Gainful employment has continued to pose a threat to for-profit colleges as they face losing federal student aid if they can not meet gainful employment requirements. The colleges have spent millions of dollars fighting the Department of Education, which has proposed gainful employment regulations, and have won some concessions in the final rule. The changes, which give colleges more time and ways to meet the rule’s benchmarks, are expected to significantly reduce the number of programs that would be penalized by the department, according to an article posted in the Chronicle of Higher Education. The extension was designed to give schools the opportunity to look at their programs and have them reform themselves, the article further stated.
Even so, some of those colleges have questioned the Department and whether they have authority to issue rules for them and accuse administrations of imposing cost controls on them. Gainful employment is supposed to protect students and taxpayers from college and learning institution programs that leave students weighed down with heavy school loan debt and minimal or no job opportunities. The issue has been the subject of intense lobbying since it was drafted a little under a year ago, with the Department receiving 90,000 comments on proposed changes, a record for the department. Recent data showed that more than 15% of students defaulted in their first two years, making default rates at their highest level in more than a decade.
When the government can not collect the money owed on those loans, taxpayers cover the brunt of the losses. The borrowers themselves then face damaged credit histories and losing wages and tax refunds that are seized by the government. While supporters of the rule have said that it will help to remove programs that are ineffective in helping students with their futures, the colleges are arguing that the ruling would reduce college access for thousands of minority and low-income students. The debates have even become more intense with those that do not support the ruling making accusations against the Department, saying that they stand to make profit from it.
The rule, which has changed several times since its draft, states that programs whose graduates carried debt-to-earnings ratios above 30% of discretionary income and 12% of total income, and where fewer than 35% of former students were paying down principal on their loans, would be ineligible for aid. But now these changes give colleges more time to comply with the rules. Other changes were also made, such as having interest-only loans in the repayment calculation and giving schools a choice of which data to use to calculate debt-to income ratios, which will make it easier for college’s to adhere requirements set out by the department.
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