September 9, 2010

Proposed Regulations: Gainful Employment

The Department of Education (ED) published a proposed rule in the July 26, 2010 Federal Register to determine “whether certain postsecondary educational programs lead to gainful employment in recognized occupations and the conditions under which these educational programs remain eligible for the student financial assistance programs authorized under Title IV of the Higher Education Act of 1965, as amended.” (Federal Register, 43616 [PDF])

The proposed regulations allow ED to determine whether or not a “program” leads to gainful employment by applying two tests:

• Debt to Income Ratio test
• Repayment Rates test

A program that meets both of these tests or scores a low debt-to-income ratio would continue to be eligible for Title IV without restrictions, unless it has a high repayment rate.

A program that meets only one of these tests would be placed in a restricted eligibility status, unless it has a high repayment rate.

Finally, a program that does not meet either of the tests would become ineligible for Title IV aid only for the non-degree or certificate programs mentioned above. (Additional information regarding these tests can be found in the Federal Register, 43616. [PDF])

It’s important to note that the proposed regulations apply to any “institutions that provide an eligible program of training that prepares students for gainful employment in a recognized occupation.” HEA defines an institution of higher education, in part, as “any institution that provides not less than a one-year program of training that prepares students for gainful employment in a recognized occupation.” (Federal Register, 43619, CFR §668.7)

Information about the gainful employment tests can be found in the July 26, 2010 Federal Register [PDF]. For detailed information about the proposed regulations, visit the NCHELP e-library.