participation
rate index is calculated as described in Sec. 668.514(b), except
that--
(i) The draft program cohort default rate is considered to be your
most recent program cohort default rate; and
(ii) If the program cohort used to calculate the draft program
cohort default rate included fewer than 30 borrowers, you may calculate
your participation rate index for that fiscal year using either your
most recent draft program cohort default rate or the average rate that
would be calculated for that fiscal year, using the method described in
Sec. 668.502(d)(2).
(3) You must send your participation rate index challenge,
including all supporting documentation, to us within 45 days after you
receive your draft program cohort default rate.
(4) We notify you of our determination on your participation rate
index challenge before your official program cohort default rate is
published.
(5) A GE program does not lose eligibility under Sec. 668.506 if
we determine that your participation rate index challenge is
meritorious, and the GE program will not lose eligibility under Sec.
668.506 when the next official program cohort default rate for the GE
program is published. A successful challenge that is based on the draft
program cohort default rate does not excuse the program from loss of
eligibility on any other ground. However, if a successful challenge
under paragraph (c)(1)(ii) of this section is based on a prior,
official program cohort default rate for the GE program, and not on the
draft program cohort default rate for the program, we also excuse the
GE program from any subsequent loss of eligibility under Sec. 668.506
that would be based on that official program cohort default rate.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.505 Notice of the official program cohort default rate of a
GE program.
(a) We notify you of the official cohort default rate of a GE
program after we calculate it. After we send our notice to you, we
publish a list of program cohort default rates for all institutions.
(b) If one or more borrowers who were enrolled in a GE program
entered repayment in the fiscal year for which the rate is calculated,
or the GE program is subject to loss of eligibility under Sec.
668.506, or if we believe you will have an official program cohort
default rate for a GE program calculated as an average rate, you will
receive a loan record detail report as part of your notification
package for that program.
(c) You have five business days, from the date of our notification,
as posted on the Department's Web site, to report any problem with
receipt of the notification package.
(d) Except as provided in paragraph (e) of this section, timelines
for submitting challenges, adjustments, and appeals begin on the sixth
business day following the date of the notification package that is
posted on the Department's Web site.
(e) If you timely report a problem with receipt of your
notification package under paragraph (c) of this section and the
Department agrees that the problem was not caused by you, the
Department will extend the challenge, appeal, and adjustment deadlines
and timeframes to account for a re-notification package.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.506 Consequences of program cohort default rates on the GE
program's eligibility to participate in the title IV, HEA programs.
(a) End of participation. (1) A GE program loses eligibility as
provided in Sec. 668.403(c)(2).
(2) [Reserved]
(b) Length of period of ineligibility. A GE program that loses
eligibility under this section continues to be ineligible as provided
in Sec. 668.410(b).
(c) [Reserved]
(d) [Reserved]
(e) Requests for adjustments and appeals. (1) A loss of eligibility
under this section does not take effect while a request for adjustment
or appeal, as listed in Sec. 668.508(a), is pending, provided your
request for adjustment or appeal is complete, timely, accurate, and in
the required format.
(2) Eligibility of a GE program that is continued under this
section ends if we determine that none of the requests for adjustments
and appeals you have submitted qualify the GE program for continued
eligibility under Sec. 668.508. Loss of eligibility takes effect on
the date that you receive notice of our determination on your last
pending request for adjustment or appeal.
(3) The GE program does not lose eligibility if we determine that
your request for adjustment or appeal for the GE program meets all
requirements of this subpart.
(4) To avoid liabilities you might otherwise incur under paragraph
(f) of this section, you may choose to suspend your participation in
the FFEL and Direct Loan programs during the adjustment or appeal
process.
(f) Liabilities during the adjustment or appeal process. If you
continued to have the GE program participate in the Direct Loan Program
under paragraph (e)(1) of this section, and we determine that none of
the requests for adjustment or appeals qualify the program for
continued eligibility--
(1) For any Direct Loan Program loan that you originated and
disbursed for borrowers in the GE program more than 30 days after you
received the notice of program cohort default rate for that GE program,
we estimate the costs of those loans;
(2) We exclude from this estimate any amount attributable to funds
that you disbursed more than 45 days after you submitted your completed
appeal to us;
(3) We notify you of the estimated amount; and
(4) Within 45 days after you receive our notice of the estimated
amount, you must pay us that amount, unless--
(i) You file an appeal under the procedures established in subpart
H of this part (for the purposes of subpart H of this part, our notice
of the estimate is considered to be a final program review
determination); or
(ii) We permit a longer repayment period.
(g) [Reserved]
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.507 Preventing evasion of the consequences of program cohort
default rates.
In calculating the program cohort default rate of a GE program, the
Secretary may include loan debt incurred by the borrower for enrolling
in GE programs at other institutions if the institution and the other
institutions are under common ownership or control, as determined by
the Secretary in accordance with 34 CFR 600.31.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
[[Page 16521]]
Sec. 668.508 General requirements for adjusting official program
cohort default rates and for appealing their consequences.
(a) Remaining eligible. A GE program does not lose eligibility
under Sec. 668.506 if--
(1) We recalculate the program cohort default rate for a program,
and it is below the percentage threshold for loss of eligibility under
Sec. 668.506 as the result of--
(i) An uncorrected data adjustment submitted under this section and
Sec. 668.509;
(ii) A new data adjustment submitted under this section and Sec.
668.510;
(iii) An erroneous data appeal submitted under this section and
Sec. 668.511; or
(iv) A loan servicing appeal submitted under this section and Sec.
668.512; or
(2) The GE program meets the requirements for--
(i) An economically disadvantaged appeal submitted under this
section and Sec. 668.513;
(ii) A participation rate index appeal submitted under this section
and Sec. 668.514;
(iii) An average rates appeal submitted under this section and
Sec. 668.515; or
(iv) A thirty-or-fewer borrowers appeal submitted under this
section and Sec. 668.516.
(b) Limitations on your ability to dispute a program cohort default
rate. (1) You may not dispute the calculation of a program cohort
default rate except as described in this subpart.
(2) You may not request an adjustment, or appeal a program cohort
default rate, under Sec. 668.509, Sec. 668.510, Sec. 668.511, or
Sec. 668.512, more than once.
(3) You may not request an adjustment, or appeal a program cohort
default rate, under Sec. 668.509, Sec. 668.510, Sec. 668.511, or
Sec. 668.512, if the GE program previously lost eligibility under
Sec. 668.506 based entirely or partially on that program cohort
default rate.
(c) Content and format of requests for adjustments and appeals. We
may deny your request for adjustment or appeal if it does not meet the
following requirements:
(1) All appeals, notices, requests, independent auditor's opinions,
management's written assertions, and other correspondence that you are
required to send under this subpart must be complete, timely, accurate,
and in a format acceptable to us. This acceptable format is described
in materials that we provide to you.
(2) Your completed request for adjustment or appeal must include--
(i) All of the information necessary to substantiate your request
for adjustment or appeal; and
(ii) A certification by your chief executive officer, under penalty
of perjury, that all the information you provide is true and correct.
(d) Our copies of your correspondence. Whenever you are required by
this subpart to correspond with a party other than us, you must send us
a copy of your correspondence within the same time deadlines. However,
you are not required to send us copies of documents that you received
from us originally.
(e) Requirements for data managers' responses. (1) Except as
otherwise provided in this subpart, if this subpart requires a data
manager to correspond with any party other than us, the data manager
must send us a copy of the correspondence within the same time
deadlines.
(2) If a data manager sends us correspondence under this subpart
that is not in a format acceptable to us, we may require the data
manager to revise that correspondence's format, and we may prescribe a
format for that data manager's subsequent correspondence with us.
(f) Our decision on your request for adjustment or appeal. (1) We
determine whether your request for an adjustment or appeal is in
compliance with this subpart.
(2) In making our decision for an adjustment, under Sec. 668.509
or Sec. 668.510, or an appeal, under Sec. 668.511 or Sec. 668.512--
(i) We presume that the information provided to you by a data
manager is correct unless you provide substantial evidence that shows
the information is not correct; and
(ii) If we determine that a data manager did not provide the
necessary clarifying information or legible records in meeting the
requirements of this subpart, we presume that the evidence that you
provide to us is correct unless it is contradicted or otherwise proven
to be incorrect by information we maintain.
(3) Our decision is based on the materials you submit under this
subpart. We do not provide an oral hearing.
(4) We notify you of our decision--
(i) If you request an adjustment or appeal because you are subject
to a sanction under Sec. 668.410 or file an economically disadvantaged
appeal under Sec. 668.513(a)(2), within 45 days after we receive your
completed request for an adjustment or appeal; or
(ii) In all other cases, before we notify you of your next official
program cohort default rate.
(5) You may not seek judicial review of our determination of a
program cohort default rate until we issue our decision on all pending
requests for adjustments or appeals for that program cohort default
rate.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.509 Uncorrected data adjustments.
(a) Eligibility. You may request an uncorrected data adjustment for
a GE program's most recent cohort of borrowers, used to calculate the
most recent official program cohort default rate, if in response to
your challenge under Sec. 668.504(b), a data manager agreed correctly
to change the data, but the changes are not reflected in your official
program cohort default rate.
(b) Deadlines for requesting an uncorrected data adjustment. You
must send us a request for an uncorrected data adjustment, including
all supporting documentation, within 30 days after you receive your
loan record detail report from us.
(c) Determination. We recalculate your program cohort default rate,
based on the corrected data, and correct the rate that is publicly
released if we determine that--
(1) In response to your challenge under Sec. 668.504(b), a data
manager agreed to change the data;
(2) The changes described in paragraph (c)(1) of this section are
not reflected in your official program cohort default rate; and
(3) We agree that the data are incorrect.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.510 New data adjustments.
(a) Eligibility. You may request a new data adjustment for the most
recent program cohort of borrowers, used to calculate the most recent
official program cohort default rate for a GE program, if--
(1) A comparison of the loan record detail reports that we provide
to you for the draft and official program cohort default rates shows
that the data have been newly included, excluded, or otherwise changed;
and
(2) You identify errors in the data described in paragraph (a)(1)
of this section that are confirmed by the data manager.
(b) Deadlines for requesting a new data adjustment. (1) You must
send to the relevant data manager, or data managers, and us a request
for a new data adjustment, including all supporting documentation,
within 15 days after you receive your loan record detail report from
us.
(2) Within 20 days after receiving your request for a new data
adjustment, the data manager must send you and us a response that--
[[Page 16522]]
(i) Addresses each of your allegations of error; and
(ii) Includes the documentation used to support the data manager's
position.
(3) Within 15 days after receiving a guaranty agency's notice that
we hold an FFELP loan about which you are inquiring, you must send us
your request for a new data adjustment for that loan. We respond to
your request as set forth under paragraph (b)(2) of this section.
(4) Within 15 days after receiving incomplete or illegible records
or data from a data manager, you must send a request for replacement
records or clarification of data to the data manager and us.
(5) Within 20 days after receiving your request for replacement
records or clarification of data, the data manager must--
(i) Replace the missing or illegible records;
(ii) Provide clarifying information; or
(iii) Notify you and us that no clarifying information or
additional or improved records are available.
(6) You must send us your completed request for a new data
adjustment, including all supporting documentation--
(i) Within 30 days after you receive the final data manager's
response to your request or requests; or
(ii) If you are also filing an erroneous data appeal or a loan
servicing appeal, by the latest of the filing dates required in
paragraph (b)(6)(i) of this section or in Sec. 668.511(b)(6)(i) or
Sec. 668.512(c)(10)(i).
(c) Determination. If we determine that incorrect data were used to
calculate your program cohort default rate, we recalculate your program
cohort default rate based on the correct data and make corrections to
the rate that is publicly released.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.511 Erroneous data appeals.
(a) Eligibility. Except as provided in Sec. 668.508(b), you may
appeal the calculation of a program cohort default rate upon which loss
of eligibility under Sec. 668.506 is based if--
(1) You dispute the accuracy of data that you previously challenged
on the basis of incorrect data, under Sec. 668.504(b); or
(2) A comparison of the loan record detail reports that we provide
to you for the draft and official program cohort default rates shows
that the data have been newly included, excluded, or otherwise changed,
and you dispute the accuracy of that data.
(b) Deadlines for submitting an appeal. (1) You must send a request
for verification of data errors to the relevant data manager, or data
managers, and to us within 15 days after you receive the notice of your
loss of eligibility. Your request must include a description of the
information in the program cohort default rate data that you believe is
incorrect and all supporting documentation that demonstrates the error.
(2) Within 20 days after receiving your request for verification of
data errors, the data manager must send you and us a response that--
(i) Addresses each of your allegations of error; and
(ii) Includes the documentation used to support the data manager's
position.
(3) Within 15 days after receiving a guaranty agency's notice that
we hold an FFELP loan about which you are inquiring, you must send us
your request for verification of that loan's data errors. Your request
must include a description of the information in the program cohort
default rate data that you believe is incorrect and all supporting
documentation that demonstrates the error. We respond to your request
as set forth under paragraph (b)(2) of this section.
(4) Within 15 days after receiving incomplete or illegible records
or data, you must send a request for replacement records or
clarification of data to the data manager and us.
(5) Within 20 days after receiving your request for replacement
records or clarification of data, the data manager must--
(i) Replace the missing or illegible records;
(ii) Provide clarifying information; or
(iii) Notify you and us that no clarifying information or
additional or improved records are available.
(6) You must send your completed appeal to us, including all
supporting documentation--
(i) Within 30 days after you receive the final data manager's
response to your request; or
(ii) If you are also requesting a new data adjustment or filing a
loan servicing appeal, by the latest of the filing dates required in
paragraph (b)(6)(i) of this section or in Sec. 668.510(b)(6)(i) or
Sec. 668.512(c)(10)(i).
(c) Determination. If we determine that incorrect data were used to
calculate your program cohort default rate, we recalculate your program
cohort default rate based on the correct data and correct the rate that
is publicly released.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.512 Loan servicing appeals.
(a) Eligibility. Except as provided in Sec. 668.508(b), you may
appeal, on the basis of improper loan servicing or collection, the
calculation of--
(1) The most recent program cohort default rate for a GE program;
or
(2) Any program cohort default rate upon which a loss of
eligibility under Sec. 668.506 is based.
(b) Improper loan servicing. For the purposes of this section, a
default is considered to have been due to improper loan servicing or
collection only if the borrower did not make a payment on the loan and
you prove that the responsible party failed to perform one or more of
the following activities, if that activity applies to the loan:
(1) Send at least one letter (other than the final demand letter)
urging the borrower to make payments on the loan.
(2) Attempt at least one phone call to the borrower.
(3) Send a final demand letter to the borrower.
(4) For a FFELP loan held by us or for a Direct Loan Program loan,
document that skip tracing was performed if the applicable servicer
determined that it did not have the borrower's current address.
(5) For an FFELP loan only--
(i) Submit a request for preclaims or default aversion assistance
to the guaranty agency; and
(ii) Submit a certification or other documentation that skip
tracing was performed to the guaranty agency.
(c) Deadlines for submitting an appeal. (1) If the loan record
detail report was not included with your official program cohort
default rate notice, you must request it within 15 days after you
receive the notice of your official program cohort default rate.
(2) You must send a request for loan servicing records to the
relevant data manager, or data managers, and to us within 15 days after
you receive your loan record detail report from us. If the data manager
is a guaranty agency, your request must include a copy of the loan
record detail report.
(3) Within 20 days after receiving your request for loan servicing
records, the data manager must--
(i) Send you and us a list of the borrowers in your representative
sample, as described in paragraph (d) of this section (the list must be
in social security number order, and it must include the number of
defaulted loans included in the program cohort for each listed
borrower);
(ii) Send you and us a description of how your representative
sample was chosen; and
[[Page 16523]]
(iii) Either send you copies of the loan servicing records for the
borrowers in your representative sample and send us a copy of its cover
letter indicating that the records were sent, or send you and us a
notice of the amount of its fee for providing copies of the loan
servicing records.
(4) The data manager may charge you a reasonable fee for providing
copies of loan servicing records, but it may not charge more than $10
per borrower file. If a data manager charges a fee, it is not required
to send the documents to you until it receives your payment of the fee.
(5) If the data manager charges a fee for providing copies of loan
servicing records, you must send payment in full to the data manager
within 15 days after you receive the notice of the fee.
(6) If the data manager charges a fee for providing copies of loan
servicing records, and--
(i) You pay the fee in full and on time, the data manager must send
you, within 20 days after it receives your payment, a copy of all loan
servicing records for each loan in your representative sample (the
copies are provided to you in hard copy format unless the data manager
and you agree that another format may be used), and it must send us a
copy of its cover letter indicating that the records were sent; or
(ii) You do not pay the fee in full and on time, the data manager
must notify you and us of your failure to pay the fee and that you have
waived your right to challenge the calculation of your program cohort
default rate based on the data manager's records. We accept that
determination unless you prove that it is incorrect.
(7) Within 15 days after receiving a guaranty agency's notice that
we hold an FFELP loan about which you are inquiring, you must send us
your request for the loan servicing records for that loan. We respond
to your request under paragraph (c)(3) of this section.
(8) Within 15 days after receiving incomplete or illegible records,
you must send a request for replacement records to the data manager and
us.
(9) Within 20 days after receiving your request for replacement
records, the data manager must either--
(i) Replace the missing or illegible records; or
(ii) Notify you and us that no additional or improved copies are
available.
(10) You must send your appeal to us, including all supporting
documentation--
(i) Within 30 days after you receive the final data manager's
response to your request for loan servicing records; or
(ii) If you are also requesting a new data adjustment or filing an
erroneous data appeal, by the latest of the filing dates required in
paragraph (c)(10)(i) of this section or in Sec. 668.510(b)(6)(i) or
Sec. 668.511(b)(6)(i).
(d) Representative sample of records. (1) To select a
representative sample of records, the data manager first identifies all
of the borrowers for whom it is responsible and who had loans that were
considered to be in default in the calculation of the program cohort
default rate you are appealing.
(2) From the group of borrowers identified under paragraph (d)(1)
of this section, the data manager identifies a sample that is large
enough to derive an estimate, acceptable at a 95 percent confidence
level with a plus or minus 5 percent confidence interval, for use in
determining the number of borrowers who should be excluded from the
calculation of the program cohort default rate due to improper loan
servicing or collection.
(e) Loan servicing records. Loan servicing records are the
collection and payment history records--
(1) Provided to the guaranty agency by the lender and used by the
guaranty agency in determining whether to pay a claim on a defaulted
loan; or
(2) Maintained by our Direct Loan Servicer that are used in
determining your program cohort default rate.
(f) Determination. (1) We determine the number of loans, included
in your representative sample of loan servicing records, that defaulted
due to improper loan servicing or collection, as described in paragraph
(b) of this section.
(2) Based on our determination, we use a statistically valid
methodology to exclude the corresponding percentage of borrowers from
both the numerator and denominator of the calculation of the program
cohort default rate for the GE program, and correct the rate that is
publicly released.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.513 Economically disadvantaged appeals.
(a) General. As provided in this section you may appeal, for a GE
program, a loss of eligibility under Sec. 668.506.
(b) Eligibility. You may appeal under this section if an
independent auditor's opinion certifies that the low income rate, as
defined in paragraph (c) of this section, for the GE program is two-
thirds or more and--
(1) The program is an associate, baccalaureate, graduate, or
professional degree, and its completion rate, as defined in paragraph
(d) of this section, is 70 percent or more; or
(2) The program is not an associate, baccalaureate, graduate, or
professional degree, and the placement rate, as defined in paragraph
(e) of this section, for the program is 44 percent or more.
(c) Low income rate. (1) The low income rate for a GE program is
the percentage of students enrolled in the program, as described in
paragraph (c)(2) of this section, who--
(i) For an award year that overlaps the 12-month period selected
under paragraph (c)(2) of this section, have an expected family
contribution, as defined in 34 CFR 690.2, that is equal to or less than
the largest expected family contribution that would allow a student to
receive one-half of the maximum Federal Pell Grant award, regardless of
the student's enrollment status or cost of attendance; or
(ii) For a calendar year that overlaps the 12-month period selected
under paragraph (c)(2) of this section, have an adjusted gross income
that, when added to the adjusted gross income of the student's parents
(if the student is a dependent student) or spouse (if the student is a
married independent student), is less than the amount listed in the
Department of Health and Human Services poverty guideline for the size
of the student's family unit.
(2) The students who are used to determine the low income rate for
a GE program include only students who were enrolled on at least a
half-time basis in the GE program at your institution during any part
of a 12-month period that ended during the 6 months immediately
preceding the program cohort's fiscal year.
(d) Completion rate. (1) For purposes of this subpart, the
completion rate for a GE program is the percentage of students enrolled
in the program, as described in paragraph (d)(2) of this section, who--
(i) Completed the GE program in which they were enrolled;
(ii) Transferred from your institution to a higher level
educational program;
(iii) Remained enrolled and are making satisfactory progress toward
completion of their educational programs at the end of the same 12-
month period used to calculate the low income rate; or
(iv) Entered active duty in the Armed Forces of the United States
within 1 year after their last date of attendance at your institution.
(2) The students who are used to determine the completion rate for
a GE program include only regular students who were--
[[Page 16524]]
(i) Initially enrolled on a full-time basis in the GE program; and
(ii) Originally scheduled to complete the GE program during the
same 12-month period used to calculate the low income rate for the GE
program.
(e) Placement rate. (1) Except as provided in paragraph (e)(2), for
purposes of this subpart the placement rate for a GE program is the
percentage of students enrolled in the program, as described in
paragraphs (e)(3) and (e)(4) of this section, who--
(i) Are employed, in an occupation for employment in which the GE
program was offered, on the date following 1 year after their last date
of attendance at your institution;
(ii) Were employed for at least 13 weeks, in the occupation for
which the GE program was offered, between the date they enrolled at
your institution and the first date that is more than a year after
their last date of attendance at your institution; or
(iii) Entered active duty in the Armed Forces of the United States
within 1 year after their last date of attendance in the GE program.
(2) For the purposes of this section, a former student is not
considered to have been employed based on any employment by your
institution.
(3) The students who are used to determine the placement rate of a
GE program include only former students who--
(i) Were initially enrolled in the GE program on at least a half-
time basis;
(ii) Were originally scheduled, at the time of enrollment, to
complete the GE program during the same 12-month period used to
calculate the low income rate; and
(iii) Remained in the GE program beyond the point at which a
student would have received a 100 percent tuition refund from you.
(4) A student is not included in the calculation of the placement
rate of a GE program if that student, on the date that is 1 year after
the student's originally scheduled completion date, remains enrolled in
the same program and is making satisfactory progress.
(f) Scheduled to complete. In calculating a completion or placement
rate under this section, the date on which a student is originally
scheduled to complete a GE program is based on--
(1) For a student who is initially enrolled full-time, the amount
of time specified in your enrollment contract, catalog, or other
materials for completion of the GE program by a full-time student; or
(2) For a student who is initially enrolled less than full-time,
the amount of time that it would take the student to complete the GE
program if the student remained at that level of enrollment throughout
the program.
(g) Deadline for submitting an appeal. (1) Within 30 days after you
receive the notice of loss of eligibility under Sec. 668.506 you must
send us your management's written assertion, as described in the
Program Cohort Default Rate Guide.
(2) Within 60 days after you receive the notice of your loss of
eligibility, you must send us the independent auditor's opinion
described in paragraph (h) of this section.
(h) Independent auditor's opinion. (1) The independent auditor's
opinion must state whether your management's written assertion, as you
provided it to the auditor and to us, meets the requirements for an
economically disadvantaged appeal and is fairly stated in all material
respects.
(2) The engagement that forms the basis of the independent
auditor's opinion must be an examination-level compliance attestation
engagement performed in accordance with--
(i) The American Institute of Certified Public Accountants' (AICPA)
Statement on Standards for Attestation Engagements, Compliance
Attestation (AICPA, Professional Standards, vol. 1, AT sec. 500), as
amended (these standards may be obtained by calling the AICPA's order
department, at 1-888-777-7077); and
(ii) Government Auditing Standards issued by the Comptroller
General of the United States.
(i) Determination. The GE program does not lose eligibility under
Sec. 668.506 if--
(1) Your independent auditor's opinion agrees that you meet the
requirements for an economically disadvantaged appeal; and
(2) We determine that the independent auditor's opinion and your
management's written assertion--
(i) Meet the requirements for an economically disadvantaged appeal
for the GE program; and
(ii) Are not contradicted or otherwise proven to be incorrect by
information we maintain, to an extent that would render the independent
auditor's opinion unacceptable.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.514 Participation rate index appeals.
(a) Eligibility.
(1) [Reserved]
(2) You may appeal a loss of eligibility under Sec. 668.506 based
on three consecutive program cohort default rates of 30 percent or
greater, if the participation rate index for that GE program is equal
to or less than 0.0625 for any of those three program cohorts' fiscal
years.
(b) Calculating the participation rate index for a GE program. (1)
Except as provided in paragraph (b)(2) of this section, the
participation rate index for a GE program for a fiscal year is
determined by multiplying the program cohort default rate for the GE
program for that fiscal year by the percentage that is derived by
dividing--
(i) The number of students who received an FFELP or a Direct Loan
Program loan to enroll in that GE program during a period of
enrollment, as defined in 34 CFR 682.200 or 685.102, that overlaps any
part of a 12-month period that ended during the 6 months immediately
preceding the program cohort's fiscal year, by
(ii) The number of regular students who were enrolled in that GE
program on at least a half-time basis during any part of the same 12-
month period.
(2) If your program cohort default rate for a fiscal year is
calculated as an average rate under Sec. 668.502(d)(2), you may
calculate the participation rate index for the GE program for that
fiscal year using either that average rate or the program cohort
default rate that would be calculated for the fiscal year alone using
the method described in Sec. 668.502(d)(1).
(c) Deadline for submitting an appeal. You must send us your appeal
under this section, including all supporting documentation, within 30
days after you receive notice of loss of eligibility of the GE program.
(d) Determination. (1) The GE program does not lose eligibility
under Sec. 668.506 if we determine that you meet the requirements for
a participation rate index appeal for that GE program.
(2) If we determine that the participation rate index for a GE
program for a fiscal year is equal to or less than 0.0625 under
paragraph (d)(1) of this section, we also excuse you from any
subsequent loss of eligibility under Sec. 668.506 that would be based
on the official program cohort default rate for that fiscal year.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.515 Average rates appeals.
(a) Eligibility.
(1) [Reserved]
(2) You may appeal a loss of eligibility under Sec. 668.506 based
on three program cohort default rates of 30 percent or greater, if at
least two of those program cohort default rates--
(i) Are calculated as average rates under Sec. 668.502(d)(2); and
(ii) Would be less than 30 percent if calculated for the fiscal
year alone using the method described in Sec. 668.502(d)(1).
[[Page 16525]]
(b) Deadline for submitting an appeal. (1) Before notifying you of
the official program cohort default rate for a GE program, we make an
initial determination about whether the GE program qualifies for an
average rates appeal. If we determine that the GE program qualifies, we
notify you of that determination at the same time that we notify you of
the official program cohort default rate for that program.
(2) If you disagree with our initial determination, you must send
us your average rates appeal for that GE program, including all
supporting documentation, within 30 days after you receive the notice
of your loss of eligibility.
(c) Determination. The GE program does not lose eligibility under
Sec. 668.506 if we determine that the GE program meets the
requirements for an average rates appeal.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.516 Thirty-or-fewer borrowers appeals.
(a) Eligibility. You may appeal a notice of a loss of eligibility
under Sec. 668.506 if 30 or fewer borrowers, in total, are included in
the three most recent cohorts of borrowers used to calculate the
program cohort default rates for that GE program.
(b) Deadline for submitting an appeal. (1) Before notifying you of
the official program cohort default rate for a GE program, we make an
initial determination about whether the GE program qualifies for a
thirty-or-fewer borrowers appeal. If we determine that the program
qualifies, we notify you of that determination at the same time that we
notify you of the official program cohort default rate for that GE
program.
(2) If you disagree with our initial determination, you must send
us the thirty-or-fewer borrowers appeal for that GE program, including
all supporting documentation, within 30 days after you receive the
notice of loss of eligibility of that GE program.
(c) Determination. The GE program does not lose eligibility under
Sec. 668.506 if we determine that the GE program meets the
requirements for a thirty-or-fewer borrowers appeal.
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Sec. 668.517 [Reserved]
(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)
Note: The following Appendix will not appear in the Code of
Federal Regulations.
Appendix A--Regulatory Impact Analysis
This regulatory impact analysis is divided into eight sections.
In ``Need for Regulatory Action,'' we discuss the problems of
high debt and relatively poor earnings impacting students who enroll
in gainful employment programs (``GE programs''). We also provide an
overview of the Department's efforts to address these problems by
establishing an institutional accountability framework for GE
programs and increasing transparency about student outcomes in GE
programs for the benefit of students, prospective students, and
their families, the public, taxpayers, the Government, and
institutions of higher education.
In ``Analysis of the Proposed Regulations,'' we present the
impact of the proposed regulations on GE programs and students for a
single year.
The ``Discussion of Costs, Benefits, and Transfers'' section
considers the costs and benefits of the proposed regulations and the
implications of the Department's impact estimates for students,
institutions, the Federal Government, and State and local
governments. There would be two primary benefits of the proposed
regulations. Because the proposed regulations would establish an
accountability framework that assesses program performance, we would
expect students, prospective students, taxpayers, and the Federal
Government to receive a better return on money spent on education.
The proposed regulations would also establish a transparency
framework designed to improve market information that would assist
students, prospective students, and their families in making
critical decisions about their educational investment and in
understanding potential outcomes of that investment. The public,
taxpayers, the Government, and institutions would also gain relevant
and useful information about GE programs, allowing them to better
evaluate their investment in these programs. Institutions would
largely bear the costs of the proposed regulations, which would fall
into three categories: paperwork costs associated with institutions
complying with the regulations, costs that could be incurred by
institutions if they attempt to improve their GE programs, and costs
due to changing student enrollment. In addition, if programs that
provided education of some value to students shut down as a result
of the proposed regulations, then the foregone value of that service
would be another potential cost to society.
We also consider the distribution of effects on institutions
associated with the proposed regulations. For institutions, the
distributional impact of the proposed regulations would be mixed.
Institutions with programs that are in the zone or failing under the
GE measures and programs that eventually lose eligibility could see
lower revenues, primarily revenues derived from title IV, HEA
program funds, and, depending upon the expenses associated with
improving a failing or zone program, potentially reduced margins
from that program. On the other hand, institutions with programs
that pass the proposed regulations would likely experience growing
enrollments and revenues and would benefit from the additional
market information that would permit these institutions to
demonstrate, and consumers to understand, the value of their GE
programs. The net gain from the student aid and other revenue that
results from student transfers to better performing programs would
depend on the instructional expense that transfers with them.
Under ``Net Budget Impacts,'' we present our estimate that the
proposed regulations would save the Federal Government between $75
million and $110 million annually depending on certain assumptions.
The largest factor in these savings would result from reduced
expenditures on Pell Grants, as some Pell Grant-eligible students
may elect not to pursue postsecondary educational opportunities if
the program they would have attended fails the GE measures or is in
the zone.
We also provide a ``Sensitivity Analysis'' to demonstrate how
alternative student and program response assumptions would impact
our budget estimates.
In ``Return on Investment,'' we present an illustrative example
of how the proposed regulations could impact student earnings.
In ``Regulatory Alternatives Considered,'' we describe the other
approaches the Department considered for key features of the
proposed regulations, including components of the GE measures and
possible alternative GE measures. Many of these alternative
approaches were discussed by the negotiated rulemaking committee.
Finally, in ``Initial Regulatory Flexibility Analysis,'' we
consider issues relevant to small businesses and non-profit
institutions.
Need for Regulatory Action
Background
The proposed regulations are intended to address growing
concerns about educational programs that, as a condition of
eligibility for title IV, HEA program funds, are required by statute
to provide training that prepares students for gainful employment in
a recognized occupation, but instead are leaving students with
unaffordable levels of loan debt in relation to their earnings or
resulting in students defaulting on their title IV, HEA program
loans.
Through this regulatory action, the Department seeks to
establish: (1) an accountability framework for GE programs that will
define what it means to prepare students for gainful employment in a
recognized occupation by establishing measures by which the
Department would evaluate whether a GE program remains eligible for
title IV, HEA program funds, and (2) a transparency framework that
would increase the quality and availability of information about the
outcomes of students enrolled in GE programs.
The accountability framework is designed to define what it means
to prepare students for gainful employment by establishing measures
that would assess whether programs provide quality education and
training that lead to earnings that will allow students to pay back
their student loan debts.
[[Page 16526]]
The transparency framework is designed to establish reporting
and disclosure requirements that would increase the transparency of
student outcomes of GE programs so that information is disseminated
to students, prospective students, and their families that is
accurate and comparable to help them make better informed decisions
about where to invest their time and money in pursuit of a
postsecondary degree or credential. Further, this information would
provide the public, taxpayers, and the Government with relevant
information to better understand the outcomes of the Federal
investment in these programs. Finally, the transparency framework
would provide institutions with meaningful information that they
could use to improve student outcomes in these programs.
Outcomes, Practices, and Literature Review
GE programs include non-degree programs, including diploma and
certificate programs, at public and private non-profit institutions
such as community colleges and nearly all educational programs at
for-profit institutions of higher education regardless of program
length or credential level. Common GE programs provide training for
occupations in fields such as cosmetology, business administration,
medical assisting, dental assisting, nursing, and massage therapy.
We estimate that there are approximately 50,000 \66\ GE programs
offered at postsecondary institutions around the country, with an
enrollment of approximately 4 million \67\ students receiving title
IV, HEA program funds. About 60 percent of these programs are at
public institutions, 10 percent at private non-profit institutions,
and 30 percent at for-profit institutions.
---------------------------------------------------------------------------
\66\ Based on reporting in NSLDS, IPEDS, and other information
provided by institutions.
\67\ Id.
---------------------------------------------------------------------------
For fiscal year 2010, 37,589 GE programs with an enrollment of
3,985,329 students receiving title IV, HEA program funds reported
program information to the Department.\68\ The Federal investment in
students attending these programs is significant. In FY 2010,
students attending GE programs received approximately $9.7 billion
in Federal student aid grants and approximately $26 billion in
Federal student aid loans.
---------------------------------------------------------------------------
\68\ NSLDS.
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Table 1 provides, by 2-digit CIP code, the number of GE programs
for which institutions reported program information to the
Department in FY 2010. Table 2 provides the enrollment of students
receiving title IV, HEA program funds in GE programs, by 2-digit CIP
code, for which institutions reported program information to the
Department.
[[Page 16527]]
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[GRAPHIC] [TIFF OMITTED] TP25MR14.005
[[Page 16533]]
Table 3 provides the percentage of students receiving title IV, HEA
program funds in GE programs who fall within the following demographic
categories: Pell grant recipients; received zero estimated family
contribution (EFC) as indicated by their Free Application for Federal
Student Aid (FAFSA); married; over the age of 24; veteran; and female.
[GRAPHIC] [TIFF OMITTED] TP25MR14.006
[[Page 16534]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.007
[[Page 16535]]
Research has consistently demonstrated the significant benefits of
postsecondary education. Among them are private pecuniary benefits \70\
and social benefits, such as higher wages.\71\ Even though the costs of
postsecondary education have risen, there is substantial evidence that
financial returns to students have increased commensurately.\72\
Although evidence of the returns on GE programs in particular is
sparse, the limited information that exists shows substantial variation
in returns depending on the occupation that the program provides
training for, including negative returns for some types of
programs.\73\
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\70\ Avery, C., and Turner, S. (2013). Student Loans: Do College
Students Borrow Too Much--Or Not Enough? Journal of Economic
Perspectives, 26(1), 165-192.
\71\ Moretti, E. (2004). Estimating the Social Return to Higher
Education: Evidence from Longitudinal and Repeated Cross-Sectional
Data. Journal of Econometrics, 121(1), 175-212.
\72\ Avery, C., and Turner, S. (2013). Student Loans: Do College
Students Borrow Too Much--Or Not Enough? Journal of Economic
Perspectives, 26(1), 165-192.
\73\ Lang, K., and Weinstein, R. (2013). ``The Wage Effects of
Not-for-Profit and For-Profit Certifications: Better Data, Somewhat
Different Results.'' NBER Working Paper 19135, Cambridge,
MA.
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Our analysis, described in more detail in ``Analysis of the
Proposed Regulations,'' reveals that low earnings and high rates of
student loan default are common in many GE programs. For example, 27
percent of the 5,539 GE programs evaluated with earnings data produced
graduates with average annual earnings below those of a full-time
worker earning no more than the Federal minimum wage
($15,080).74 75 Sixty-four percent of the 5,539 GE programs
evaluated with earnings data produced graduates with average annual
earnings less than the earnings of individuals who have not obtained a
high school diploma ($24,492).76 77 Approximately 24 percent
of former student borrowers who attended programs with below high
school dropout earnings defaulted on their Federal student loans within
the first three years of entering repayment. \78\
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\74\ At the Federal minimum wage of $7.25 per hour (www.dol.gov/whd/minimumwage.htm), an individual working 40 hours per week for 52
weeks per year would have annual earnings of $15,080.
\75\ 2012 GE informational rates. Our analysis by sector shows
the following: Of the 5,539 programs evaluated with earnings data,
30 percent of for-profit programs and 13 percent of public non-
profit programs produced graduates with average annual earnings
below a Federal minimum wage worker.
\76\ Based on a weekly wage of $471 (http://www.bls.gov/emp/ep_chart_001.htm) for 52 weeks.
\77\ 2012 GE informational rates. Our analysis by sector shows
the following: Of the 5,539 programs evaluated with earnings data,
72 percent of for-profit programs and 32 percent of public non-
profit programs produced graduates with average annual earnings less
than the earnings of individuals who have not obtained a high school
degree.
\78\ 2012 GE informational rates. Percent of defaulters
calculated based on pCDR data for programs with mean or median
earnings below high school dropout.
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In light of the low earnings and high rates of default of some GE
programs, the Department is concerned that all students at these
programs may not be making optimal borrowing decisions. While many
students appear to borrow less than might be optimal, either because
they are risk averse or lack access to credit,\79\ the outcomes
described above indicate that overborrowing may be a significant
problem for at least some students.
---------------------------------------------------------------------------
\79\ Dunlop, E. ``What Do Student Loans Actually Buy You? The
Effect of Stafford Loan Access on Community College Students,''
Working Paper (2013).
---------------------------------------------------------------------------
Over the past three decades, student loan debt has grown rapidly as
increases in college costs have outstripped increases in family
income,\80\ State and local postsecondary education funding has
flattened,\81\ and relatively expensive for-profit institutions have
proliferated.\82\ Student loan debt now stands at over $904 billion
nationally and rose by 41 percent, or $264 billion, between 2008 and
2012, a period when other forms of consumer debt were flat or
declining.\83\ Since 2003, the percentage of 25-year-olds with student
debt has nearly doubled, increasing from 25 percent to 43 percent.\84\
Young people with student debt also owe more; the average student loan
balance among 25-year-olds with debt has increased from $10,649 in 2003
to $20,326 in 2012.\85\ The increases in the percentage of young people
with student debt and in average student debt loan balances have
coincided with sluggish growth in State tax appropriations for higher
education.\86\ While State funding for public institutions has
stagnated, Federal student aid has increased dramatically. From 2000-
2001 to 2010-2011, Federal Pell Grant expenditures more than tripled,
while Stafford Loan volumes more than doubled.\87\
---------------------------------------------------------------------------
\80\ Martin, A., and Andrew L., ``A Generation Hobbled by the
Soaring Cost of College,'' New York Times, May 12, 2012.
\81\ Deming, D., Goldin, C., and Katz, L. (2013). For Profit
Colleges. Future of Children, 23(1), 137-164.
\82\ Deming, D., Goldin, C., and Katz, L. (2013). For Profit
Colleges. Future of Children, 23(1), 137-164.
\83\ Federal Reserve Bank of New York (2012, November).
Quarterly Report on Household Debt and Credit. Retrieved from
www.newyorkfed.org/research/nationaleconomy/householdcredit/DistrictReport_Q32012.pdf.
\84\ Brown, M., and Sydnee C. (2013). Young Student Loan
Borrowers Retreat from Housing and Auto Markets. Liberty Street
Economics, retrieved from: http://libertystreeteconomics.newyorkfed.org/2013/04/young-student-loan-borrowers-retreat-from-housing-and-auto-markets.html.
\85\ Id.
\86\ Deming, D., Goldin, C., and Katz, L. (2013). For Profit
Colleges. Future of Children, 23(1), 137-164.
\87\ Id.
---------------------------------------------------------------------------
Evidence suggests that student borrowing is not too high across the
board.\88\ Rather, overborrowing results from specific and limited
conditions. Although students may have access to information on average
rates of return, they may not understand how their own abilities,
choice of major, or choice of institution may affect the expected value
of the investment they make in their education.\89\ Further,
overborrowing may result because students do not understand the true
cost of loans, because they overestimate their chance of graduating, or
because they overestimate the earnings associated with the completion
of their program of study.\90\ For example, among a nationally
representative sample of first-time bachelor degree-seeking students,
only 52 percent of those who expected to complete a BA degree did so
within six years of beginning their studies, and of these students,
those who borrowed incurred an average debt of $14,457.\91\
---------------------------------------------------------------------------
\88\ Avery, C., and Turner S. Student Loans: Do College Students
Borrow Too Much Or Not Enough? The Journal of Economic Perspectives
26, no. 1 (2012): 189.
\89\ Id. at 165-192.
\90\ Id.
\91\ Id.
---------------------------------------------------------------------------
Inefficiently high borrowing can cause substantial harm to
borrowers. There is some suggestive evidence that high levels of
student debt decrease the long-term probability of marriage.\92\ For
those who do not complete a degree, greater amounts of student debt may
raise the probability of bankruptcy.\93\ There is also evidence that it
increases the probability of being credit constrained, particularly if
students underestimate the probability of dropping out.\94\ Student
debt has been found to be associated with reduced home ownership
rates.\95\ And, excessively high student debt may make it more
difficult for borrowers to meet new mortgage underwriting standards,
tightened in response to the recent recession and financial crisis.\96\
---------------------------------------------------------------------------
\92\ Gicheva, D. ``In Debt and Alone? Examining the Causal Link
between Student Loans and Marriage.'' Working Paper (2013).
\93\ Gicheva, D., and U. N. C. Greensboro. ``The Effects of
Student Loans on Long-Term Household Financial Stability.'' Working
Paper (2014).
\94\ Id.
\95\ Shand, J. M. (2007). ``The Impact of Early-Life Debt on the
Homeownership Rates of Young Households: An Empirical
Investigation.'' Federal Deposit Insurance Corporation Center for
Financial Research.
\96\ Brown, M., and Sydnee C. (2013). Young Student Loan
Borrowers Retreat from Housing and Auto Markets. Liberty Street
Economics, retrieved from: http://libertystreeteconomics.newyorkfed.org/2013/04/young-student-loan-borrowers-retreat-from-housing-and-auto-markets.html.
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[[Page 16536]]
There is ample evidence that students are having difficulty
repaying their loans. The national two-year cohort default rate on
Stafford loans has increased from 5.2 percent in 2006 to 10 percent in
2011.\97\ As of 2012, approximately 6 million borrowers were in default
on Federal loans, owing $76 billion.\98\
---------------------------------------------------------------------------
\97\ U.S. Department of Education (2014). 2-year official
national student loan default rates. Federal Student Aid. Retrieved
from http://www2.ed.gov/offices/OSFAP/defaultmanagement/defaultrates.html.
\98\ Martin, A., ``Debt Collectors Cashing In on Student
Loans,'' New York Times, September 8, 2012.
---------------------------------------------------------------------------
There is a wide array of literature on the determinants of default,
which include both student and institutional characteristics. A
substantial body of research suggests that ``completing a postsecondary
program is the strongest single predictor of not defaulting regardless
of institution type.'' \99\ In a study of outcomes 10 years after
graduation for students receiving BS/BA degrees in 1993, Lochner and
Monge-Naranjo found that both student debt and post-school income
levels are significant predictors of repayment and nonpayment, although
the estimated effects were modest.\100\ In another study, Belfield
examined the determinants of Federal loan repayment status of a more
recent cohort of borrowers and found that loan balances had only a
trivial influence on default rates.\101\ However, Belfield found
substantial differences between students who attended for-profit and
those who attended public institutions. Even when controlling for
student characteristics, measures of college quality, and college
practices, students at for-profit institutions, especially two-year
colleges, borrow more and have lower repayment rates than students at
public institutions.\102\ In two recent studies, Hillman and Deming,
Goldin, and Katz also found that students who attend for-profit
colleges have higher rates of default than comparable students who
attend public colleges.103 104
---------------------------------------------------------------------------
\99\ Gross, J. P., Cekic, O., Hossler, D., & Hillman, N. (2009).
What Matters in Student Loan Default: A Review of the Research
Literature. Journal of Student Financial Aid, 39(1), 19-29.
\100\ Lochner, L., and Monge-Naranjo, A. (2014). ``Default and
Repayment Among Baccalaureate Degree Earners.'' NBER Working Paper
No. w19882.
\101\ Belfield, C. R. (2013). ``Student Loans and Repayment
Rates: The Role of For-Profit Colleges.'' Research in Higher
Education, 54(1): 1-29.
\102\ Id.
\103\ Deming, D., Goldin, C., and Katz, L. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile
Predators. Journal of Economic Perspectives, 26(1), 139-164.
\104\ Hillman, N. W. ``College on Credit: A Multilevel Analysis
of Student Loan Default.'' The Review of Higher Education 37.2
(2014): 169-195. Project MUSE. Web. 12 Mar. 2014.
---------------------------------------------------------------------------
The causes of excessive debt, high default rates, and low earnings
of students at GE programs include aggressive or deceptive marketing
practices, a lack of transparency regarding program outcomes, excessive
costs, low completion rates, deficient quality, and a failure to
satisfy requirements needed for students to obtain higher paying jobs
in a field such as licensing, work experience, and programmatic
accreditation.
As we noted in connection with the 2011 Prior Rule, the outcomes of
students who attend for-profit educational institutions are of
particular concern. 76 FR 34386. The for-profit sector has experienced
tremendous growth over the past 15 years, fueled in large part by
Federal student aid funding.\105\ The share of total enrollment of for-
profit institutions eligible for title IV, HEA program funds has
increased from about 4 percent in 2000 to nearly 11 percent in
2009,\106\ while the share of Federal student financial aid going to
students at for-profit institutions has doubled to nearly 25 percent
over the same time period.\107\
---------------------------------------------------------------------------
\105\ Id.
\106\ Id.
\107\ Id.
---------------------------------------------------------------------------
The for-profit sector serves older students, women, Black students,
Hispanic students, and students with low incomes at disproportionately
high rates.\108\ Single parents, students with a certificate of high
school equivalency, and students with lower family incomes are more
commonly found at for-profit institutions than community colleges.\109\
---------------------------------------------------------------------------
\108\ Id.
\109\ Id.
---------------------------------------------------------------------------
For-profit institutions develop curriculum and teaching practices
that can be replicated at multiple locations and at convenient times,
and offer highly structured programs to help ensure timely
completion.\110\ For-profit institutions ``are attuned to the
marketplace and are quick to open new schools, hire faculty, and add
programs in growing fields and localities.'' \111\
---------------------------------------------------------------------------
\110\ Deming, D., Goldin, C., and Katz, L. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile
Predators. Journal of Economic Perspectives, 26(1), 139-164.
\111\ Deming, D., Goldin, C., and Katz, L. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile
Predators. Journal of Economic Perspectives, 26(1), 139-164.
---------------------------------------------------------------------------
At least some research suggests that for-profit institutions
respond to demand that public institutions are unable to handle because
of budget shortfalls. Recent evidence from California suggests that
for-profit institutions are increasingly absorbing students from budget
constrained public institutions.\112\ Conversely, increased taxpayer
support for local community colleges results in higher enrollments in
those institutions and a decrease in enrollments in for-profit schools
in the first few years after a bond passage.\113\
---------------------------------------------------------------------------
\112\ Keller, J. (2011, January 13). Facing new cuts,
California's colleges are shrinking their enrollments. Chronicle of
Higher Education. Retrieved from http://chronicle.com/article/Facing-New-Cuts-Californias/125945/.
\113\ Cellini, Stephanie Riegg. (2009). Crowded Colleges and
College Crowd-Out: The Impact of Public Subsidies on the Two-Year
College Market. American Economic Journal: Economic Policy, 1(2): 1-
30.
---------------------------------------------------------------------------
For-profit institutions may also be able to respond more quickly to
increases in demand for postsecondary education. Research by Deming,
Goldin and Katz found that ``[c]hange[s] in for-profit college
enrollments are more positively correlated with changes in State
college-age populations than are changes in public-sector college
enrollments.'' \114\
---------------------------------------------------------------------------
\114\ Deming, D.J., Goldin, C., and Katz, L.F. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile
Predators? Journal of Economic Perspectives, 26(1), 139-164.
---------------------------------------------------------------------------
Although research indicates that the for-profit sector has some
positive features, there is growing evidence of troubling outcomes and
practices at many institutions. For-profit institutions typically
charge higher tuitions than do public postsecondary institutions. 76 FR
34386. Average tuition and fees at less-than-two-year for-profit
institutions are more than double the average cost at less-than-two-
year public institutions.\115\ Attending a two-year for-profit
institution costs a student four times as much as attending a community
college.\116\
---------------------------------------------------------------------------
\115\ IPEDS First-Look (July 2013), table 2. Average costs (in
constant 2012-13 dollars) associated with attendance for full-time,
first-time degree/certificate-seeking undergraduates at Title IV
institutions operating on an academic year calendar system, and
percentage change, by level of institution, type of cost, and other
selected characteristics: United States, academic years 2010-11 and
2012-13.
\116\ Id.
---------------------------------------------------------------------------
``Unlike other sectors, grant aid has not risen with tuition in the
for-profit sector, leading to steep increases in the net price that
students pay.'' \117\ Not surprisingly, ``student borrowing in the for-
profit sector has risen dramatically to meet the rising net prices.''
\118\ Students at for-profit institutions are more likely to receive
Federal student financial aid and have higher average
[[Page 16537]]
student debt than students in public and not-for-profit
institutions.\119\ 76 FR 34386.
---------------------------------------------------------------------------
\117\ Cellini, S. R., and Darolia, R. (2013). College Costs and
Financial Constraints: Student Borrowing at For-Profit Institutions.
Unpublished manuscript.
\118\ Id.
\119\ Deming, D.J., Goldin, C., and Katz, L.F. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile
Predators? Journal of Economic Perspectives, 26(1), 139-164.
---------------------------------------------------------------------------
In 2011-2012, 86 percent of students who earned certificates from
for-profit institutions took out student loans compared to 35 percent
of certificate recipients from public two-year institutions.\120\ Of
those who borrowed, the median loan amount borrowed of for-profit
certificate recipients was $11,000 as opposed to $8,000 for certificate
recipients from public two-year institutions.\121\ Eighty-eight percent
of associate degree graduates from for-profit institutions took out
student loans, while only 40 percent of associate degree recipients
from public two-year institutions took out student loans.\122\ Of those
who borrowed, for-profit associate degree recipients had a median loan
amount borrowed of $23,590 in comparison to $10,000 for students who
received their degrees from public two-year institutions.\123\
---------------------------------------------------------------------------
\120\ National Postsecondary Student Aid Study 2012.
\121\ Id.
\122\ Id.
\123\ Id.
---------------------------------------------------------------------------
``While increasing in every sector in recent years, student loan
default rates have consistently been highest among students in the for-
profit college sector.'' 124 125 Approximately 22 percent of
borrowers who attended for-profit institutions default on their Federal
student loans within the first three years of entering repayment as
compared to about 13 percent of borrowers who attended public
institutions.\126\ Two other estimates produced by the Department for
purposes other than determining eligibility for title IV, HEA program
funds yield even higher default rates for for-profit students. First,
estimates of ``cumulative lifetime default rates,'' based on the number
of loans, rather than borrowers, yield a default rate of about 31
percent for cohorts graduating between 2005 and 2009.\127\ Second,
based on estimates used in the President's budget, which use dollars,
rather than loans or borrowers, to estimate defaults, lifetime defaults
are around 48 percent for two-year for-profit students.\128\
---------------------------------------------------------------------------
\124\ Darolia, R. (2013). Student Loan Repayment and College
Accountability. Federal Reserve Bank of Philadelphia.
\125\ Deming, D.J., Goldin, C., and Katz, L.F. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile
Predators? Journal of Economic Perspectives, 26(1), 139-164.
\126\ Based on the Department's analysis of the three-year
cohort default rates for fiscal year 2010, U.S. Department of
Education, available at www.ed.gov/news/press-releases/default-rates-continue-rise-federal-student-loans.
\127\ Cellini S.R., and Darolia, R. (2013). College Costs and
Financial Constraints: Student Borrowing at For-Profit Institutions.
Unpublished manuscript. http://www.upjohn.org/stuloanconf/Cellini_Darolia.pdf.
\128\ Id.
---------------------------------------------------------------------------
Although more expensive, there is growing evidence that many for-
profit programs may not prepare students as well as comparable programs
at public institutions. 75 FR 43618. A 2011 GAO report reviewed results
of licensing exams for 10 occupations that are, by enrollment, among
the largest fields of study and found that that for 9 out of 10
licensing exams, graduates of for-profit institutions had lower rates
of passing than graduates of public institutions.\129\ Many for-profit
institutions devote greater resources to recruiting and marketing than
they do to instruction or to student support services.\130\ An
investigation by the U.S. Senate Committee on Health, Education, Labor
& Pensions (Senate HELP Committee) of thirty prominent for-profit
institutions found that almost 23 percent of revenues were spent on
marketing and recruiting but only 17 percent on instruction.\131\ A
review of useable data provided by some of the institutions that were
investigated showed that they employed 35,202 recruiters compared with
3,512 career services staff and 12,452 support services staff.\132\
---------------------------------------------------------------------------
\129\ Postsecondary Education: Student Outcomes Vary at For-
Profit, Nonprofit, and Public Schools (GAO-12-143), GAO, December 7,
2011.
\130\ For Profit Higher Education: The Failure to Safeguard the
Federal Investment and Ensure Student Success, Senate HELP
Committee, July 30, 2012.
\131\ Id.
\132\ Id.
---------------------------------------------------------------------------
Lower rates of completion in many four-year for-profit institutions
are also a cause for concern. 76 FR 34409. The six-year graduation rate
of first-time undergraduate students who began at a four-year degree-
granting institution in 2003-2004 was 34 percent at for-profit
institutions in comparison to 65 percent at public institutions.
However, for first-time undergraduate students who began at a two-year
degree-granting institution in 2003-2004, the six-year graduation rate
was 40 percent at for-profit institutions in comparison to 35 percent
at public institutions.\133\
---------------------------------------------------------------------------
\133\ U.S. Department of Education, National Center for
Education Statistics (NCES), 2003-04 Beginning Postsecondary
Students Longitudinal Study, Second Follow-up (BPS:04/09)
(cumulative certificate, associate's degree, and bachelor's degree
attainment at any institution).
---------------------------------------------------------------------------
The higher costs of for-profit institutions and consequently
greater amounts of debt incurred by their former students, together
with generally lower rates of completion, continue to raise concerns
about whether for-profit programs lead to earnings that justify the
investment made by students. See 75 FR 43617. As we stated in
connection with the 2011 Prior Rule, this ``value proposition'' is what
``distinguishes programs `that lead to gainful employment in a
recognized occupation.' '' 76 FR 34386.
``While research is still emerging on returns to for-profit
colleges, recent studies indicate that for-profit students generate
earnings gains that are lower than those of students in other
sectors.'' \134\ ``Among associate's degree students, estimates of
returns to for-profit attendance are generally in the range of 2 to 8
percent per year of education, compared to upwards of 9 percent in the
public sector.'' \135\ Analysis of data collected on the outcomes of
2003-2004 first-time beginning postsecondary students as a part of the
Beginning Postsecondary Students Longitudinal Study shows that students
who attend for-profit institutions are more likely to be idle, not
working or in school, six years after starting their programs of study
in comparison to students who attend other types of institutions.\136\
Further, for-profit students no longer enrolled in school six years
after beginning postsecondary education have lower earnings at the six-
year mark than students who attend other types of institutions.\137\
Some studies, however, fail to find significant differences between the
returns to students on educational programs at for-profit institutions
and other sectors.\138\
---------------------------------------------------------------------------
\134\ Darolia, R. (2013). Student Loan Repayment and College
Accountability. Federal Reserve Bank of Philadelphia.
\135\ Cellini S. R., and Darolia, R. (2013). College Costs and
Financial Constraints: Student Borrowing at For-Profit Institutions.
Unpublished manuscript. http://www.upjohn.org/stuloanconf/Cellini_Darolia.pdf.
\136\ Deming, D., Goldin, C., and Katz, L. The For-Profit
Postsecondary School Sector: Nimble Critters or Agile Predators?,
Journal of Economic Perspectives, vol. 26, no. 1, Winter 2012.
\137\ Id.
\138\ Lang, K., and Weinstein R. (2013). ``The Wage Effects of
Not-for-Profit and For-Profit Certifications: Better Data, Somewhat
Different Results.'' NBER Working Paper.
---------------------------------------------------------------------------
Overall, these outcomes are troubling for two reasons. First, some
students will have earnings that will not support the debt they
incurred to enroll in these GE programs. Second, because students are
limited under the HEA in the amounts of Federal grants and loans they
may receive to support their education, their options to move to
higher-quality and affordable programs are constrained as they may no
longer
[[Page 16538]]
have access to sufficient student aid. Specifically, Federal law sets
lifetime limits on the amount of grant and subsidized loan assistance
students may receive: Federal Pell Grants may be received only for the
equivalent of 12 semesters of full-time attendance, and Federal
subsidized loans may be received for no longer than 150 percent of the
published program length.\139\ These limitations make it even more
critical that students' initial choices in GE programs prepare them for
employment that provides adequate earnings and do not result in
excessive debt.
---------------------------------------------------------------------------
\139\ See section 401(c)(5) of the HEA, 20 U.S.C. 1070a(c)(5),
for Pell Grant limitation; see section 455(q) of the HEA, 20 U.S.C.
1087e(q), for the 150 percent limitation.
---------------------------------------------------------------------------
We also remain concerned that students seeking to enroll in these
programs do not have access to reliable information that will enable
them to compare programs in order to make informed decisions about
where to invest their time and limited educational funding. As we noted
in the 2011 Prior Rule, the GAO and other investigators have found
evidence of high-pressure and deceptive recruiting practices at some
for-profit institutions. See 76 FR 34386. In 2010, the GAO released the
results of undercover testing at 15 for-profit colleges across several
States.\140\ Thirteen of the colleges tested gave undercover student
applicants ``deceptive or otherwise questionable information'' about
graduation rates, job placement, or expected earnings.\141\ The Senate
HELP Committee investigation of the for-profit education sector also
found evidence that many of the most prominent for-profit institutions
engage in aggressive sales practices and provide misleading information
to prospective students.\142\ Recruiters described ``boiler room''-like
sales and marketing tactics and internal institutional documents showed
that recruiters are taught to identify and manipulate emotional
vulnerabilities and target non-traditional students.\143\
---------------------------------------------------------------------------
\140\ For-Profit Colleges: Undercover Testing Finds Colleges
Encouraged Fraud and Engaged in Deceptive and Questionable Marketing
Practices (GAO-10-948T), GAO, August 4, 2010 (reissued November 30,
2010).
\141\ Id.
\142\ For Profit Higher Education: The Failure to Safeguard the
Federal Investment and Ensure Student Success, Senate HELP
Committee, July 30, 2012.
\143\ Id.
---------------------------------------------------------------------------
There has been growth in the number of qui tam lawsuits brought by
private parties alleging wrongdoing at for-profit institutions, such as
overstating job placement rates. Moreover, a growing number of State
and other Federal law enforcement authorities have launched
investigations into whether for-profit institutions are using
aggressive or even deceptive marketing and recruiting practices.
Several State Attorneys General have sued for-profit institutions to
stop these fraudulent marketing practices which include manipulations
of job placement rates. On August 19, 2013, the New York State Attorney
General announced a $10.25 million settlement with Career Education
Corporation (CEC), a private for-profit education company, after its
investigation revealed that CEC significantly inflated its graduates'
job placement rates in disclosures made to students, accreditors, and
the State.\144\ The State of Illinois sued Westwood College for
misrepresentations and false promises made to students enrolling in the
company's criminal justice program.\145\ The Commonwealth of Kentucky
has filed lawsuits against several private for-profit institutions,
including National College of Kentucky, Inc., for misrepresenting job
placement rates, and Daymar College, Inc., for misleading students
about financial aid and overcharging for textbooks.\146\ And most
recently, early this year, a group of 13 State Attorneys General issued
Civil Investigatory Demands to Corinthian Colleges, Inc., Education
Management Co., ITT Educational Services, Inc., and CEC, seeking
information about job placement rate data and marketing and recruitment
practices. The States participating include Arizona, Arkansas,
Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina,
Oregon, Pennsylvania, Tennessee, and Washington.
---------------------------------------------------------------------------
\144\ ``A.G. Schneiderman Announces Groundbreaking $10.25
Million Dollar Settlement with For-Profit Education Company That
Inflated Job Placement Rates to Attract Students,'' press release,
Aug. 19, 2013. Available at: www.ag.ny.gov/press-release/ag-schneiderman-announces-groundbreaking-1025-million-dollar-settlement-profit.
\145\ ``Attorneys General Take Aim at For-Profit Colleges'
Institutional Loan Programs,'' The Chronicle of Higher Education,
March 20, 2012. Available at: http://chronicle.com/article/Attorneys-General-Take-Aim-at/131254/.
\146\ ``Kentucky Showdown,'' Inside Higher Ed, Nov. 3, 2011.
Available at: www.insidehighered.com/news/2011/11/03/ky-attorney-general-jack-conway-battles-profits.
---------------------------------------------------------------------------
Further, the Consumer Financial Protection Bureau issued Civil
Investigatory Demands to Corinthian Colleges, Inc. and ITT Educational
Services, Inc. in November, 2013, demanding information about their
marketing, advertising, and lending policies.\147\ The Securities and
Exchange Commission also subpoenaed records from Corinthian Colleges,
Inc. on June 6, 2013, seeking student information in the areas of
recruitment, attendance, completion, placement, and loan defaults.\148\
These inquiries supplement the Department's existing monitoring and
compliance efforts to protect against such abuses.
---------------------------------------------------------------------------
\147\ ``For Profit Colleges Face New Wave of State
Investigations, Bloomberg, Jan. 29, 2014. Available at:
www.bloomberg.com/news/2014-01-29/for-profit-colleges-face-new-wave-of-coordinated-state-probes.html.
\148\ ``Corinthian Colleges Crumbles 14% on SEC probe,'' Fox
Business, June 11, 2013. Available at: www.foxbusiness.com/government/2013/06/11/corinthian-colleges-crumbles-14-on-sec-probe/.
---------------------------------------------------------------------------
The 2012 Senate HELP Committee report also found extensive evidence
of aggressive and deceptive recruiting practices, excessive tuition,
and regulatory evasion and manipulation by for-profit colleges in their
efforts to enroll service members, veterans, and their families. The
report described veterans being viewed as ``dollar signs in uniform.''
\149\ The Los Angeles Times reported that recruiters from for-profit
colleges have been known to recruit at Wounded Warriors centers and at
veterans hospitals, where injured soldiers are pressured into enrolling
through promises of free education and more.\150\ Some for-profit
colleges take advantage of service members and veterans returning home
without jobs through a number of improper practices, including by
offering post-9/11 GI Bill benefits that are intended for living
expenses as ``free money.'' \151\ Many veterans enroll in online
courses simply to gain access to the monthly GI Bill benefits even if
they have no intention of completing the coursework.\152\ In addition,
some institutions have recruited veterans with serious brain injuries
and emotional vulnerabilities without providing adequate support and
counseling, engaged in misleading recruiting practices onsite at
military installations, and failed to accurately disclose information
regarding the graduation rates of veterans.\153\ In June 2012, an
investigation in 20 States, led by the Commonwealth of Kentucky's
[[Page 16539]]
Attorney General, resulted in a $2.5 million settlement with
QuinStreet, Inc. and the closure of GIBill.com, a Web site that
appeared as if it was an official site of the U.S. Department of
Veterans Affairs, but was in reality a for-profit portal that steered
veterans to 15 colleges, almost all for-profit institutions, including
Kaplan University, the University of Phoenix, Strayer University, DeVry
University, and Westwood College.\154\
---------------------------------------------------------------------------
\149\ ``Dollar Signs In Uniform,'' Los Angeles Times, Nov. 12,
2012. Available at: http://articles.latimes.com/2012/nov/12/opinion/la-oe-shakely-veterans-college-profit-20121112; citing ``Harkin
Report,'' S. Prt. 112-37, For Profit Higher Education: The Failure
to Safeguard the Federal Investment and Ensure Student Success, July
30, 2012.
\150\ Id.
\151\ Id.
\152\ Id.
\153\ ``We Can't Wait: President Obama Takes Action to Stop
Deceptive and Misleading Practices by Educational Institutions that
Target Veterans, Service Members and their Families,'' White House
Press Release, April 26, 2012. Available at: www.whitehouse.gov/the-press-office/2012/04/26/we-can-t-wait-president-obama-takes-action-stop-deceptive-and-misleading.
\154\ ``$2.5M Settlement over `GIBill.com','' Inside Higher Ed,
June 28, 2012. Available at: www.insidehighered.com/news/2012/06/28/attorneys-general-announce-settlement-profit-college-marketer.
---------------------------------------------------------------------------
Basis of Regulatory Approach
The components of the proposed accountability framework that a
program must satisfy to meet the gainful employment requirement are
rooted in the legislative history of the predecessors to the statutory
provisions of sections 101(b)(1), 102(b), 102(c), and 481(b) of the HEA
that require institutions to establish the title IV, HEA program
eligibility of GE programs. 20 U.S.C. 1001(b)(1), 1002(b)(1)(A)(i),
(c)(1)(A), 1088(b).
The legislative history of the statute preceding the HEA that first
permitted students to obtain federally financed loans to enroll in
programs that prepared them for gainful employment in recognized
occupations demonstrates the conviction that the training offered by
these programs should equip students to earn enough to repay their
loans. APSCU v. Duncan, 870 F.Supp.2d at 139; see also 76 FR 34392.
Allowing these students to borrow was expected to neither unduly burden
the students nor pose ``a poor financial risk'' to taxpayers. 76 FR
34392. Specifically, the Senate Report accompanying the initial
legislation (the National Vocational Student Loan Insurance Act
(NVSLIA), Pub. L. 89-287) quotes extensively from testimony provided by
University of Iowa professor Dr. Kenneth B. Hoyt, who testified on
behalf of the American Personnel and Guidance Association. On this
point, the Senate Report sets out Dr. Hoyt's questions and conclusions:
Would these students be in a position to repay loans following
their training? * * *
If loans were made to these kinds of students, is it likely that
they could repay them following training? Would loan funds pay
dividends in terms of benefits accruing from the training students
received? It would seem that any discussion concerning this bill must
address itself to these questions. * * *
We are currently completing a second-year followup of these
students and expect these reported earnings to be even higher this
year. It seems evident that, in terms of this sample of students,
sufficient numbers were working for sufficient wages so as to make the
concept of student loans to be [repaid] following graduation a
reasonable approach to take. * * * I have found no reason to believe
that such funds are not needed, that their availability would be
unjustified in terms of benefits accruing to both these students and to
society in general, nor that they would represent a poor financial
risk.
Sen. Rep. No. 758, 89th Cong., First Sess. (1965) at 3745, 3748-49
(emphasis added).
Notably, both debt burden to the borrower and financial risk to
taxpayers and the Government were clearly considered in authorizing
federally backed student lending. Under the loan insurance program
enacted in the NVSLIA, the specific potential loss to taxpayers of
concern was the need to pay default claims to banks and other lenders
if the borrowers defaulted on the loans. After its passage, the NVSLIA
was merged into the HEA, which in title IV, part B, has both a direct
Federal loan insurance component and a Federal reinsurance component,
under which the Federal Government reimburses State and private non-
profit loan guaranty agencies upon their payment of default claims. 20
U.S.C. 1071(a)(1). Under either HEA component, taxpayers and the
Government assume the direct financial risk of default. 20 U.S.C.
1078(c) (Federal reinsurance for default claim payments), 20 U.S.C.
1080 (Federal insurance for default claims).
Not only did Congress consider expert assurances that vocational
training would enable graduates to earn wages that would not pose a
``poor financial risk'' of default, but an expert observed that this
conclusion rested on evidence that ``included both those who completed
and those who failed to complete the training.'' APSCU v. Duncan, 870
F.Supp.2d at 139, citing H.R. Rep. No. 89-308, at 4 (1965), and S. Rep.
No. 89-308, at 7, 1965 U.S.C.C.A.N. 3742, 3748.
The concerns regarding excessive student debt reflected in the
legislative history of the gainful employment eligibility provisions of
the HEA are as relevant now as they were then. Excessive student debt
affects students and the country in three significant ways: Payment
burdens on the borrower; the cost of the loan subsidies to taxpayers;
and the negative consequences of default (which affect borrowers and
taxpayers).
The first consideration is payment burdens on the borrower. As we
said previously in connection with the 2011 Prior Rule and restate
here, loan payments that outweigh the benefits of the education and
training for GE programs that purport to lead to jobs and good wages
are an inefficient use of the borrower's resources. See 75 FR 43621.
The second consideration is taxpayer subsidies. Borrowers who have
low incomes but high debt may reduce their payments through income-
driven repayment plans. These plans can either be at little or no cost
to taxpayers or, through loan cancellation, can cost taxpayers as much
as the full amount of the loan with interest. 75 FR 43622. Deferments
and repayment options are important protections for borrowers because,
although postsecondary education generally brings higher earnings,
there is no guarantee for the individual. Policies that assist those
with high debt burdens are a critical form of insurance. However, as we
explained in connection with the 2011 Prior Rule, these repayment
options should not mean that institutions should increase the level of
risk to the individual student or taxpayers through high-cost, low-
value programs. See id.
The third consideration is default. The Federal Government covers
the cost of defaults on Federal student loans. These costs can be
significant to taxpayers. Id. We continue to assert as we did in
connection with the 2011 Prior Rule and restate here, loan defaults
harm students and their families. Id. Their credit rating is damaged,
undermining their ability to rent a house, get a mortgage, or purchase
a car. To the extent they can get credit, they pay much higher
interest. And, increasingly, employers consider credit records in their
hiring decisions. 75 FR 43622. In addition, former students who default
on Federal loans cannot receive additional title IV, HEA program funds
for postsecondary education. Id.; see also section 484(a)(3) of the
HEA, 20 U.S.C. 1091(a)(3).
In accordance with the legislative intent behind the gainful
employment eligibility provisions now found in sections 101, 102, and
481 of the HEA and the significant policy concerns they reflect, we
propose to use the certification requirements to establish a program's
eligibility and, to assess continuing eligibility, the metrics-based
standards that measure whether students will be able to pay back the
educational debt they incur to enroll in the occupational training
programs that
[[Page 16540]]
are the subject of this rulemaking. 20 U.S.C. 1001(b)(1),
1002(b)(1)(A)(i), (c)(1)(A), 1088(b).
Proposed Regulatory Framework
As stated previously, the Department's goals in the proposed
regulations are twofold: to establish an accountability framework for
GE programs, and to increase the transparency of student outcomes of GE
programs.
As part of the accountability framework, to determine whether a
program provides training that prepares students for gainful employment
as required by the HEA, we propose procedures to establish a program's
eligibility and to measure its outcomes on a continuing basis. To
establish a program's eligibility, an institution would be required to
certify that each of its GE programs meets all applicable accreditation
and licensure requirements necessary for a student to obtain employment
in the occupation for which the program provides training. This
certification would be incorporated into the institution's program
participation agreement.
To assess the continuing eligibility of a GE program, we propose to
use two measures--the D/E rates measure, which compares the debt
incurred by students completing the program against their earnings, and
the pCDR measure, which examines the rate at which borrowers who
previously enrolled in the program default on their FFEL or Direct
Loans. The proposed regulations would establish minimum thresholds for
the D/E rates measure and the pCDR measure. The D/E rates and the pCDR
measures would operate independently of each other, as they are
designed to achieve complementary objectives, capturing two ways a
program could fail to meet the gainful employment requirement.
In addition to the accountability framework, the proposed
regulations include institutional reporting and disclosure requirements
designed to increase the transparency of student outcomes for GE
programs. Institutions would be required to report information that is
necessary to implement aspects of the proposed regulations that support
the Department's two goals of accountability and transparency. This
would include information needed to calculate the D/E rates and the
pCDR, as well as some of the specific required disclosures. The
proposed disclosure requirements would operate independently of the
proposed eligibility requirements and ensure that relevant information
regarding GE programs is made available to students, prospective
students, and their families, the public, taxpayers, and the
Government, and institutions. The disclosure requirements would provide
for accountability and transparency throughout the admissions and
enrollment process so that students, prospective students, and their
families can make informed decisions. Specifically, institutions would
be required to make information regarding such items as cost of
attendance, completion, debt, earnings, and student loan repayment
available in a meaningful and easily accessible format.
Together, the certification requirements, accountability metrics,
and disclosure requirements are designed to make improved and
standardized market information about GE programs available for better
decision making by students, prospective students, and their families,
the public, taxpayers, and the Government, and institutions and lead to
a more competitive marketplace that encourages improvement; improve the
quality of programs and lead to reduced costs and student debt;
eliminate poor performing programs; result in a better return on
educational investment for students, prospective students, and their
families, as well as for taxpayers and the Federal Government; and, for
institutions with high-performing programs, lead to growth in
enrollments and revenues resulting from transparent market information
that would permit those institutions to demonstrate to consumers the
value of their GE programs.
The D/E Rates and pCDR
As previously stated, as part of the accountability framework, we
propose two complementary yet independent measures--the D/E rates
measure and the pCDR measure--that would be used to determine whether a
GE program remains eligible for title IV, HEA program funds. The debt-
to-earnings measures under both the 2011 Prior Rule and the proposed
regulations assess the debt burden incurred by students who completed a
GE program in relation to their earnings. The pCDR measure, like the
loan repayment rate in the 2011 Prior Rule, would assess the extent to
which a program's borrowers are paying back their loans, whether or not
they completed the program, by measuring the GE program's title IV, HEA
loan default rate.
The D/E rates measure would evaluate the amount of debt students
who completed a GE program incurred to enroll in that program in
comparison to those same students' discretionary and annual earnings
after completing the program. The proposed regulations would establish
the standards by which the program would be assessed to determine, for
each year rates are calculated, whether it passes or fails the D/E
rates measure or is ``in the zone.'' Under the proposed regulations, to
pass the D/E rates measure, the GE program must have a discretionary
income rate less than or equal to 20 percent or an annual earnings rate
less than or equal to 8 percent. The proposed regulations would also
establish a zone for GE programs that have a discretionary income rate
between 20 percent and 30 percent or an annual earnings rate between 8
percent and 12 percent. GE programs with a discretionary income rate
over 30 percent and an annual earnings rate over 12 percent would fail
the D/E rates measure. Under the proposed regulations, a GE program
would become ineligible for title IV, HEA program funds if it fails the
D/E rates measure for two out of three consecutive years, or has a
combination of D/E rates measures that are in the zone or failing for
four consecutive years. We propose the D/E rates measure and the
thresholds to assess whether a GE program has prepared students to earn
enough to repay their loans, to better safeguard the Federal investment
in the program.
To allow institutions an opportunity to improve, the proposed
regulations include a transition period for the first four years after
the final regulations become effective. During the transition period,
an alternative D/E rates calculation would be made so that institutions
could benefit from any immediate reductions in cost they make. During
these four years, the transition period and zone together would allow
institutions to make improvements to their programs in order to become
passing.
In addition to the D/E rates measure, the proposed regulations
would establish a pCDR measure. The pCDR measure would evaluate the
default rate of former students enrolled in a GE program, regardless of
whether they completed the program. Under the proposed regulations, a
program would lose eligibility if its GE program has a pCDR of 30
percent or greater for three consecutive fiscal years. We propose the
pCDR measure and the thresholds to identify those programs that may
pass, or may not be evaluated by, the D/E rates measure, but whose
students incur debt they cannot repay and ultimately default on their
loans. Unlike the D/E rates measure, the pCDR measure would include
students who did not complete their programs and therefore would assess
programs with low completion
[[Page 16541]]
rates that, regardless of the earnings of students who complete the
program, leave a significant number of students without credentials and
with unmanageable debt.
Both the D/E rates measure and pCDR measure assess program outcomes
that, consistent with legislative intent, indicate whether a program is
preparing students for gainful employment. Although the measures
supplement and complement one another, each focuses on separate and
distinct expectations upon which Congress relied in enacting
legislation that make these programs eligible for title IV, HEA program
funds based on the condition that they provide training that prepares
students for gainful employment. Consequently, we believe the measures
should operate independently.
The D/E rates and pCDR measures are designed to reflect and account
for the three primary reasons that a program may fail to prepare
students for gainful employment where former students are unable to
earn wages adequate to manage their educational debt: (1) A program
does not train students in the skills they need to obtain and maintain
jobs in the occupation for which the program purports to train
students, (2) a program provides training for an occupation for which
low wages do not justify program costs, and (3) the program is
experiencing a high number of withdrawals or ``churn'' because
relatively large numbers of students enroll but few, or none, complete
the program, which can often lead to default.
The D/E rates measure assesses the outcomes of only those students
who complete the program. The calculation includes former students who
received title IV, HEA program funds and took on educational debt and
those who did not. And, for those students who have debt, the D/E rates
take into account private loans and institutional financing in addition
to title IV, HEA program loans.
The D/E rates measure primarily assesses whether the loan funds
obtained by students ``pay dividends in terms of benefits accruing from
the training students received,'' and whether such training has indeed
equipped students to earn enough to repay their loans such that they
are not unduly burdened. H.R. Rep. No. 89-308, at 4 (1956); S. Rep. No.
89-758, at 7 (1965). A 2002 survey found that a majority of borrowers
felt burdened by their student loan payments and reported that they
would borrow ``much less'' or a ``little less'' to finance their higher
education if they were to enroll again in an educational program. An
analysis of the 2002 survey combined borrowers' responses to questions
about student loan burden, hardship, and regret to create a ``debt
burden index'' that was significantly positively associated with
borrowers' debt-to-income ratios; in other words, borrowers with higher
debt-to-income ratios tended to feel higher levels of burden, hardship,
and regret.\155\
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\155\ Baum, S., and Schwartz, S. (2003). How Much Debt is Too
Much? Defining Benchmarks for Managing Student Debt.
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As a result, the D/E rates measure identifies programs that fail to
adequately provide students with the occupational skills needed to
obtain employment or that train students for occupations with low
wages. The D/E rates also provide evidence of the experience of
borrowers and, specifically, where borrowers may be struggling with
their debt burden.
In contrast to the D/E rates measure, pCDR measures the extent to
which a program's former students are paying back their Direct and FFEL
loans regardless of their earnings, if any. In comparison to the D/E
rates measure, the pCDR measure applies to those programs that have
relatively high enrollments but no or few completions such that
students are left with debt they cannot repay. As stated previously,
research indicates that ``completing a postsecondary program is the
strongest single predictor of not defaulting regardless of institution
type.'' \156\
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\156\ Gross, J. P., Cekic, O., Hossler, D., and Hillman, N.
(2009). What Matters in Student Loan Default: A Review of the
Research Literature. Journal of Student Financial Aid, 39(1), 19-29.
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The legislative history supports inclusion of students who did not
complete a program in the proposed accountability framework. As
discussed, Congress specifically considered expert advice that students
who took out Federal loans for the purpose of training programs,
including students who do not complete the programs, would be able to
repay those loans, as defaults by those students would burden taxpayers
in the same way as defaults by students who completed the program.
The pCDR, consequently, is foremost a measure that assesses whether
a program presents a ``poor financial risk to the taxpayer.'' 76 FR
34392. In light of congressional intent reflected in the legislative
history, a program that presents a poor financial risk for taxpayers
cannot be considered a program that prepares students for gainful
employment.
Despite the distinctive purposes of the D/E rates and pCDR
measures, the measures supplement and complement one another. The scope
of the pCDR measure is broader than the D/E rates measure as the pCDR
measure also takes into account the outcomes of borrowers who did not
complete the program. Accordingly, the pCDR measure supplements the D/E
rates measure in those cases in which D/E rates cannot be calculated
because no or very few students who enrolled in a program actually
completed the program. By including an accountability metric that
reflects the outcomes of students who do not complete the program,
institutions would have incentive to address any high dropout and
``churn'' issues or face the loss of eligibility.
Likewise, the D/E rates measure complements the pCDR measure.
Specifically, the pCDR measure does not take into account the many
students who may be struggling to repay their loans, such as those
receiving economic hardship deferments or who are in an income-driven
repayment plan. These students may see their loans grow, rather than
shrink, because their incomes are low and their debts are high. While
the pCDR measure may not identify programs whose former students are in
such circumstances, the D/E rates measure would take into account those
students who are struggling with their debt burden despite having
completed their programs.
Analysis of the Proposed Regulations
Data and Methodology for Analysis of the Proposed Regulations
Data
After the effective date of the 2011 Final Rules on July 1, 2011,
the Department received, pursuant to the reporting requirements of the
2011 Final Rules, information from institutions on their GE programs
for award years 2006-2007 through 2010-2011 (GE Data). The GE Data is
stored in the National Student Loan Database System (NSLDS), maintained
by the Department's Office of Federal Student Aid (FSA). The GE Data
originally included information on students who received title IV, HEA
program funds, as well as students who did not. After the decisions in
APSCU v. Duncan, the Department removed from NSLDS and destroyed the
data on students who did not receive title IV, HEA program funds.
Using the GE Data, student loan information also stored in NSLDS,
and earnings information obtained from SSA, the Department calculated
(1) 2012 GE informational D/E rates and (2) 2012 GE informational pCDR
for GE programs. As discussed in the ``Background'' section of the
preamble to this NPRM, the 2012 GE informational D/E rates and 2012 GE
[[Page 16542]]
informational pCDR are referred to as the ``2012 GE informational
rates.'' The 2012 GE informational rates are stored in a data file
maintained by the Department that is accessible on its Web site.\157\
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\157\ http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html.
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The 2012 GE informational D/E rates were calculated by program and
are based on the debt and earnings of students receiving title IV, HEA
program funds who completed GE programs between October 1, 2007, and
September 30, 2009 (the ``08/09 2012 D/E rates cohort''). The annual
loan payment component of the debt-to-earnings formulas for the 2012 GE
informational D/E rates was calculated for each program using student
loan information from the GE Data and from NSLDS. For the annual
earnings figures that were used in the debt-to-earnings calculations,
the Department obtained from SSA the 2011 annual earnings, by program,
of the 08/09 2012 D/E rates cohort. The 2012 GE informational D/E rates
were calculated using the following criteria:
N-size: 30
Amortization schedule: 10 years for certificate and
associate degree programs, 15 years for bachelor's and master's degree
programs, and 20 years for doctoral and first professional programs
Interest rate: 5.42 percent
The 2012 GE informational rates files also include debt-to-earnings
rates calculated using variations of the n-size and amortization
schedule criteria for comparative purposes.
The 2012 GE informational pCDR were calculated by program for
students receiving title IV, HEA program funds who entered repayment
between October 1, 2008, and September 30, 2009 (the ``09 2012 pCDR
cohort'') on FFEL or Direct Loans for enrollment in a GE program. The
2012 GE informational pCDR calculations were made using student loan
information for the 09 2012 pCDR cohort from the GE Data and NSLDS.
Unless otherwise specified, in accordance with the proposed
regulations, the Department analyzed the 2012 GE informational D/E
rates, and program level debt and earnings, only for those programs
with 30 or more students who completed the program during an applicable
cohort period--that is, those programs that met the minimum ``n-size--
in this case between October 1, 2007, and September 30, 2009, as
previously described. Of the 37,589 GE programs for which institutions
reported program information to the Department in FY 2010, 5,539 met
the minimum n-size of 30 for the 2012 GE informational D/E rates
calculations.
The proposed regulations regarding pCDR do not include similar n-
size requirements because various challenges and appeals are available
for programs that have less than 30 borrowers included in the
calculation. For the purpose of this regulatory impact analysis,
however, we analyzed the 2012 GE informational pCDR only for those
programs with an n-size of 30 or more borrowers who entered repayment
on FFEL or Direct Loans for attendance in the program during an
applicable cohort period. The applicable cohort period for the 2012 GE
informational pCDR is October 1, 2008, to September 30, 2009, unless
fewer than 30 students entered repayment during that year, in which
case the calculation includes students who entered repayment in the
previous two years. Of the 37,589 GE programs for which institutions
reported program information to the Department in FY 2010, 6,815 met
the minimum n-size of 30 borrowers for the 2012 GE informational pCDR
calculations. In total, we estimate that 7,934 programs out of the
37,589 programs, representing 73 percent of students receiving title
IV, HEA program funds in FY 2010, would be evaluated under the GE
measures because they would receive D/E rates and pCDR, D/E rates only,
or pCDR only.
For the purposes of this regulatory impact analysis, we analyzed
the impact of the proposed regulations on GE programs by the following
criteria:
Enrollment: Number of students receiving title IV, HEA
program funds for attendance in a program. In order to estimate
enrollment, we used the FY 2010 enrollment of students receiving title
IV, HEA programs funds.
6-digit classification of instructional program (``CIP'')
code: 6-digit CIP codes are categories of program type defined by the
Department's National Center for Education Statistics. The first two
digits of each 6-digit CIP code represent the corresponding 2-digit CIP
code, which provides a higher-level categorization of program
categories.
Sector: Public non-profit, private non-profit, for-profit
designation for each OPEID (institution) using NSLDS sector data as of
November 2013.
Institution type: Less than 2 years, 2 years, and 4 years
or more designation for each OPEID using NSLDS sector data as of
November 2013.
Credential level: Certificate, associate degree,
bachelor's degree, post-baccalaureate certificate, master's degree,
doctoral degree, and first professional degree.
We examined the number of programs that would, under the proposed
regulations, ``pass,'' ``fail,'' or fall in the ``zone'' based on the
2012 GE informational D/E rates. Similarly, we examined the number of
programs that would, under the proposed regulations, ``pass'' or
``fail'' based on the 2012 GE informational pCDR.
Methodology
The estimated effects of the proposed regulations described in
``Analysis of the Proposed Regulations'' are based on the 2012 GE
informational rates sample. The methodologies used for the
informational data calculations depart slightly in some areas from the
provisions in the proposed regulations as described in the following
methodological notes related to the rates calculated for this
regulatory impact analysis.
[GRAPHIC] [TIFF OMITTED] TP25MR14.039
[[Page 16543]]
Both the annual earnings and discretionary income rates
were calculated by program for students receiving title IV, HEA program
funds who completed the program between October 1, 2007, and September
30, 2009, defined above as the 08/09 2012 D/E rates cohort.
D/E rates were not calculated for programs with fewer than
10 students in the 08/09 2012 D/E rates cohort. Unless otherwise
indicated, analysis of programs under the D/E rates measure in this
regulatory impact analysis includes only programs with 30 or more
students in the 08/09 2012 D/E rates cohort to reflect the D/E rates
measure minimum n-size requirements in the proposed regulations.
The SSA provided, at the program level, the 2011 calendar
year mean and median annual earnings of the 08/09 2012 D/E rates
cohort. Annual earnings include wages, salaries, tips, and self-
employment income. The higher of the mean or median annual earnings was
used as the annual earnings component of the annual earnings rate and
discretionary income rate calculations.
The annual loan payment was calculated by determining the
median loan debt for the 08/09 2012 D/E rates cohort and amortizing
that median debt amount over a 10-year period for undergraduate
certificate, associate degree, and post-baccalaureate certificate
programs, a 15-year period for bachelor's and master's degree programs,
and a 20-year period for doctoral and first professional degree
programs using an annual interest rate of 5.42 percent, which
represents the average undergraduate and graduate unsubsidized interest
rate on Federal Direct Unsubsidized Loans for the six years prior to
the end of the applicable cohort period.
Loan debt includes both FFEL and Direct Loans (except PLUS
Loans made to parents or Direct Unsubsidized loans that were converted
from TEACH Grants), private loans, and institutional loans that a
student received for attendance in the GE program.
In cases where students completed multiple GE programs at
the same institution, all loan debt was attributed to the highest
credentialed program that the students completed and the student was
not included in the calculation of rates for the lower credentialed
programs.
In calculating median loan debt, the loan debt associated
with a student was capped at an amount equivalent to the program's
tuition and fees if: (1) tuition and fees information was provided by
the institution, and (2) the amount of tuition and fees was less than
the student's loan debt. This tuition and fees cap applied to
approximately 15 percent of student records for the 08/09 2012 D/E
rates cohort.
For the discretionary earnings rate calculations, the
Poverty Guideline is the Federal poverty guideline for an individual
person in the continental United States as issued by the U.S.
Department of Health and Human Services. We used the 2013 Guideline of
$11,490 to conduct our analysis.
Excluded from the calculations are students whose loans
were in military deferment or who were enrolled at an institution of
higher education for any amount of time in the calendar year for which
earnings were retrieved or whose loans were discharged because of
disability or death.
The annual loan payment was truncated rather than rounded,
with no digits after the decimal place.
The annual earnings rate and discretionary income rate are
truncated two digits after the decimal place.
[GRAPHIC] [TIFF OMITTED] TP25MR14.043
The pCDR was calculated by program for students who
entered repayment between October 1, 2008, and September 30, 2009,
defined previously as the 09 2012 pCDR cohort, on FFEL or Direct Loans
received for attendance in the GE program.
Borrowers whose loans entered repayment represents the
number of students, by program, in the 09 2012 pCDR cohort.
Borrowers whose loans are in default represents the number
of students, by program, in the 09 2012 pCDR cohort who defaulted on
their FFEL or Direct Loans at any time within the first three fiscal
years of repayment. For the 09 2012 pCDR cohort, this was the period
between October 1, 2008, and September 30, 2011.
For programs with fewer than 30 students in the 09 2012
pCDR cohort:
[cir] Borrowers whose loans entered repayment also includes
students who entered repayment between October 1, 2006, to September
30, 2007 (2007 pCDR Cohort) and October 1, 2007, to September 30, 2008
(2008 pCDR Cohort) on FFEL or Direct Loans received for enrollment in
the GE program; and
[cir] Borrowers whose loans are in default also includes the number
of students, by program, in the 2007 and 2008 pCDR Cohorts who
defaulted on their FFEL or Direct Loans at any time within the first
three fiscal years of repayment. For the 2007 pCDR Cohort, this was the
period between October 1, 2006, and September 30, 2009. For the 2008
pCDR Cohort, this was the period between October 1, 2007, and September
30, 2010.
pCDR were not calculated for programs with less than 30
total combined students in the 2007 and 2008 pCDR Cohorts and 09 2012
pCDR cohort.
The pCDRs are truncated to two digits after the decimal
point.
Analysis of Impact of Student Demographics
In connection with the 2011 Final Rules and the public hearings and
meetings of the negotiating committee for the current gainful
employment negotiated rulemaking, we received comments that the results
of programs under the proposed GE measures is driven in large part by
the demographic characteristics of the students attending the programs
rather than characteristics of the programs themselves. For the current
rulemaking, we conducted an analysis to examine the contribution of
demographic factors, including the program's estimated concentration of
Pell Grant recipients and estimated concentration of minority students
(black, American Indian, or Hispanic), to program performance under the
proposed GE measures. Students qualify for Pell Grants based on a
number of factors, with household income being a primary factor, making
the share of students enrolled in a program who receive Pell Grants an
indicator of the socioeconomic status of students in a program.
To examine the extent to which student demographic factors explain
program performance under the proposed regulations, we developed two
regression models using the 2012 GE
[[Page 16544]]
informational rates. In the first regression the dependent variable was
the program's annual earnings rate. In the second regression, the
dependent variable was the program's cohort default rate.
Two explanatory variables measured at the program-level were used
for the annual earnings rate regression analysis. The first variable
was the percentage of students enrolled in the program who were Pell
eligible. The second variable was the percentage of students who were
enrolled in the program and had minority status (black, American
Indian, or Hispanic). The annual earnings rate regression analysis
showed that the percentage of Pell Grant recipients and the percentage
of students with minority status account for less than 2 percent of the
variation in annual earnings rates.
The pCDR regression analysis used the same program-level percentage
of Pell eligible students variable used in the annual earnings rate
regression analysis. Since program-level race/ethnicity data that
include both students who completed the program and those who did not
are not available, institution-level minority race/ethnicity data were
used as a proxy. The pCDR regression analysis showed that the
percentage of Pell Grant recipients and the percentage of students with
minority status accounted for less than 20 percent of the variation in
pCDR.
These results suggest that performance on the GE measures under the
proposed regulations is not substantially the result of Pell status or
race and ethnicity.
The Department further looked at explanatory factors for both the
annual earnings rate and pCDR by adding the following variables to the
regressions: sector (public, private non-profit, or for-profit) and
institution type (< 2-year, 2-3 year, >= 4-year), as well as additional
demographic characteristics including percentage of title IV recipients
that were female, above the age of 24, and had a zero estimated family
contribution. The Department found that by including these additional
variables, 36 percent of the variance in the annual earnings rate could
be explained and 33 percent of the variance in pCDR could be explained.
Analysis of the 2012 GE Informational Rates
The 2012 GE informational rates include only programs from the FY
2010 reporting that meet the minimum n-size criteria. Of the 37,589 GE
programs in the FY 2010 reporting with total enrollment of 3,985,329
students receiving title IV, HEA program funds, 7,934 programs,
representing 2,914,376 students receiving title IV, HEA program funds,
were evaluated in the 2012 GE informational rates.
Table 4 provides, by 2-digit CIP code, the number of programs in
the 2012 GE informational rates sample. Table 5 provides, by 2-digit
CIP code, the number of 2012 GE informational rate programs as a
percentage of all GE programs for which institutions reported program
information to the Department in FY 2010. Table 6 provides, by 2-digit
CIP code, the title IV enrollment of programs in the 2012 GE
informational rates sample. Table 7 provides, by 2-digit CIP code,
title IV enrollment of programs in the 2012 GE informational rates
sample as a percentage of all title IV enrollment in GE programs for
which institutions reported program information to the Department in FY
2010.
[[Page 16545]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.010
[[Page 16546]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.011
[[Page 16547]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.012
[[Page 16548]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.013
[[Page 16549]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.014
[[Page 16550]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.015
[[Page 16551]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.016
[[Page 16552]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.017
[[Page 16553]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.018
[[Page 16554]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.019
[[Page 16555]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.020
[[Page 16556]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.021
[[Page 16557]]
Table 8 provides the number of 2012 informational rate programs
that would be evaluated under the proposed regulations under the D/E
rates measure or the pCDR measure after application of the exclusions
and n-size requirements as explained in the ``Methodology'' portion of
this section.
[GRAPHIC] [TIFF OMITTED] TP25MR14.022
[[Page 16558]]
Table 9 shows the 2012 GE informational rate programs that are
passing, in the zone, or failing under the proposed GE measures.
[GRAPHIC] [TIFF OMITTED] TP25MR14.023
[[Page 16559]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.024
Tables 9a and 9b show by program count and title IV enrollment
respectively, for programs in the 2012 GE informational rate programs
that fail, results disaggregated by the metric that causes failure.
[[Page 16560]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.025
[[Page 16561]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.026
[[Page 16562]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.027
Table 10 provides the weighted averages of the median annual loan
payment, higher of the mean or median annual earnings and pCDR of
programs in the 2012 GE informational rates sample.
[[Page 16563]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.028
[[Page 16564]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.029
[[Page 16565]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.030
Table 11 shows the results of programs under the D/E rates measure
in the 2012 GE informational rates sample.
[[Page 16566]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.031
[[Page 16567]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.032
Table 12 disaggregate results under the D/E rates measure for the
two debt-to-earnings rates, the annual earnings rate and the
dicretionary income rate.
[[Page 16568]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.033
[[Page 16569]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.034
[[Page 16570]]
Table 13 shows the results of programs under the pCDR measure in
the 2012 GE informational rates sample.
[GRAPHIC] [TIFF OMITTED] TP25MR14.035
[[Page 16571]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.036
Table 14 provides program and FY 2010 title IV enrollment counts
for the 20 most frequent CIP-credential level combinations in the 2012
GE informational rates. In addition, Table 14 provides the percentage
of programs and enrollment that each CIP-credential level combination
represents of all programs in the 2012 GE informational rates sample.
[[Page 16572]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.037
[[Page 16573]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.038
Table 15 provides the weighted averages of the median annual loan
payment, higher of the mean or median annual earnings and pCDR for the
20 most frequent CIP-credential-level
[[Page 16574]]
combinations in the 2012 informational rates.
[GRAPHIC] [TIFF OMITTED] TP25MR14.044
[[Page 16575]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.045
Table 16 provides the 20 CIP-credential level combinations with the
highest FY 2010 title IV enrollment in the 2012 GE informational rates
sample. In addition, Table 16 provides the percentage of programs and
enrollment
[[Page 16576]]
that each CIP-credential level combination represents out of all
programs and enrollment and out of each CIP-credential level
combination in the 2012 GE informational rates sample.
[GRAPHIC] [TIFF OMITTED] TP25MR14.046
[[Page 16577]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.047
Table 17 provides the weighted averages of the median annual loan
payment, higher of the mean or median annual earnings, and pCDR for the
CIP-credential level combinations in the 2012 GE informational rates
sample
[[Page 16578]]
with the highest FY 2010 title IV enrollment.
[GRAPHIC] [TIFF OMITTED] TP25MR14.048
[[Page 16579]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.049
Table 18 shows the 20 most frequent CIP-credential level
combinations in the for-profit sector in the 2012 GE informational
rates sample.
[[Page 16580]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.050
[[Page 16581]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.051
Table 19 shows the 20 CIP-credential level combinations with the
highest title IV enrollment in the for-profit sector in the 2012 GE
informational rates sample.
[[Page 16582]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.052
[[Page 16583]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.053
Table 20 shows the 20 most frequent CIP-credential level
combinations in the public sector in the 2012 GE informational rates
sample.
[[Page 16584]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.054
[[Page 16585]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.055
Table 21 shows the 20 CIP-credential level combinations with the
highest title IV enrollment in the public sector in the 2012 GE
informational rates sample.
[[Page 16586]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.056
[[Page 16587]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.057
Table 22 provides the 2012 GE informational rate program and
enrollment counts for the CIP-credential level combinations with the
most programs that are failing or in the zone under the proposed GE
measures.
[[Page 16588]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.058
[[Page 16589]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.059
Table 23 provides the weighted averages of the median annual loan
payment, higher of the mean or median annual earnings, and pCDR for the
CIP-credential-level combinations with the most frequent zone or
failing programs
[[Page 16590]]
in the 2012 GE informational rates sample.
[GRAPHIC] [TIFF OMITTED] TP25MR14.060
[[Page 16591]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.061
[[Page 16592]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.062
Table 24 provides the 20 CIP-credential level combinations with the
highest FY 2010 title IV enrollment in zone and failing programs in the
2012 GE informational rates sample.
[[Page 16593]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.063
[[Page 16594]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.064
Table 25 provides weighted averages of the median annual loan
payment, higher of the mean or median annual earnings, and pCDR for the
CIP-credential level combinations in the 2012 GE informational rates
sample
[[Page 16595]]
with the highest FY 2010 title IV enrollment in zone and failing
programs.
[GRAPHIC] [TIFF OMITTED] TP25MR14.065
[[Page 16596]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.066
[[Page 16597]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.067
Table 26 provides the percentage of institutions (entities with
unique OPEID numbers) in the 2012 GE informational rates sample with
all passing programs and the percentage of all institutions
[[Page 16598]]
that have at least one zone or failing program.
Tables 22 through 25 demonstrate that, in many cases, for the most
common for-profit program types that would fail or fall in the zone
under the proposed regulations, some for-profit institutions are
offering the same exact program but with better outcomes for students.
These programs are resulting in less debt, higher earnings, and lower
default rates.
[GRAPHIC] [TIFF OMITTED] TP25MR14.068
[[Page 16599]]
Table 27 provides the concentration of zone and failing programs at
institutions in the 2012 GE informational rates sample.
[GRAPHIC] [TIFF OMITTED] TP25MR14.069
[[Page 16600]]
Table 28 provides the concentration of title IV enrollment in zone
and failing programs at institutions in the 2012 GE informational rates
sample.
[GRAPHIC] [TIFF OMITTED] TP25MR14.070
[[Page 16601]]
Table 29 provides earnings information for programs in the 2012 GE
informational rates sample.
Table 29--Programs in the 2012 GE Informational Rates Sample by Earnings Level
--------------------------------------------------------------------------------------------------------------------------------------------------------
All sectors Public Private For-profit
-------------------------------------------------------------------------------------------------------------
% of all
t4
% of all students
Earnings level D/E n30 in D/E
Programs programs t4 n30 Programs t4 Programs t4 Programs t4
with students programs students students students
earnings with
data earnings
data
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than Poverty Guidelines for 1 person 631 11.4 115,581 4.6 60 6,108 63 11,086 508 98,387
($11,490)................................
Less than Federal min wage ($15,080)...... 1,492 26.9 351,581 13.9 137 16,223 95 20,037 1,260 315,321
Less than 150% of Poverty Guidelines for 1 2,090 37.7 540,381 21.4 189 29,069 118 25,105 1,783 486,207
person ($17,235).........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Discussion of Costs, Benefits, and Transfers
Assumptions and Methodology for Costs, Benefits, and Transfers and Net
Budget Impacts
Assumptions
We made assumptions in three areas in order to estimate the impact
of the proposed regulations on the title IV, HEA programs:
1. Program performance under the proposed regulations;
2. Student behavior in response to program performance; and
3. Growth rates of enrollment in GE programs.
Program Performance Assumptions
Given a program's results under the D/E rates and pCDR measures in
any year--passing, in the zone, or failing, or not evaluated because
the program did not meet the minimum n-size requirements--we developed
assumptions for the likelihood that, in the subsequent year, the
program's results would place it in any of the following six
categories:
1. Passing (program would have to pass both the D/E rates and pCDR
measures);
2. In the zone (program would be in the zone under the D/E rates
and pass pCDR);
3. Failing for the first time (program would be failing under
either or both the D/E rates and pCDR measures);
4. Failing for the second time (program would be failing for the
second time under the pCDR measure; a second failure under the D/E
rates measure would make the program ineligible);
5. Ineligible under either or both measures (a program could become
ineligible in one of three ways: (a) by failing the D/E rates measure
for two consecutive years or two out of three consecutive years, (b) by
being in the zone for four consecutive years, or (c) by failing pCDR
for three consecutive years); and
6. Not evaluated because the program failed to meet the minimum n-
size requirements for both the D/E rates and pCDR measures.
The likelihood of each of the year 1-year 2 combinations (e.g., a
program could fail in year 1 but pass in year 2) are guided by our
observations of the GE programs in our data set for which we were able
to calculate D/E rates or pCDR for two consecutive years. For the D/E
rates, the first year's results are based on the outcomes of students
who completed GE programs in FYs 2007 and 2008, and the second year's
results are based on the outcomes of students who completed GE programs
in FYs 2008 and 2009. In order to maximize the number of programs in
the two-year comparative analysis, we applied a minimum n-size of 10
for the D/E rates. For pCDR, the first year's results are based on the
outcomes of students who entered repayment in FY 2008, and the second
year's results are based on the outcomes of students who entered
repayment in 2009. Table 30 shows the changes in results from year one
to year two for the programs for which we could calculate two years of
D/E rates or pCDR.
[[Page 16602]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.102
The observed changes in the two-year program results from our data
set informed, but did not define, our assumptions for year-to-year
program results because they are based on years in which there were no
regulations regarding GE programs. Our assumptions for year-to-year
program results are provided in Table 31.
For year 1 to year 2, the assumed changes are identical to the
observed two-year program results. We made one exception to this for
programs that failed in two consecutive years because the assumptions
must account for the difference in results for a program that failed
the D/E rates measure twice, ineligibility, and one that failed the
pCDR measure, a second fail. For this combination, fail in year 1 and
fail in year 2, we used two data points to determine the percentage of
programs that are assumed to be ineligible and the percentage of
programs that are assumed to have a second fail. First, we observed in
the two-year results that of the programs that fail in year 1, 57
percent fail in year 2. Second, we found that, of all failing programs
in the year 2 data set regardless of whether they had a year 1 result,
50 percent (49 percent rounded) failed the D/E rates. We used this to
assume that of the 57 percent of year 1 failures that failed in year 2
in our two-year results, half, or 29 percent (28.5 percent rounded)
would fail the D/E rates measure for a second consecutive year and
therefore become ineligible. The other half, 29 percent (28.5 percent
rounded), were assumed to receive a second consecutive pCDR failure,
which would place these programs in the second fail category in our
assumptions in Table 31. We maintained this even split for each year of
our assumptions. After year 1 to year 2, assume some first fail
programs may fall into the not evaluated category in subsequent years
because program enrollments and completions may fluctuate from year-to-
year causing some programs to fall below the minimum n-size
requirements for the GE measures.
For the other categories of year 1-year 2 program results, after
year 1 to year 2, the assumed changes between program results are
guided by the observed two-year results but are adjusted slightly to
reflect assumed improved program performance in response to the
proposed regulations. So, each year, we assume a modest increase in the
percentage of programs that improve from failing to zone or passing and
from zone to passing. But, for year 4 to year 5, as provided under the
proposed regulations, we assume that some percentage of zone programs
would become ineligible.
Because we were only able to determine two years of program results
from our data set, we did not have observed results for the second fail
category. For the first year that second fail programs would exist,
year 2, we assumed that a relatively large percentage of programs would
become ineligible in the subsequent year. After that, as with the other
categories, we assumed improved program
[[Page 16603]]
performance from year to year and gradually decreased the percentage of
second fail programs that would become ineligible.
[GRAPHIC] [TIFF OMITTED] TP25MR14.072
[[Page 16604]]
Student Response Assumptions
Depending on the results that a program receives--passing, in the
zone, failing in the first year, failing in the second year,
ineligible--we developed assumptions for the likelihood that a student
would transfer to a passing program, transfer to a zone program, remain
in the program, or drop out. These assumptions were developed for two
scenarios. The first scenario assumes that students would have a ``low
reaction'' to program results. The second assumes that students would
have a ``high reaction'' to program results. Our assumptions regarding
student responses to program results are provided in Table 32. These
student response rates are based on our best judgment and are presented
to facilitate comment on the estimated impacts of the proposed
regulations.
[GRAPHIC] [TIFF OMITTED] TP25MR14.073
Enrollment Growth Rate Assumptions
We estimated, for each fiscal year, the rate of growth or decline
in enrollment of students in GE programs receiving title IV, HEA
program funds. This estimate is based on the Department's President's
Budget (PB) 2015 loan projections by institution type and, for for-
profit institutions, level. The budget estimates for growth do not
specify credential level, so we based our enrollment estimates for
programs at public and private non-profit institutions on the estimates
for 2-year or less institutions because the budget estimates for 4-year
institutions would be driven to a greater extent by degree programs not
subject to the proposed
[[Page 16605]]
regulations. The 2-year or less category is the closest approximation
of GE programs available in the budget projections, and so we applied
these projections to public and private non-profit institutions. For
private for-profit institutions, the estimates are split into rates for
2-year or less and 4-year private for-profit institutions. For the PB
2015 estimates, the Department had data through September 2013, so the
estimates for 2010-2011 through 2012-2013 are based on actual data
showing a decline in Stafford subsidized loans for 2-year public and
private non-profit institutions, 2-year or less private for-profit
institutions, and 4-year for-profit institutions. Our data also
included the first quarter of the 2013-2014 award year. The first
quarter generally represents about 50 percent of the loans in a given
year, which was the basis for our estimate that enrollment will decline
in the 2013-2014 and 2014-2015 award years. For subsequent years, we
assumed a reversion to long-run historical averages for the relevant
institutional categories.
[GRAPHIC] [TIFF OMITTED] TP25MR14.074
Methodology for Net Budget Impacts
To calculate the net budget impacts estimate, we developed a simple
model based on the assumptions previously described for the estimated
yearly rate of enrollment change of students receiving title IV, HEA
program funds in GE programs, program results, and student response to
program results.
We estimated the enrollment of students receiving title IV, HEA
programs funds for FYs 2016-2024 by applying the enrollment growth
assumptions to the enrollment of students receiving title IV, HEA
program funds for FY 2010 that we determined based on data received
from institutions through reporting under the 2011 Prior Rule. We then
assumed that the program results--passing, zone, failing, and not
evaluated--for 2016 would be identical to those under the 2012 GE
informational rates but applied a minimum n-size of 15 for the D/E
rates calculations. In order to ensure as accurate an estimate as
possible, the distribution for the budget estimate is based on a D/E
rates n-size of 15 because we assume these programs would have 30
students who completed the program over a 4-year period and may be
subject to the proposed regulations. It is important to note that the
results provided in the ``Analysis of the Proposed Regulations''
section are based on a minimum n-size of 30 for the D/E rates measure.
The estimated 2016 enrollment and program results were used to
establish an initial 2016 distribution of students by program result.
Table 34 provides the estimated initial 2016 distribution of programs
and title IV enrollment by program result.
[[Page 16606]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.075
The estimated change in enrollment from 2016 to 2017 was then
applied to this distribution of students. We then estimated student
behavior in response to these results based on our student reaction
assumptions to create the distribution of students at the beginning of
the subsequent year, 2017, before the programs receive a second
determination of their GE measures. Next, we applied our assumed change
in year-to-year program results to the initial 2016 program results to
create a new distribution of programs, and corresponding enrollment, to
which ineligibility was added as a result since the second year of
results is the first time that programs could become ineligible. We
repeated this cycle for each subsequent year to 2024. The student
response to program performance is assumed to be constant for each
cycle while the year-to-year program transitions assume some
institutional learning and improved ability to meet the GE measures
over time as reflected in the reduced percentage of failing programs
that become ineligible and increased percentage of programs that pass
the GE measures in later years.
This process produced a yearly estimate for the number of students
receiving title IV, HEA program funds who will choose to enroll in a
better-performing program, remain in a zone, failing, or ineligible
program, or will choose to drop out of postsecondary education
altogether after their program receives a zone or failing result or
becomes ineligible. The estimated net savings for the title IV, HEA
programs results from students who drop out of postsecondary education
in the year after the program that they are enrolled in receives rates
that are zone or failing or who remain at a program that becomes
ineligible for title IV, HEA program funds. We assume no budget impact
on title IV, HEA programs from students who transfer from programs that
are failing or in the zone to better-performing programs as the
students' eligibility for title IV, HEA program funds carries with them
across programs. To estimate the yearly Pell Grant and loan volume that
would be removed from the system based on the low reaction and high
reaction scenarios, we multiplied the number who leave postsecondary
education or who remain in ineligible programs by the average Pell
grant amount and average loan amount for each type of title IV, HEA
program loan, from NPSAS 2012, for students who received some type of
title IV aid by sector and credential level. To determine the estimated
subsidy cost of the reduced loan volume in the ``Net Budget Impacts''
section, the yearly loan volumes were multiplied by the PB 2015 subsidy
rates for the relevant loan type.
Methodology for Costs, Benefits, and Transfers
The estimated number of students for each response category was
used to quantify the costs and transfers in the ``Discussion of Costs,
Benefits, and Transfers'' section of this analysis. We quantify a
transfer of title IV, HEA program funds from programs that lose
students to programs that gain students. We also quantify the transfer
of instructional expenses as students shift programs as well as the
cost associated with additional instructional expense to educate the
students who transfer to better-performing programs. We calculated
estimated costs and transfers for each year from 2017 to 2024.
In this analysis, student transfers could be of students who
enrolled in a program and switch programs or prospective students who
choose an alternative program to one they would have chosen in the
absence of the proposed regulations. Based on our assumptions, the
average number of yearly transfers between 2017 and 2024, rounded to
the nearest thousand, would be 172,000 for the low reaction scenario
and 233,000 for the high reaction scenario, respectively.
For both the low student reaction and high student reaction
scenarios, we multiplied the estimated number of students receiving
title IV, HEA program funds transferring from ineligible, failing, or
zone programs each year by the average Pell Grant, Stafford subsidized
loan, unsubsidized loan, PLUS loan, and GRAD PLUS loan, as determined
by NPSAS 2012, to calculate the amounts of student aid that could shift
with students each year. In order to annualize the amount of student
aid transfers over the 2014-2024 budget window, we made two separate
total net present value (NPV) calculations of each year's estimated
amount of transfer in student aid, one calculation using a discount
rate of 3 percent, and the other using a discount rate of 7 percent.
These two discount rates are standards set by OMB for use in the
Accounting Statement provided in Table 41. As provided in Table 41, the
estimated range for the amount of student aid transfers annualized over
the 2014-2024 budget window would be $1.4 billion (low reaction) to
$2.0 billion (high reaction) at a 7 percent discount rate and $1.35
billion (low reaction) to $1.8 billion (high reaction) at a 3 percent
discount rate.
As stated, we also quantify the transfer of instructional expenses
as students shift programs as well as the cost associated with
additional instructional expense to educate the students who transfer
to better-
[[Page 16607]]
performing programs. For the transfer of instructional expenses, we
applied the $4,529 average for-profit instructional expense per
enrollee for 2010-2011 from IPEDS to the estimated number of annual
student transfers from 2017-2024. We estimate that the range of
annualized transfers in instructional expenses would be $705 million
(low reaction) to $962 million (high reaction) at a 7 percent discount
rate and $660 million (low reaction) to $896 million (high reaction) at
a 3 percent discount rate.
For the analysis of the additional cost of educating students at
better-performing programs, we collected IPEDS data on instructional
expenses for 2010-2011 and applied the expense per enrollee to each
institution's programs and determined the average instructional expense
per enrollee of passing, zone, and failing programs in the 2012 GE
informational rates. We applied a difference of $1,212 for those who
transfer from failing to passing programs and $924 for those who
transfer from zone to passing programs to the estimated number of
students who will transfer between 2017 and 2024. As provided in Table
41, we estimate that the range of the additional annualized cost of
educating students at better-performing programs over the 2014-2024
budget window would be $173 million (low reaction) to $236 million
(high reaction) at a 7 percent discount rate and $162 million (low
reaction) to $230 million (high reaction) at a 3 percent discount rate.
Discussion of Costs, Benefits, and Transfers
The potential primary benefits of the proposed regulations are: (1)
Improved and standardized market information about GE programs that
would increase the transparency of student outcomes for better decision
making by students, prospective students, and their families, the
public, taxpayers, and the Government, and institutions and lead to a
more competitive marketplace that encourages improvement; (2)
improvement in the quality of programs and reduction in costs and
student debt; (3) elimination of poor performing programs; (4) better
return on educational investment for students, prospective students,
and their families, as well as for taxpayers and the Federal
Government; and (5) for institutions with high-performing programs,
potential growth in enrollments and revenues resulting from the
additional market information that would permit those institutions to
demonstrate to consumers the value of their GE programs.
We have considered and determined the primary costs and benefits of
the transparency framework and accountability framework for the
following groups or entities that we expect to be affected by the
proposed regulations:
Students
Institutions
Federal, State, and local government
We discuss first the broad benefits that we would expect to result
from improved market information. We then describe the impact of the
proposed regulations--both the costs and the benefits--for each of
students, institutions, and the Federal Government and State and local
governments.
Improved Market Information
The proposed regulations would provide a standardized process and
format for students, prospective students, and their families to obtain
information about borrowing, earnings, completion, and the incidence of
defaults among GE programs. This information would allow them to make
educated decisions based on reliable information about a program's
costs and the outcomes of former students. The proposed disclosures
would provide prospective students with extensive, comparable, and
reliable information that would assist them in avoiding overpaying and
overborrowing for postsecondary credentials.
As explained in connection with the 2011 Prior Rule, the improved
information that would be available as a result of the proposed
regulations would also benefit institutions in addition to students,
prospective students, and their families. 76 FR 34491. We continue to
believe that debt, earnings, and default information would provide a
clear indication to institutions about whether their students are
successful in securing positions that allow them to repay their loans
and avoid default. Id. This information would help institutions
determine when it would be prudent to expand programs or whether
certain programs should be improved or eliminated or offered at a
reduced cost. Id. Additionally, institutions may be encouraged to
better prepare students for jobs in well-paying and in-demand fields in
order to meet the requirements of the GE measures. Id. This effect
could create an incentive for institutions to provide higher-quality
and more comprehensive training, so that they prepare students for jobs
with better salaries and employment prospects. 76 FR 34492.
The information provided in the disclosures would also allow the
public, taxpayers, and the Government to monitor the results of the
Federal investment in these programs, and would allow institutions to
see which programs produce exceptional results for students so that
those programs may be emulated.
Students
Students would benefit from lower tuition prices or improved
program quality as institutions with failing or zone programs seek to
comply with the proposed regulations. Lower tuition may also result in
reduced educational debt for students. Efforts to improve programs by
offering student services to increase persistence and completion, work
with employers to ensure graduates have needed skills, improve academic
quality, and help students with career planning could lead to better
outcomes and higher earnings over time. Students who graduate with
manageable debts and adequate earnings would be able to save for
retirement or other goals, form families, or take out other debt for
home ownership or business opportunities.
Students enrolled in programs that do not pass the proposed D/E
rates measure or pCDR measure would be particularly affected by the
proposed regulations. Based on the assumptions and methodology
described previously in this section, we estimate that the FY 2010
enrollment of students who received title IV, HEA program funds in
programs that would fail either GE measure or fall in the zone under
the D/E rates measure is approximately 1.2 million. We estimate that,
in 2016, approximately 2.9 million students receiving title IV, HEA
funds would be enrolled in programs evaluated under the proposed
regulations, of which approximately 585,000 would be in failing
programs and 223,000 in zone programs, totaling 808,000. As programs
become ineligible for title IV, HEA program funds, students enrolled in
those programs (or prospective students who would have enrolled in
them) would have to choose among other title IV, HEA programs (at the
same or other institutions), or pay for the program without the use of
title IV, HEA program funds if the institution continues to offer the
program. Similarly, students enrolled in programs that receive a zone
or failing result would face a similar choice as to whether to transfer
to a higher-performing program or remain in the program. Students who
transfer to programs at other postsecondary institutions to continue
their education could face increased commuting costs, additional
tuition and fees if their credits do not transfer, or other costs
[[Page 16608]]
due to disruptions in their educational plans.
Some students may choose to drop out of postsecondary education if
their program loses title IV, HEA program eligibility or if the program
receives a zone or failing result. We estimate that, under the low and
high reaction scenarios, 22,000 current or prospective students in the
low reaction scenario, and 45,000 current or prospective students in
the high reaction scenario, would not continue postsecondary education
in the year after the first program results are released under the
proposed regulations. Some of these students may eventually continue
their postsecondary education, but others may not return.
The number of programs that could lose eligibility and the number
of students who could transfer to another program or drop out of
postsecondary education as a result of poor program performance raises
a concern about the supply of GE programs available to students. In the
short term, the supply of GE program enrollment capacity could be
reduced, particularly in locations served by few providers, as programs
become ineligible or institutions close programs that receive zone or
failing results despite the opportunity to improve during the
transition period. Over time, we expect existing or new postsecondary
institutions to expand capacity among programs that meet the GE
measures and to establish new programs, and that new and expanded
programs would perform better than closed programs. Some students could
also choose to enroll in programs at for-profit institutions outside of
the Federal student aid system. Researchers estimate that 4,600
postsecondary institutions operate outside of the title IV, HEA
programs, enrolling approximately 700,000 students, and that these
institutions are ``long-lived, surviving and apparently thriving
without access to title IV funds,'' and that they provide programs of
comparable net price and quality to those operating inside the title
IV, HEA system.\166\
---------------------------------------------------------------------------
\166\ Goldin, C., and Cellini S. R. Does Federal Student Aid
Raise Tuition? New Evidence on For-Profit Colleges. American
Economic Journal: Economic Policy. Forthcoming.
---------------------------------------------------------------------------
Students would not only be affected by the results of the programs
in which they are enrolled or plan to enroll in, but also by the
proposed requirements that students read the disclosures and students
warnings from institutions. We estimate that this would increase the
paperwork burden on students by an estimated 2,167,129 hours in the
initial year of reporting. The monetized cost of this additional burden
on students, using wage data developed using Bureau of Labor Statistics
data, available at www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $35,324,203
and is detailed more fully in Paperwork Reduction Act of 1995.
Institutions
For institutions, the impact of the proposed regulations would
likely be mixed. As noted in connection with the 2011 Prior Rule,
institutions with programs that do not pass, including programs that
lose eligibility, are likely to see lower revenues and possibly reduced
profit margins. 76 FR 34493. On the other hand, institutions with high-
performing programs are likely to see growing enrollment and revenue
and to benefit from additional market information that permits
institutions to demonstrate the value of their programs. Id.
As the proposed regulations are implemented, institutions would
inevitably incur costs as they make changes needed to comply with the
new regulations. These costs could include but would not be limited to
one or more of the following, as they relate to satisfying the
requirements of the proposed regulations: (1) Training of staff for
additional duties, (2) potential hiring of new employees, (3) purchase
of new software or equipment, and (4) procurement of external services.
Compliance costs may be administrative in nature or aimed at improving
program outcomes under the GE measures. As discussed in connection with
the 2011 Prior Rule, an institution could choose to spend more on
curriculum development to better link a program's content to the needs
of in-demand and well-paying jobs in the workforce. 76 FR 34492.
Institutions could also allocate more funds toward other functions,
such as hiring better faculty; providing training to existing faculty
to improve program outcomes; tutoring or providing other support
services to assist struggling students; providing career counseling to
help students find jobs; or other areas where increased investment
could yield improved performance on the GE measures. Id.
These costs are difficult to quantify as they would vary
significantly by institution and ultimately depend on institutional
behavior. Institutions where the majority of their programs are passing
the proposed GE measures could be inclined to commit only minimal
resources toward compliance activities associated with satisfying the
requirements of the proposed regulations. Institutions with multiple
failing or zone programs could decide to devote significant resources
toward compliance activities, depending on their existing capacity
levels. Small or single-program institutions with failing or zone
programs could decide to commit a significant amount of resources to
compliance activities as the suspension of the title IV, HEA program
eligibility of one or more of their programs could have severe
financial consequences or even lead to closure. However, regardless of
performance, we expect that all institutions with GE programs would
incur at least minor costs due to compliance-related activities.
Whatever the costs institutions devote to program changes to
improve results to comply with the proposed regulations, institutions
would incur costs associated with the reporting and disclosure
requirements of the proposed regulations. This additional workload is
discussed in more detail under Paperwork Reduction Act of 1995. As
discussed in connection with the 2011 Prior Rule, additional workload
would normally be expected to result in estimated costs associated with
either the hiring of additional employees or opportunity costs related
to the reassignment of existing staff from other activities. 76 FR
34493. In total, the proposed regulations are estimated to increase
burden on institutions participating in the title IV, HEA programs by
4,775,248 hours in the first year of reporting as multiple years are
reported at once. The monetized cost of this additional burden on
institutions in the first year of reporting, using wage data developed
using BLS data available at: www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is
$174,535,314. This cost was based on an hourly rate of $36.55. We would
expect this amount to decrease in subsequent years to approximately $29
million.
As discussed in connection with the 2011 Prior Rule, institutions
would possibly incur administrative costs from enrolling additional
students who transfer to their GE programs in response to the
disclosures and warnings for other GE programs. 76 FR 34492. Schools
for which their required disclosure metrics reveal less than
satisfactory outcomes for current or former students may experience
revenue losses via enrollment decreases. We expect a strong response
from prospective students who are notified that they may not be able to
use title IV, HEA program funds in the future to attend a program they
are considering. We also continue to project that some
[[Page 16609]]
students may withdraw or transfer completely from an institution while
others may transfer into another program at the institution if
possible. Id. Institutions with programs of different costs may also
incur revenue losses if current or prospective students choose to
transfer or enroll in a less expensive program at the same institution.
Id. Although lower costs are a driving factor for many passing programs
and the transfer of students to passing programs might result in lower
revenue across the postsecondary system, students might also examine
the disclosure data and elect to attend a program in a different
sector, CIP code, or credential level that could result in the student
paying more than he or she would have paid for the original program,
potentially increasing institutional revenues. Id.
Expenses associated with educating students would also shift.
Educating additional students requires a postsecondary education
institution to incur additional costs--both fixed costs (for example,
additional classroom space) and variable costs (such as hiring
additional instructors). Id. As a result, there would be a shift of
certain costs from institutions with zone and failing programs to
institutions with passing programs. Id. We estimate that, on average
over 2017-2024, approximately 172,000 current or prospective students
in the low reaction scenario and 233,000 current or prospective
students in the high reaction scenario would transfer programs
annually. Applying the average instructional expense of $4,529 for for-
profit institutions from IPEDS data for 2010-2011,\167\ we estimate the
annualized transfer of instructional expenses to be $705 million in the
low reaction scenario to $962 million in the high reaction scenario at
a 7 percent discount rate and $660 million in the low reaction scenario
to $896 million in the high reaction scenario at a 3 percent discount
rate.
---------------------------------------------------------------------------
\167\ U.S. Department of Education, National Center for
Education Statistics, Condition of Education 2010 table 416,
available at https://nces.ed.gov/programs/digest/d12/tables/dt12_416.asp.
---------------------------------------------------------------------------
Assuming institutions act rationally in determining program
offerings and do not offer programs at a loss for an extended period, a
reduction or increase in enrollment would result in some profit loss or
gain to sending or receiving institutions. Further, some institutions
could decide to lower their tuition prices in response to the proposed
regulations in order to ensure the long-term viability of their
programs but, in the process, would reduce their revenue levels.
The proposed regulations may lead to increased enrollments and
revenue for those institutions with passing programs. As the public
gains more information about GE programs, individuals would be able to
make informed market decisions and identify high-performing programs
that match their interests. As noted in connection with the 2011 Prior
Rule, the better and clearer information that would be available about
GE programs would also benefit institutions with high-performing
programs, which could use their performance on the GE measures to
differentiate themselves from competitors. 76 FR 34492. The proposed
regulations would allow an institution to demonstrate to prospective
students that its programs lead to better wages, lower debt burdens,
and a higher likelihood of ability to repay student loan debt than
competitor offerings--easily understandable data that tell a clear
story about student success. Id.
In the scenarios evaluated in ``Net Budget Impacts,'' we estimate
that approximately 172,000 current or prospective students in the low
reaction scenario and 233,000 current or prospective students in the
high reaction scenario might transfer or elect to attend passing or
zone programs annually instead of programs that fail the GE measures or
become ineligible for title IV, HEA program funds. We estimate that
approximately $1.4 billion in title IV, HEA Pell Grant aid and loan
volume in the low reaction scenario and approximately $2.0 billion in
the high reaction scenario at a 7 percent discount rate and $1.35
billion in title IV, HEA Pell Grant aid and loan volume in the low
reaction scenario and approximately $1.8 billion in the high reaction
scenario at a 3 percent discount rate would transfer between failing
and ineligible programs to passing or zone programs on an annualized
basis. These amounts reflect the anticipated high level of initial
transfers as institutions adapt to the proposed regulations and failing
and zone programs eventually lose eligibility for title IV, HEA program
funds. We would expect the title IV, HEA program funds associated with
student transfers related to the proposed regulations to decline in
future years. These figures assume students would receive the same
amount of title IV, HEA program funds at the new program as the program
in which the student is currently enrolled.
As noted in the 2011 Prior Rule, when students transfer programs,
the expense of providing instruction shifts with them along with
revenues and aid amounts. 76 FR 34492. The added expense of educating
students at better-performing programs is a cost, but, as we noted in
the regulatory impact analysis of the 2011 Prior Rule, a cost
associated with improved program quality. 76 FR 34492. To determine the
added instructional costs resulting from student transfers, as
described in ``Methodology for Costs, Benefits, and Transfers,'' we
applied the difference in instructional expenses per enrollee of $1,212
for those who transfer from failing to passing programs and $924 for
those who transfer from zone to passing programs to the estimated
number of students who will transfer from our net budget estimate. The
additional cost of educating students who shift from low-performing
programs to programs with better results would be approximately $173
million under the low reaction scenario and $236 million under the high
reaction scenario at a 7 percent discount rate and $162 million under
the low reaction scenario and $220 million under the high reaction
scenario at a 3 percent discount rate on an annualized basis.
Federal Government
A primary benefit of the proposed regulations would be improved
oversight and administration of the title IV, HEA programs.
Additionally, as detailed in ``Net Budget Impacts,'' we anticipate some
small savings in the title IV, HEA programs as some students who would
have attended programs that fail the GE measures would elect not to
pursue postsecondary education. Also, students enrolled in programs
that become ineligible may choose to remain in those programs and
forego Federal loans or Pell Grants or transfer to a for-profit
institution that does not participate in the title IV, HEA programs. As
provided in Tables 35 and 36, based on the assumed responses of these
students, we estimate a total savings of $666 million to $973 million
over the 2014-2024 loan cohorts in the low reaction and high reaction
scenarios respectively. This represents our best estimate of the effect
on title IV, HEA programs. We assume that most students who transfer
out of failing or zone programs to programs with better results would
still receive title IV, HEA program funds, and accordingly estimate
that the response of these students would have little to no impact on
the title IV, HEA programs budget.
State and Local Government
As noted in connection with the 2011 Prior Rule, if States choose
to expand enrollment of passing programs, it is not necessarily the
case that they will face marginal costs that are similar to their
average cost or that they will only
[[Page 16610]]
choose to expand through traditional brick-and-mortar institutions. 76
FR 34493. The Department continues to find that many States across the
country are experimenting with innovative models that use different
methods of instruction and content delivery that allow students to
complete courses faster and at a lower cost. Id. Rather than adding
additional buildings or campuses, States may instead opt to expand
online education offerings or try innovative practices like awarding
credit when students demonstrate they have mastered a competency. Id.
Forecasting the extent to which future growth would occur in
traditional settings versus online education or some other model is
outside the scope of this analysis. Id.
We welcome comments on the effects of the proposed regulations on
students, institutions, the Federal Government and State and local
government, and other stakeholders. Any comments received will be
considered in the development of the final regulations.
Net Budget Impacts
We do not expect these regulations to significantly affect Federal
costs, as the vast majority of students are typically assumed to resume
their education at another program in the event the program they are
attending loses eligibility to participate in the title IV, HEA
programs. As discussed in connection with the 2011 Prior Rule,
scenarios presented in this regulatory impact analysis anticipate that
some students would not pursue education if warned about debt burdens
or if their program loses eligibility, so we have estimated potential
Federal costs under the low reaction scenario and high reaction
scenario. 76 FR 34495. We continue to project that estimated savings
come from Federal loans and Pell Grants not taken by students who do
not pursue an education in each scenario. Id. As provided in Tables 35
and 36, the estimated net impact on the Federal budget between the FY
2014 and FY 2024 loan cohorts is savings of $666 million in the low
reaction scenario and $973 million in the high reaction scenario. A
cohort reflects all loans originated in a given fiscal year. Consistent
with the requirements of the Credit Reform Act of 1990, budget cost
estimates for the student loan programs reflect the estimated net
present value of all future non-administrative Federal costs associated
with a cohort of loans. As discussed in connection with the 2011 Prior
Rule, estimated reductions in Pell Grants are offset by increased
subsidy costs from reduced unsubsidized and PLUS loan volumes. 76 FR
34495. As provided in Tables 35 and 36, the estimated reductions in
Pell Grants of approximately $702 million in the low reaction scenario
and $1.0 billion in the high reaction scenario would be offset by
increased subsidy costs from reduced unsubsidized and PLUS loan
volumes. We continue to believe that the potential savings represent
our best estimate of the effect of the regulations on the Federal
student aid programs, but student responsiveness to program
performance, programs' efforts to improve performance, and potential
increases in retention rates could offset the estimated savings. Id.
Tables 35 and 36 present the net budget impact of the proposed
regulations under the low reaction and high reaction scenarios. While
Table 37 presents the approximate effect on the estimated initial
37,589 programs that would first be evaluated under the proposed
regulations, it does not take into account the addition of new
programs.
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[[Page 16615]]
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The amounts presented represent our best estimate of the range of
the net budget impact given certain assumptions about student and
institutional responses to the proposed regulations and the data and
results that
[[Page 16616]]
will be generated when the proposed regulations take effect. Many
factors could affect whether the net budget impact falls within the
range established by the scenarios presented or outside of that range.
For example, if students, including prospective students, react more
strongly to the consumer disclosures or potential ineligibility of
programs than anticipated in the scenarios, the impact on Pell Grants
and loans affected could increase substantially. Similarly, if
institutions react to the implementation of the proposed regulations by
modifying their program offerings, enrollment strategies, or pricing,
the estimated enrollments and aid amounts used in the scenarios above
could be overstated.
As described in ``Analysis of the Proposed Regulations,'' the data
available for analyzing the proposed regulations are subject to several
limitations, among them the lack of performance information for
certificate programs once disaggregated, the use of the old attribution
rules that combined undergraduate and graduate debt at the same
institutions, and the inability to predict the extent to which
institutions would take advantage of the transition period to reduce
the costs to students of failing and zone programs. Although these
factors are not explicitly accounted for in the estimates, we expect
that they would all operate to reduce the number of failing and zone
programs and affected students.
Additionally, as previously stated, we do not estimate any
significant budget impact from student transfers when a program they
attended or planned to attend loses eligibility for title IV, HEA
program funds or when a program's performance is disclosed. Although it
is true that programs have varied costs across sector, CIP code,
credential level, location, and other factors, the students'
eligibility for title IV, HEA program funds carries with them across
programs. It is possible that passing and zone programs that students
choose to transfer to could have lower prices than the failing or
ineligible programs, and the amount of title IV, HEA program funds to
GE programs may be reduced as a result of those transfers. However,
students or counselors may also use the disclosures and earnings
information to choose a different field of study or credential level
which could result in increased aid volume. In general, we anticipate
that overall aid to students who transfer among GE programs or to non-
GE programs will not change significantly, so no net budget impact was
estimated for these students. However, an estimated economic impact
from transfers as an amount of revenues and instructional expenses that
could transfer from zone, failing, and ineligible programs to zone and
passing programs that receive students was presented in ``Discussion of
Costs, Benefits, and Transfers'' and in the Accounting Statement.
The effects previously described represent the estimated effects of
the proposed regulations during the initial period of time after the
proposed regulations take effect. We expect, as noted in connection
with the 2011 Prior Rule, that the budget effects of the proposed
regulations would decline over time as programs that could not comply
are eliminated and institutions have more data about program
performance under, and are more familiar with, the GE measures. 76 FR
34484. This is similar to the pattern observed when cohort default
rates (CDR) were introduced in 1989 with an initial elimination of the
worst-performing programs followed by a new equilibrium in which
programs complied with the minimum standards in the regulations. Id. We
do not expect the impact of the proposed regulations on program results
to drop off as sharply as occurred with the introduction of
institutional CDR. This is because the inclusion of multiple measures,
the need to fail the D/E rates measure at least twice in three
consecutive years or not pass in four years and the need to fail the
pCDR measure for three consecutive years to be ineligible, the
transition period, and the continued introduction of new programs will
extend the effect of the proposed regulations on program results.
Alternate Enrollment Projections
In developing the estimated net budget impact, we also analyzed the
effects of the proposed regulations based on NCES enrollment
projections instead of the PB 2015 budget loan estimates. Although the
primary estimate of the net budget impact and the estimates in the
``Discussion of Costs, Benefits, and Transfers'' section are based on
the Department's budget projections, we are providing the results of
the alternative NCES-based enrollment projections as additional
information for commenters.
Table 38--Alternate NCES Enrollment Growth Rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010-16 2017 2018 2019 2020 2021 2022 2023
Sector (Percent) (Percent) (Percent) (Percent) (Percent) (Percent) (Percent) (Percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public.................................................. 7.00 1.50 1.60 1.50 1.30 0.90 1.20 1.20
Private................................................. 7.40 1.50 1.70 1.50 1.20 0.90 1.30 1.30
--------------------------------------------------------------------------------------------------------------------------------------------------------
In conducting this analysis, all other assumptions about student
and program response were held constant. The estimated NCES-based
enrollment of students receiving title IV, HEA program funds in 2016
would be 4.3 million compared to 2.9 million in the primary estimate
and the estimated savings for the net budget impact across loan cohorts
2014-2024 would be $988 million in the low reaction scenario to $1.4
billion in the high reaction scenario, compared to the primary estimate
of $666 million and $973 million, respectively. Tables 39 and 40
present the estimated net budget impacts under the alternate NCES-based
enrollment projections. We welcome comments on the estimates, data, and
assumptions discussed in this regulatory impact analysis.
[[Page 16617]]
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[[Page 16618]]
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[[Page 16620]]
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[[Page 16621]]
Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in Table 35, we have prepared an accounting statement showing
the classification of the expenditures associated with the provisions
of the proposed regulations. This table provides our best estimate of
the changes in Federal student aid payments as a result of the proposed
regulations. Expenditures are classified as transfers from the Federal
Government to students receiving title IV, HEA program funds and from
low-performing programs to higher-performing programs. Transfers are
neither costs nor benefits, but rather the reallocation of resources
from one party to another.
In order to generate the estimates presented, the Department made
several assumptions about projected enrollments, aid amounts, programs
covered by the proposed regulations, student reaction to program
performance, and the likelihood of program results under the GE
measures changing from year to year.
Table 41--Accounting Statement
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Low reaction scenario
High reaction scenario
----------------------------------------------------------------------------------------------------------------
Category Benefits
----------------------------------------------------------------------------------------------------------------
Improved market information and development of
measures linking programs to labor market
outcomes....................................... Not Quantified
Not Quantified
----------------------------------------------------------------------------------------------------------------
Better return on money spent on education....... Not Quantified
Not Quantified
----------------------------------------------------------------------------------------------------------------
Category Costs
----------------------------------------------------------------------------------------------------------------
Discount Rate................................... 3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
Additional expense of educating transfer $162 $173 $220 $236
students at passing programs...................
----------------------------------------------------------------------------------------------------------------
Cost of Compliance with Paperwork Burden........ $54.8 (3%); $58.5 (7%)
----------------------------------------------------------------------------------------------------------------
Category Transfers
----------------------------------------------------------------------------------------------------------------
Discount Rate................................... 3% 7% 3% 7%
Transfer of Federal student aid money from $70 $75 $103 $110
failing programs to the Federal government when
students drop out of programs..................
Estimated Transfer of revenues from non-passing $1,353 $1,447 $1,837 $1,974
programs to passing or zone programs as
students transfer..............................
Estimated Transfer of instructional expenses $660 $705 $896 $962
from non-passing programs to passing or zone
programs as students transfer..................
----------------------------------------------------------------------------------------------------------------
Sensitivity Analysis
We have also prepared alternative accounting statements using
varied student response and program performance assumptions to
demonstrate the sensitivity of the estimated effects of the proposed
regulations to these factors. The assumptions about institution and
student reactions are critical to this analysis. We offer several
scenarios to illuminate how varying these assumptions would affect the
title IV, HEA programs and institutions offering GE programs. We
attempt to offer extreme scenarios in order to bound the estimates of
effects although we believe these extreme scenarios are unlikely to
occur.
Alternative Program Performance Assumptions
In addition to the primary program response assumptions provided in
Table 31, we created two additional program response scenarios, a
negative program response assumption and a positive program response
assumption.
Negative Program Response: In this extreme worst case scenario, we
assumed institutions would have no success in improving programs over
time so the program performance transition rates are held constant.
Table 42 presents the program response for this assumption.
Table 42--Negative Program Response Assumption
--------------------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
Result Result in subsequent year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Evaluated Year Pass Zone First fail Second fail Ineligible Not evaluated
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pass.................................................... 25% 50% 20% 0% 0% 5%
Zone.................................................... 0% 20% 75% 0% 0% 5%
First Fail.............................................. 0% 0% 0% 0% 100% 0%
Second Fail............................................. 0% 0% 0% 0% 100% 0%
Not Evaluated........................................... 0% 0% 15% 0% 0% 85%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Positive Program Response: In this best case scenario, we assume
institutions would be highly successful in improving program
performance and the rate of improvement would accelerate as
institutions have more time to adjust to the proposed regulations.
Table 43 presents the program response for this assumption.
[[Page 16622]]
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Alternative Student Response Assumptions
Zero Student Response: In this extreme scenario, we assume that
students would have no reaction to program results, regardless of the
outcome. As a result, there would be no student transfers or drop outs
and associated costs or economic transfers in response to the proposed
regulations. There would still be a net budget impact due to students
remaining in ineligible programs for which they could no longer receive
title IV, HEA program funds. We applied the zero student response
scenario to the primary program response assumption described in
``Discussion of Costs, Benefits, and Transfers,'' the positive program
response alternative assumption, and the negative program response
alternative assumption. Under the primary program response assumption,
the annualized net budget impact for the no student response scenario
would be $157 million at a 3 percent discount rate and $167 million at
a 7 percent discount rate. As no programs become ineligible under the
positive program response assumption, the net budget impact would be $0
in that scenario. For the negative program response assumption, the
annualized net budget impact would be $1 billion.
Student Response Only to Ineligibility: We assumed two scenarios
where students would not react to warnings and disclosures, but might
have some reaction when a program becomes ineligible for title IV, HEA
program funds. The first scenario assumes 50 percent of students would
drop out and 50 percent of students would transfer when faced with
ineligibility. The second scenario evenly divides the responses between
students who would drop out, transfer, and remain in the program. Table
44 presents the student response assumptions for these two scenarios.
For transfers in both scenarios, 85 percent of students who transfer
are assumed to transfer to passing programs and 15 percent to zone
programs. This matches the split of enrollment in passing and zone
programs as a percent of enrollment in evaluated programs that did not
fail in the 2012 GE informational rates sample.
[[Page 16623]]
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The costs and transfers associated with the student response only
to ineligibility scenarios are provided in Tables 45 and 46. Only the
primary program and negative program response scenarios are provided as
no programs reach ineligibility under the positive program assumption.
[[Page 16624]]
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[[Page 16625]]
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Strong Student Response to Program Results: We also assumed three
scenarios in which students are highly responsive to program
performance. The first scenario assumes 100 percent of students would
drop out in response to any non-passing program result. The effect of
this scenario is reflected in the transfer of title IV, HEA program
funds from students at non-passing programs to the Federal Government
as they drop out of postsecondary education. The second scenario
assumes that 100 percent of students would transfer in response to any
non-passing program result, with 85 percent of those who transfer
assumed to transfer to passing programs and 15 percent to zone
programs. The third scenario evenly divides the responses between
students who will drop out, transfer, and remain in the program. Table
47 presents the student response assumptions for these three scenarios.
[[Page 16626]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.089
The costs and transfers associated with the strong student response
scenarios are provided in Tables 48, 49, and 50.
[[Page 16627]]
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[[Page 16628]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.091
[[Page 16629]]
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Return on Investment Analysis
Students who transfer to better-performing programs would be
expected to experience higher earnings. However, some students that
leave postsecondary education in response to their program's
performance under the proposed regulations would lose the associated
earnings gains. As an illustrative example, we estimated the change in
the lifetime earnings associated with postsecondary education for the
estimated number of students who would transfer and who would dropout
because of the proposed regulations. We offer this example to
underscore that increased earnings from postsecondary education is a
necessary condition for students to pay back their student debt
obligations.
Assumptions and Methodology
Our budget estimate generates a number of students who drop out in
response to a non-passing program result and makes no assumption about
their future education. For this analysis, we assume that they do not
return to postsecondary education. Table 51 shows the estimated
transfers and dropouts used for the analysis of the impact of the
proposed regulations on earnings.
[[Page 16630]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.093
Based on these transfer and dropout assumptions, we calculated the
net present value of total lifetime earnings based on the age-profile
of earnings for a high school graduate assuming work between ages 24
and 64, as provided in Table 52, and valued each transfer category
(fail to zone, fail to pass, zone to pass, fail to drop, and zone to
drop) based on the difference in the net present value of lifetime
earnings. The net present value was discounted for two rates, 3 percent
and 7 percent, and we assumed a return on investment (in terms of the
percentage improvement in earnings at every age), using the earnings of
a worker with a high school degree as a baseline, of 2 percent for
students who attend a failing program, 4 percent for a zone program,
and 6 percent for a passing program. We calculated earnings
differentials for both the low reaction and high reaction student
response scenarios.
[[Page 16631]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.094
[[Page 16632]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.095
Earnings Differential Estimates
Our return on investment estimates are presented in Table 53. For
students who dropout, we estimate a loss of earnings ranging from $2.8
billion and $6.9 billion in the high reaction scenario at 7 percent and
3 percent discounting, respectively, compared to $1.3 billion and $3.3
billion in the low reaction scenario at 7 percent and 3 percent
discounting, respectively. For students who remain in postsecondary
education and transfer to higher-performing programs, the lifetime gain
in earnings ranges between $14.6 billion (7 percent) and $35.5 billion
(3 percent) in the high reaction scenario and $11.1 billion (7 percent)
and $27.1 billion (3 percent) in the low reaction scenario.
[[Page 16633]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.096
Regulatory Alternatives Considered
As part of the development of the proposed regulations, the
Department engaged in a negotiated rulemaking process in which we
received comments and proposals from non-Federal negotiators
representing institutions, consumer advocates, students, financial aid
administrators, accreditors, and State Attorneys General. The non-
Federal negotiators submitted a variety of proposals relating to
placement rates, student protections for failing programs, exemptions
for programs with low borrowing or default rates, rigorous approval
requirements for existing and new programs, as well as other proposals.
Information about these proposals is available on the GE Web site at
http://www2.ed.gov/policy/
[[Page 16634]]
highered/reg/hearulemaking/2012/gainfulemployment.html.
In addition to the proposals from the non-Federal negotiators and
the public, the Department considered alternatives to the proposed
regulations based on its own analysis. We considered both alternative
provisions within the GE measures we have proposed, as well as
alternatives to the GE measures themselves. Important alternatives that
were considered are discussed below and Table 60 summarizes the
estimated impacts of key alternatives considered for the calculation of
the D/E rates. We welcome comments on the alternatives discussed and
will consider any such feedback in the development of the final
regulations.
Alternative Components of D/E Rates Measure
N-Size
For the purpose of calculating the D/E rates measure, we considered
reducing the n-size for program evaluation to 10 students who completed
a program in a two-year cohort period. As a result, 11,050 programs, or
programs accounting for approximately 75 percent of the FY 2010
enrollment of students receiving title IV, HEA program funds, would be
subject to evaluation on at least one GE measure, as opposed to 60
percent if we use a program n-size of 30. Although we believe an n-size
of 10 students who complete the program would be reasonable for the D/E
rates, we elected to retain the n-size of 30 for both GE measures, but
to include those who completed over a four-year period if needed to
achieve a 30-student cohort for a given program. Our data shows that,
using the two-year cohort period, 5,539 programs have enough students
who completed the program to satisfy an n-size of 30, with those
students representing approximately 60 percent of students who received
title IV, HEA program funds for enrolling in a program. Further, we
estimate that, by using both a two-year cohort period and a four-year
cohort period, we would include in the D/E rates measure calculation
approximately 70 percent of students who received title IV, HEA program
funds for enrolling in GE programs.
Table 54--Effect of N-Size on Programs Evaluated Under the D/E Rates Measure
----------------------------------------------------------------------------------------------------------------
N=10 N=30
Result ---------------------------------------------------------------
Programs Enrollment Programs Enrollment
----------------------------------------------------------------------------------------------------------------
Pass............................................ 9,023 2,058,028 4,256 1,715,421
Zone............................................ 1,271 495,936 832 446,719
Fail............................................ 756 395,717 451 359,143
---------------------------------------------------------------
Total....................................... 11,050 2,949,681 5,539 2,521,283
----------------------------------------------------------------------------------------------------------------
Interest Rates
The interest rate used in the D/E rates calculations has a
substantial effect on the performance of programs with respect to the
D/E rates measure.
Table 55--Interest Rate Impact on D/E Rates Results (Total 5,539 Programs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Interest Rate 3% 4% 5% 6% 7% 8% 9%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Passing Programs........................ 4,555 4,441 4,304 4,185 4,033 3,919 3,795
Zone Programs........................... 670 728 807 855 948 986 1,033
Failing Programs........................ 314 370 428 499 558 634 711
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: 10-15-20 amortization, minimum program n-size of 30, 2008-2009 two-year cohort period.
The Department considered several options. Some non-Federal
negotiators suggested using the actual rates on an individual borrower
level, but we believe that would be unnecessarily complicated. Although
the calculation of the D/E rates is based on a group of students who
completed a program over a particular two- or four-year period, the
date on which each of these students may have taken out a loan and,
with it, the interest rate on that loan, varies. Averaging the interest
rates over the six years prior to the end of the applicable cohort
period is designed to approximate the interest rate that a large
percentage of the students in the calculation received, even those
students who attended four-year programs, and to mitigate any year-to-
year fluctuations in the interest rates that would cloud the
performance of programs under the D/E rates measure.
[[Page 16635]]
Table 56--Options for Determining Interest Rate\168\ for D/E Rates Calculation
----------------------------------------------------------------------------------------------------------------
Four-year average Three-year average Two-year average
----------------------------------------------------------------------------------------------------------------
GRAD GRAD
2YP 2YPMED UG (%) GRAD (%) MED (%) UG (%) (%) MED (%) UG (%) (%) MED (%)
----------------------------------------------------------------------------------------------------------------
08-09 05-06 6.43 6.43 4.04 6.80 6.80 4.03 6.80 6.80 4.34
11-12 08-09 6.80 6.80 6.43 6.80 6.80 6.80 6.80 6.80 6.80
12-13 09-10 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80 6.80
13-14 10-11 6.07 6.45 6.80 5.82 6.34 6.80 5.33 6.11 6.80
14-15 11-12 5.61 6.38 6.80 5.21 6.24 6.80 4.42 5.97 6.80
15-16 12-13 5.26 6.42 6.80 4.75 6.29 6.80 5.19 6.73 6.80
16-17 13-14 4.99 6.53 6.45 5.37 6.90 6.34 5.57 7.09 6.11
----------------------------------------------------------------------------------------------------------------
Amortization Period
The proposed regulations apply the same 10-, 15-, 20-year
amortization periods by credential level as under the 2011 Prior Rule.
Accordingly, under the proposed regulations, in calculating the annual
loan payment for the purpose of the D/E rates measure, we would use a
10-year amortization period for certificate and associate degree
programs, a 15-year amortization period for baccalaureate and master's
degree programs, and a 20-year amortization period for doctorate and
first professional degree programs. We did consider several options and
presented, as an alternative, a 10-year amortization period for all
programs, which we believe is reasonable especially in light of the
decision to evaluate graduate programs on graduate-level debt only. As
discussed in ``Sec. 668.404 Calculating D/E rates'' in Significant
Proposed Regulations, we looked at available data on the repayment plan
selection of existing borrowers, the repayment patterns of older loan
cohorts, and available amortization periods for different loan balances
under consolidation loan repayment rules. Although the prevalence of
the standard 10-year repayment plan and data related to older cohorts
could support 10-year amortization for all credential levels, the
Department retained the split amortization approach for the proposed
regulations. Growth in loan balances, the introduction of plans with
longer repayment periods than were available when those older cohorts
were in repayment, and some differentiation in repayment periods by
credential level in more recent cohorts contributed to this decision.
---------------------------------------------------------------------------
\168\ Projected interest rates from Budget Service used in
calculations requiring interest rates for future award years.
---------------------------------------------------------------------------
As expected, extending the amortization period would reduce the
number of programs that fail the D/E rates measure. The greatest effect
would be on graduate-level programs. As can be seen in Tables 57 and
58, when the 10-year and 20-year amortization periods are applied, the
D/E rates measure failure rate across all sectors and credential levels
changes from 9.0 percent (for 10-year amortization) to 2.8 percent (for
20-year amortization), but for first professional degrees, from 70
percent to 30 percent, and from 45.5 percent to 25.8 percent for
bachelor's degrees.
[[Page 16636]]
Table 57--D/E Rates Results by Sector and Credential (5.42% Interest Rate, N-Size of 30, 10-Year Amortization)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sector & IHE type Credential level Programs Pass Zone Fail Pass% Zone% Fail %
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public
--------------------------------------------------------------------------------------------------------------------------------------------------------
<2 year........................... Certificate.............. 157 157 0 0 100.00 0.00 0.00
2-year............................ Certificate.............. 824 823 1 0 99.88 0.12 0.00
4-year............................ Certificate.............. 86 84 1 1 97.67 1.16 1.16
Post-Bacc Certificate.... 26 26 0 0 100.00 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
Private
--------------------------------------------------------------------------------------------------------------------------------------------------------
<2 year........................... Certificate.............. 49 48 1 0 97.96 2.04 0.00
2-year............................ Certificate.............. 73 70 3 0 95.89 4.11 0.00
Post-Bacc Certificate.... 1 1 0 0 100.00 0.00 0.00
4-year............................ Certificate.............. 91 88 1 2 96.70 1.10 2.20
Post-Bacc Certificate.... 39 38 0 1 97.44 0.00 2.56
--------------------------------------------------------------------------------------------------------------------------------------------------------
For-Profit
--------------------------------------------------------------------------------------------------------------------------------------------------------
<2 year........................... Certificate.............. 1,100 919 153 28 83.55 13.91 2.55
Associate's.............. 5 4 1 0 80.00 20.00 0.00
1st Professional Degree.. 4 4 0 0 100.00 0.00 0.00
2-year............................ Certificate.............. 1,223 969 217 37 79.23 17.74 3.03
Associate's.............. 452 236 153 63 52.21 33.85 13.94
Post-Bacc Certificate.... 2 2 0 0 100.00 0.00 0.00
4-year............................ Certificate.............. 267 180 68 19 67.42 25.47 7.12
Associate's.............. 514 206 164 144 40.08 31.91 28.02
Bachelor's............... 407 175 47 185 43.00 11.55 45.45
Post-Bacc Certificate.... 8 8 0 0 100.00 0.00 0.00
Master's................. 171 153 6 12 89.47 3.51 7.02
Doctoral................. 30 26 2 2 86.67 6.67 6.67
1st Professional Degree.. 10 2 1 7 20.00 10.00 70.00
---------------------------------------------------------------------------------------------------------------------
Total 5,539 4,219 819 501 76.17 14.79 9.04
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 16637]]
[GRAPHIC] [TIFF OMITTED] TP25MR14.097
D/E Rate Thresholds and the Zone
We also considered the related issues of the appropriate thresholds
for the D/E rates measure and whether there should be a zone. The
proposed regulations would establish stricter passing thresholds than
the thresholds in the 2011 Prior Rule. The passing threshold for the
discretionary income rate would be 20 percent instead of 30 percent,
and the threshold for the annual earnings rate would be 8 percent
instead of 12 percent. Additionally, the proposed regulations add a
zone category for programs with a discretionary income rate greater
than 20 percent but less than or equal to 30 percent or an annual
earnings rate
[[Page 16638]]
greater than 8 percent but less than or equal to 12 percent.
The proposed passing thresholds for the discretionary income rate
and the annual earnings rate are based upon mortgage industry practices
and expert recommendations. The passing threshold for the discretionary
income rate is set at 20 percent, based on research conducted by
economists Sandy Baum and Saul Schwartz, which the Department
previously considered in connection with the 2011 Prior Rule.\169\
Specifically, Baum and Schwartz concluded that the debt payment-to-
discretionary income ratio should never exceed 17 to 20 percent, and
that ``there are virtually no circumstances under which higher debt
service ratios would be reasonable.'' \170\ The passing threshold of 8
percent for the annual earnings rate used in the proposed regulations
has been a fairly common credit-underwriting standard. It is based on
the recommendation made by many lenders that student and all other loan
installments not exceed 8 percent of the borrower's pretax income so
that the borrower has sufficient funds available to cover taxes, car
payments, rent or mortgage payments, and household expenses. Indeed,
other studies have also accepted the 8 percent standard, and some State
agencies have established similar guidelines. These percentages are
derived from home mortgage underwriting criteria where total household
debt should not exceed 38 to 45 percent of pretax income, with 30
percent being available for housing-related debt.\171\
---------------------------------------------------------------------------
\169\ Baum, S., and Schwartz, S. (2003). How Much Debt is Too
Much? Defining Benchmarks for Managing Student Debt.
\170\ Id.
\171\ Id.
---------------------------------------------------------------------------
In the 2011 Prior Rule, the passing thresholds for the debt-to-
earnings ratios were based on the same expert recommendations and
industry practice, but were increased by 50 percent to 30 percent for
the discretionary income rate and 12 percent for the annual earnings
rate to identify the lowest-performing GE programs and to build in a
tolerance. 76 FR 34400.
Table 59--D/E Rates Measure Results for Alternative Thresholds
----------------------------------------------------------------------------------------------------------------
12/30 no zone 8/20 w/zone
Result ---------------------------------------------------------------
Programs Enrollment Programs Enrollment
----------------------------------------------------------------------------------------------------------------
Pass............................................ 5,088 2,162,140 4,256 1,715,421
Zone............................................ N/A N/A 832 446,719
Fail............................................ 451 359,143 451 359,143
---------------------------------------------------------------
Total....................................... 5,539 2,521,283 5,539 2,521,283
----------------------------------------------------------------------------------------------------------------
Upon further consideration of this issue and analysis of the GE
Data, we believe that the stated objectives of the 2011 Prior Rule to
identify the worst performing programs and build a ``tolerance'' into
the thresholds are better achieved by setting 30 percent for the
discretionary income rate and 12 percent for the annual earnings rate
as the upper boundaries for a zone rather than as the passing
thresholds.
Estimated Effects of the D/E Rates Alternatives
In order to consider the alternatives for calculation of the D/E
rates and to provide information to potential commenters, we estimated
the impacts of the alternatives. The results are summarized in Table 42
and are the equivalent of the annualized costs and transfers in the
Accounting Statement for the proposed regulations. To evaluate the
alternatives, the same data, methods, and assumptions were used as for
the estimates for the proposed regulations as described in
``Methodology for Costs, Benefits, and Transfers'' and the ``Net Budget
Impacts'' sections of this regulatory impact analysis. The alternatives
considered would result in different estimated distributions of
enrollment in passing, zone, and failing programs under the proposed
regulations, leading to the results in Table 42.
Table 60--Estimated Effects of D/E Rates Alternatives
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
N=10, 10-15-20 Amortization
----------------------------------------------------------------------------------------------------------------
Estimates Low Reaction
High Reaction
----------------------------------------------------------------------------------------------------------------
Average Annual Student Transfers over 2017-2024. 175,000 236,000
Average Annual Student Dropouts over 2017-2024.. 23,000 45,000
----------------------------------------------------------------------------------------------------------------
3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
Better return on money spent on education....... Not Quantified
Not Quantified
----------------------------------------------------------------------------------------------------------------
Additional expense of educating transfer $164 $176 $223 $240
students at passing programs...................
Transfer of Federal student aid money from 71 76 104 112
failing programs to the Federal government when
students drop out of programs..................
Estimated Transfer of revenues from non-passing 1,373 1,468 1,864 2,002
programs to passing or zone programs as
students transfer..............................
Estimated Transfer of instructional expenses 670 716 909 976
from non-passing programs to passing or zone
programs as students transfer..................
----------------------------------------------------------------------------------------------------------------
[[Page 16639]]
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
N=30, 10 Year Amortization for All Credentials
----------------------------------------------------------------------------------------------------------------
Estimates Low Reaction
High Reaction
----------------------------------------------------------------------------------------------------------------
Average Annual Student Transfers over 2017-2024. 175,000 236,000
Average Annual Student Dropouts over 2017-2024.. 23,000 45,000
----------------------------------------------------------------------------------------------------------------
3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
Better return on money spent on education....... Not Quantified
Not Quantified
----------------------------------------------------------------------------------------------------------------
Additional expense of educating transfer $164 $176 $223 $240
students at passing programs...................
Transfer of Federal student aid money from 71 76 104 112
failing programs to the Federal government when
students drop out of programs..................
Estimated Transfer of revenues from non-passing 1,375 1,472 1,865 2,006
programs to passing or zone programs as
students transfer..............................
Estimated Transfer of instructional expenses 670 718 910 978
from non-passing programs to passing or zone
programs as students transfer..................
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
N=30, 20 Year Amortization for All Credentials
----------------------------------------------------------------------------------------------------------------
Estimates Low Reaction
High Reaction
----------------------------------------------------------------------------------------------------------------
Average Annual Student Transfers over 2017-2024. 157,000 214,000
Average Annual Student Dropouts over 2017-2024.. 21,000 41,000
----------------------------------------------------------------------------------------------------------------
3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
Better return on money spent on education....... Not Quantified
Not Quantified
----------------------------------------------------------------------------------------------------------------
Additional expense of educating transfer $147 $156 $201 $215
students at passing programs...................
Transfer of Federal student aid money from 64 68 94 100
failing programs to the Federal government when
students drop out of programs..................
Estimated Transfer of revenues from non-passing 1,227 1,302 1,675 1,785
programs to passing or zone programs as
students transfer..............................
Estimated Transfer of instructional expenses 598 635 817 870
from non-passing programs to passing or zone
programs as students transfer..................
----------------------------------------------------------------------------------------------------------------
Discretionary Income Rate
Instead of two debt-to-earnings ratios, the annual earnings rate
and the discretionary income rate, we considered a simpler approach
where only the discretionary income rate would be used as a metric.
However, this would have led to any program with earnings below the
discretionary income level failing the measure. Having a single
discretionary income-based metric would essentially set a minimum
earnings threshold for the proposed regulations, even if the debt for
students completing the program was very low. Because of this, the
Department retained the annual earnings rate metric of the 2011 Prior
Rule. For programs with very low earnings but also very low debt, we
believe that the transparency requirements are a more effective
regulatory approach. With information about program outcomes available
through the proposed disclosures, students would be able to make their
own assessment of whether the potential earnings would meet their goals
and expectations.
Pre-Post Earnings Comparison
The Department also considered an approach that would compare pre-
program and post-program earnings to capture the near-term effect of
the program. This approach had been suggested by commenters responding
to the 2011 Prior Rule, especially for short-term programs, and has
some merit conceptually. However, earnings immediately before
enrollment may not be an accurate measure of an individual's baseline
earning potential without the program. Pre-enrollment earnings are
particularly unlikely to reflect earnings potential for dependent
students, workers returning to school after becoming unemployed, or
those using their training to switch fields. Moreover, such a
measurement would not identify programs where large numbers of students
are taking out debts they cannot afford to repay.
pCDR Thresholds
As described in ``Sec. 668.403 Gainful employment framework'' in
Significant Proposed Regulations, we modeled pCDR on the cohort default
rate metric that is currently used to determine institutional
eligibility to participate in title IV, HEA programs. Thus, in addition
to adopting the iCDR threshold under which an institution loses
eligibility if it has three consecutive fiscal years of a pCDR of 30
percent or greater, we considered adopting the second threshold, which
is that an institution loses eligibility if it has one year of an iCDR
of 40 percent or greater. Of the 6,815 programs in the 2012 GE
informational rates sample with pCDR data, 233 have a default rate of
40 percent or more. However, we do not believe that a measure that
results in the loss of program eligibility after only a single year of
failure is consistent with our overall approach to allow institutions
time to improve their programs, particularly during the initial years
of implementation of the regulations.
Negative Amortization
Another proposal the Department considered was a variation on a
repayment metric that would compare the total amounts owed at the
beginning and end of the calculation year for borrowers from a program
who entered repayment in the two-year period, without regard to whether
the borrower completed the program, to determine if
[[Page 16640]]
borrower payments reduced that balance over the course of the
calculation year. Different variations of this measure were considered,
including a comparison of total balances and a comparison of principal
balances only. The measure would have been an additional metric that
would have accounted for the performance of students who did not
complete the program.
Ultimately, the Department decided not to propose negative
amortization as an eligibility metric in the proposed regulations
because we were unable to draw clear conclusions from the data
available.
Programs With Low Rates of Borrowing
Several negotiators argued that low-cost, and consequently low-
risk, programs where borrowing is largely unnecessary should not be
subject to the D/E rates measure because the measure would not
accurately reflect the level of borrowing by individuals enrolled in
the program and the low cost of the program. The negotiators claimed
that, for many low-cost programs, students receiving title IV, HEA
program funds constitute only a small, unrepresentative portion of the
students in terms of borrowing behavior. They argued that, for these
programs, the percentage of students who receive title IV, HEA program
funds and incur debt to enroll in the program is significantly greater
than the percentage of all students who incur debt to enroll in the
program. According to the negotiators, a program in which a majority of
students have no debt is unlikely to produce graduates whose
educational debts would be excessive because the tuition and costs are
likely to be modest and require little borrowing, and therefore would
not place the Federal investment in the program at significant risk. To
more adequately account for low-cost, low-risk programs, the
negotiators suggested that a GE program should pass the D/E rates
measure if (1) the median loan debt of all individuals who complete the
program in the applicable cohort period (both individuals who received,
and who did not receive, title IV, HEA program funds) is zero, or (2)
the program has a borrowing rate of less than 50 percent.
A program with a borrowing rate of less than 50 percent may not, in
fact, be low risk. For example, the majority of students could have
alternative resources to pay the program costs, such as employers,
State grant programs, or military benefits, or the program could still
have a significant number of students who received title IV, HEA
program loans for enrollment in the program. Accordingly, rather than
adopting a broad approach that would apply to all programs and could
commonly lead to inaccurate determinations as to whether a program is
low risk to students and taxpayers, the proposed regulations reserve
such an inquiry to situations where a program is failing or in the zone
under the D/E rates measure. The proposed regulations would permit an
institution to demonstrate that a program with D/E rates that are
failing or in the zone should instead be deemed to be passing the D/E
rates measure because less than 50 percent of all individuals who
completed the program, both those who received title IV, HEA program
funds, and those who did not, had to assume any debt to enroll in the
program.
Enrollment Limits and Borrower Protections
During the negotiated rulemaking sessions members of the negotiated
rulemaking committee raised proposals to create borrower relief
provisions for students in programs that fail the GE measures and to
place additional restrictions on those program. The Department had
proposed, for a program that does not pass the GE measures and is in
jeopardy of losing its eligibility for title IV, HEA program funds, in
addition to the student warning requirement, limits on the number of
students eligible for title IV, HEA program funds who could be enrolled
in the program. In response to the negotiators' concerns, the
Department also proposed, in those circumstances, to require
institutions to make arrangements to reduce student debt. We have not
included these additional consequences in the proposed regulations.
We have not included enrollment limits in the proposed regulations
as we believe that providing warnings to students and prospective
students about potentially ineligible programs, along with the
information that would be available through the required disclosures,
provide meaningful protections and will sufficiently enable students
and their families to make informed decisions about their educational
investment. However, we invite comment on whether enrollment limits
should be imposed on programs that could become ineligible and how
those limits could be practically implemented.
We developed our debt reduction proposal in response to suggestions
from negotiators representing consumer advocates and students. These
negotiators argued that, while a failing or zone program would be
allowed several years to pass the GE measures before becoming
ineligible, students would continue to borrow to attend a program that
the Department, based on the proposed regulations, may not reasonably
expect would lead to gainful employment. Moreover, in the event a
program lost eligibility under the GE measures, enrolled students would
still be responsible for the debt they accumulated despite the fact
they could not complete a program identified by the Department as
failing the performance metrics.
To address this, the negotiators argued that the Department should
provide loan discharges under section 437(c) of the HEA to students who
borrowed for attending a program that loses eligibility under the GE
measures. They contended that these borrowers would also have claims
against the institution for enrolling them in a program that was
offered as an eligible program, but that in fact did not meet the
eligibility requirements proposed in the regulations. They observed
that Federal regulations implementing section 455(h) of the HEA, 20
U.S.C. 1087e(h), allow a Direct Loan borrower to assert, as a defense
to loan repayment, any claim that the borrower has against the
institution, and that this existing regulation would apply to the case
of a program that did not meet the standards of the proposed
regulations. 34 CFR 685.206(c).\172\ These negotiators further urged
the Department to formally adopt, as a defense to loan repayment, a
program's failure to pass the GE measures, whether or not the program
eventually lost eligibility. Additionally, the negotiators suggested a
variety of other remedies, including requiring institutions to refund
tuition paid for a program that loses eligibility, requiring
institutions to post a surety bond or letter of credit when a program
receives a zone or failing result in order to provide for relief in the
event that the program later becomes ineligible, and requiring all
institutions intending to offer a GE program to contribute to a
``common pool'' fund to be administered by the Department that would be
used to provide debt relief to students affected by a program's loss of
eligibility.
---------------------------------------------------------------------------
\172\ In response to these objections, we noted that the
Department had already expressly interpreted section 437(c) of the
HEA in controlling regulations to provide no relief for a claim that
the loan was arranged for enrollment in an institution that was
ineligible, or that the institution arranged the loan for enrollment
in an ``ineligible program.'' 34 CFR 682.402(e); 59 FR 22470 (April
29, 1994), 59 FR 2490 (Jan. 14, 1994).
---------------------------------------------------------------------------
One of the non-Federal negotiators submitted a proposal that would
allow a program that did not pass the GE
[[Page 16641]]
measures to remain eligible if the institution implemented a debt
reduction plan that would reduce borrowing to levels that would meet
the GE measures.
In response, at the second and third negotiating sessions, we drew
on the negotiator proposals and presented regulatory provisions that
would have required an institution with a program that could lose
eligibility the following year to make sufficient funds available to
enable the Department, if the program became ineligible, to reduce the
debt burden of students who attended the program during that year. The
amount of funds would have been approximately the amount needed to
reduce the debt burden of students to the level necessary for the
program to pass the GE measures. If the program were to lose
eligibility, the Department would use the funds provided by the
institution to pay down the loans of students who were enrolled at that
time or who attended the program during the following year. We also
included provisions that would allow an institution, during the
transition period, to avoid these requirements by offering to every
enrolled student for the duration of their program, and every student
who subsequently enrolled while the program's eligibility remained in
jeopardy, institutional grants in the amounts necessary to reduce loan
debt to a level that would result in the program passing the GE
measures. If an institution took advantage of this option, a program
that would otherwise lose eligibility would avoid that consequence
during the transition period.
Negotiators voiced numerous concerns about the proposed borrower
relief provisions. These included whether the proposals would be
sufficient to compensate students for enrolling in an ineligible
program, what cohort of students would receive relief, the extent of
the relief to be provided, how any monetary amounts would be
calculated, and costs that would be incurred by institutions in
providing relief. The nature of these discussions made clear that these
are very complex issues that warrant further exploration. Accordingly,
we are not including proposed language regarding borrower relief in the
regulations and request comment on these issues, including other
options that the Department could consider to address borrower relief
concerns.
Initial Regulatory Flexibility Analysis
This Initial Regulatory Flexibility Analysis presents an estimate
of the effect on small entities of the proposed regulations. The U.S.
Small Business Administration Size Standards define ``for-profit
institutions'' as ``small businesses'' if they are independently owned
and operated and not dominant in their field of operation with total
annual revenue below $7,000,000, and defines ``non-profit
institutions'' as small organizations if they are independently owned
and operated and not dominant in their field of operation, or as small
entities if they are institutions controlled by governmental entities
with populations below 50,000. The Secretary invites comments from
small entities as to whether they believe the proposed changes would
have a significant economic impact on them and, if so, requests
evidence to support that belief.
Description of the Reasons That Action by the Agency Is Being
Considered
The Secretary is creating through the proposed regulations a
definition of gainful employment in a recognized occupation by
establishing what we consider, for purposes of meeting the requirements
of section 102 of the HEA, to be a reasonable relationship between the
loan debt incurred by students in a training program and income earned
from employment after the student completes the training. The proposed
regulations also assess the default experience of students who borrowed
title IV, HEA program funds to attend a program.
As described in this regulatory impact analysis, the trends in
graduates' earnings, student loan debt, defaults, and repayment
underscore the need for the Department to act. The gainful employment
accountability framework takes into consideration the relationship
between total student loan debt and earnings after completion of a
postsecondary program and the default experience of students who borrow
title IV, HEA program loans regardless of whether they complete a
program.
Succinct Statement of the Objectives of, and Legal Basis for, the
Proposed Regulations
As discussed in connection with the 2011 Prior Rule, the proposed
regulations are intended to address growing concerns about high levels
of loan debt for students enrolled in postsecondary programs that
presumptively provide training that leads to gainful employment in a
recognized occupation. 76 FR 76 FR 34498. The HEA applies different
criteria for determining the eligibility of programs and institutions
for title IV, HEA program funds. Id. In the case of shorter programs
and programs of any length at for-profit institutions, eligibility is
restricted to programs that ``prepare students for gainful employment
in a recognized occupation.'' Generally, the HEA does not require
degree programs greater than one year in length at public and non-
profit institutions to meet this gainful employment requirement in
order to be eligible for title IV, HEA program funds. Id. This
difference in eligibility is longstanding and has been retained through
many amendments to the HEA. Id. As recently as the HEOA, Congress again
adopted the distinct treatment of for-profit institutions while adding
an exception for certain liberal arts baccalaureate programs at some
for-profit institutions. Id.
Description of and, Where Feasible, an Estimate of the Number of Small
Entities to Which the Proposed Regulations Would Apply
The proposed regulations would apply to programs eligible for title
IV, HEA program funds because they prepare students for gainful
employment in a recognized occupation. The Department estimates that
approximately 6,842 programs offered by small entities could be subject
to the proposed regulations, of which 2,555 would be evaluated under at
least one GE measure. As stated in connection with the 2011 Prior Rule,
given that the category of small entities includes some private non-
profit institutions regardless of revenues, a wide range of small
entities would be covered by the proposed regulations. 76 FR 34498.
This continues to be true today, and the entities may include
institutions with multiple programs, a few of which are covered by the
proposed regulations, to single-program institutions with well-
established ties to a local employer base. Id. Many of the programs
that would be subject to the proposed regulations are offered by for-
profit institutions and public and private non-profit institutions with
programs less than two years in length. Id.
The structure of the proposed regulations and the proposed n-size
provisions reduce the effect of the proposed regulations on small
entities but complicate the analysis. As discussed in connection with
the 2011 Prior Rule, the proposed regulations provide for the
evaluation of individual GE programs offered by postsecondary
institutions, but these programs are administered by the institution,
either at the branch level or on a system-wide basis. 76 FR 34498. Many
institutions continue to have programs that would be considered small,
but the
[[Page 16642]]
classification for this analysis is at the institutional level, as a
program that is determined ineligible under the proposed regulations
could affect the institution's ability to operate. Id. Table 61
demonstrates that many small entities offer a limited number of GE
programs and the number of small entities that would have at least 50
percent of their programs become failing or in the zone. With a high
percentage of programs that are failing or in the zone, the loss of
title IV, HEA program eligibility for any program would be more likely
to cause the institution to shut down than would be the case for larger
entities with multiple programs.
Table 61--Distribution and GE Measure Performance of Small Entities by Number of Programs
----------------------------------------------------------------------------------------------------------------
Number of small Number of small
Number per small entity Number of small entities with more than entities with more than
entities 50% failing 50% zone or failing
----------------------------------------------------------------------------------------------------------------
1.................................... 737 95 95
2.................................... 232 31 31
3.................................... 74 5 5
4.................................... 47 4 4
5.................................... 22 3 3
6.................................... 20 7 7
7.................................... 8 2 2
8.................................... 4 0 0
9.................................... 4 0 0
10................................... 2 0 0
11................................... 1 0 0
12................................... 1 0 0
15................................... 1 0 0
22................................... 1 0 0
----------------------------------------------------------------------------------------------------------------
While private non-profit institutions are classified as small
entities, our estimates indicate that no more than 2 percent of
programs at those institutions are likely to fail either of the GE
measures, with an even smaller percentage likely to be found
ineligible. As noted in connection with the 2011 Prior Rule, the
governmental entities controlling public sector institutions are not
expected to fall below the 50,000 threshold for small status under the
Small Business Administration's Size Standards, but, even if they do,
programs at public sector institutions are highly unlikely to fail the
GE measures. 76 FR 34500. This continues to hold true; therefore, our
analysis of the effects on small entities focuses on the for-profit
sector. The percentage of programs subject to evaluation in the for-
profit sector likely to fail the GE measures is 23.4 percent for four-
year institutions, 19.8 percent for two-year institutions, and 14.0
percent for less-than-two-year institutions. When modeled using the
small entities only, those percentages are 34.6 percent, 12.4 percent,
and 10.7 percent, respectively.
[GRAPHIC] [TIFF OMITTED] TP25MR14.098
[[Page 16643]]
Description of the Projected Reporting, Recordkeeping, and Other
Compliance Requirements of the Proposed Regulations, Including an
Estimate of the Classes of Small Entities That Would Be Subject to the
Requirement and the Type of Professional Skills Necessary for
Preparation of the Report or Record
Table 63 relates the estimated burden of each information
collection requirement to the hours and costs estimated in Paperwork
Reduction Act of 1995. This additional workload is discussed in more
detail under Paperwork Reduction Act of 1995. Additional workload would
normally be expected to result in estimated costs associated with
either the hiring of additional employees or opportunity costs related
to the reassignment of existing staff from other activities. In total,
these changes are estimated to increase burden on small entities
participating in the title IV, HEA programs by 1,651,551 hours in the
initial year of reporting. The monetized cost of this additional burden
on institutions, using wage data developed using BLS data available at
www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $60,364,201. In subsequent
years, this burden would be reduced as institutions would only be
reporting for a single year and we would expect the annual cost to be
approximately $10 million. This cost was based on an hourly rate of
$36.55.
Table 63--Paperwork Reduction Act
----------------------------------------------------------------------------------------------------------------
Provision Reg section OMB Control No. Hours Costs
----------------------------------------------------------------------------------------------------------------
Issuing and Challenging D/E 668.405 OMB--NEW1.................. 85,094 3,110,175
Rates.
D/E Rates Appeals............ 668.406 OMB--NEW2.................. 11,677 426,779
Consequences of GE Measures.. 668.41 OMB--NEW1.................. 427,091 15,610,175
Reporting Requirements of GE 668.411 OMB--NEW1.................. 202,336 7,395,398
Programs.
Disclosure Requirements for 668.412 OMB--NEW1.................. 748,282 27,349,710
GE Programs.
Calculating, Issuing, and 668.413 OMB--NEW1.................. 174,126 6,364,305
Challenging Completion,
Withdrawal, and Repayment
Rates.
Certification and Application 668.414 OMB--NEW1.................. 665 24,323
Requirement for GE Programs.
Draft Program Cohort Default 668.504 OMB--NEW3.................. 2,055 75,115
Rates and Challenges.
Program CDR--Uncorrected Data 668.509 OMB--NEW3.................. 129 4,726
Adjustments.
Program CDR--New Data 668.51 OMB--NEW3.................. 31 1,143
Adjustments.
Program CDR-Erroneous Data 668.511 OMB--NEW3.................. 0 0
Appeals.
Program CDR--Loan Servicing 668.512 OMB--NEW3.................. 45 1,649
Appeals.
Program CDR--Economically 668.513 OMB--NEW3.................. 16 586
Disadvantaged Appeals.
Program CDR--Participation 668.514 OMB--NEW3.................. 3 117
Rate Index Appeals.
----------------------------------------------------------------------------------
Total.................... ................ ........................... 1,651,551 60,364,201
----------------------------------------------------------------------------------------------------------------
Identification, to the Extent Practicable, of All Relevant Federal
Regulations That May Duplicate, Overlap, or Conflict With the Proposed
Regulations
The proposed regulations are unlikely to conflict with or duplicate
existing Federal regulations. Under existing law and regulations,
institutions are required to disclose data in a number of areas related
to the proposed regulations.
Alternatives Considered
As previously described, we evaluated the proposed regulations for
their effect on different types of institutions, including the small
entities that comprise approximately 60 percent of institutions that
would be subject to the proposed regulations. As discussed in
``Regulatory Alternatives Considered,'' several different approaches
were analyzed, including the use of different interest rates and
amortization periods, placement rates, pre- and post-program earnings
comparison, and different n-size for programs to be evaluated. These
alternatives are not specifically targeted at small entities, but the
n-size provision may have a larger effect on programs at small
entities.
[FR Doc. 2014-06000 Filed 3-24-14; 8:45 am]
BILLING CODE 4000-01-P