The U.S. Education Department issued a much-anticipated proposed rule Wednesday that would significantly restrict operations at certain for-profit colleges and job certificate programs.
The gainful employment rule, once adopted after a public comment period that begins Friday, would cut federal funding for programs and institutions that repeatedly fail to produce graduates whose incomes can adequately cover their yearly debt payments. It would also require all institutions to disclose information related to attendance costs, graduates’ earnings, typical borrowing amounts and other data.
The proposed rule, which was scheduled for release last year but delayed, comes after months of deliberations and hearings.
“The Department of Education is proposing the strongest protections against unaffordable college debt in history,” said Education Secretary Miguel Cardona in a press call Wednesday evening. “Investing in a college degree or career certificate is supposed to pay off. Instead, too many students are getting ripped off. Every single year 700,000 students enroll in postsecondary programs that leave them with unaffordable debt or earnings no better than (that of) a typical high school graduate in their state.”
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The new rule would crack down on those programs while also requiring all colleges to cough up information on how much attendance really costs and graduates really earn.
It’s part of a larger series of efforts the Biden administration has made to address spiraling college costs and debt. It’s eased the process for securing public-service loan forgiveness, for example, and is attempting to provide mass relief for American individuals making less than $125,000, though that plan is currently held up in the Supreme Court.
“This administration has taken unprecedented actions to help students struggling with loans that they can’t afford,” Under Secretary James Kvaal said in Wednesday’s press call. “Now we’re addressing the source of those unaffordable debts.”
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What the rules would do and who is affected
Federal law already requires that certificate programs at all institutions as well as for-profit college degree programs provide training that leads to so-called “gainful employment.”
The newly proposed rules would essentially define outline what gainful employment entails – what it means and what happens when institutions don’t comply. Under the rules, certificate programs and for-profit colleges would have to show:
- The average student’s “debt-to-earnings ratio” – the share of their annual income that goes toward yearly debt payments – is no more than 8% (or no more than 20% of their discretionary income).
- At least half of graduates have higher earnings than a typical high-school graduate in their state’s workforce who never pursued a college education.
The department estimates it would protect more than 700,000 students annually who would otherwise likely enroll in the roughly 1,800 low-performing programs.
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The rule would also require all colleges – public and private, nonprofit and for-profit – to report and publish an array of new information related to typical costs and debt. The goal is to give prospective students and their families more insight into the true expenses that come with attendance and into graduates’ earnings and borrowing amounts.
Delays in rulemaking
The administration of former President Barack Obama was the first to enact a gainful employment rule over concerns that certain career programs were leaving graduates saddled with debt they couldn’t pay off with their low-paying jobs.
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But the policy drew criticism from the for-profit college community and free-market advocates who said it was unfair overreach. The department under former President Donald Trump and Education Secretary Betsy DeVos did away with the restrictions.
The Biden administration made it a priority to reenact the gainful employment rule but last year was met with skepticism, including from nonprofit and community colleges, during negotiations. Last summer, it announced it was pushing back the rule’s release for another few months.
Already, the new proposal has its critics. Career Education Colleges and Universities, which represents for-profit institutions, said the department ignored feedback during the negotiation period.
“The rule unfairly targets programs at proprietary institutions and fails to account for the unique challenges facing students and communities that career-oriented programs serve,” CECU’s President and CEO Jason Altmire said in a statement. “During the public comment phase, we urge the Department to consider sensible changes that improve the rule to protect all students and hold public, private nonprofit, and for-profit institutions equally accountable for their outcomes.”
The Education Department has until November to enact the rule. It would go into effect next summer.
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Contact Alia Wong at (202) 507-2256 or awong@usatoday.com. Follow her on Twitter at @aliaemily.
