[Federal Register Volume 75, Number 142 (Monday, July 26, 2010)]
[Proposed Rules]
[Pages 43616-43708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-17845]
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Part II
Department of Education
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34 CFR Part 668
Program Integrity: Gainful Employment; Proposed Rule
Federal Register / Vol. 75, No. 142 / Monday, July 26, 2010 /
Proposed Rules
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DEPARTMENT OF EDUCATION
34 CFR Part 668
RIN 1840-AD04
[Docket ID ED-2010-OPE-0012]
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 Student Assistance General
Provisions to establish measures for determining 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 (HEA).
DATES: We must receive your comments on or before September 9, 2010.
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 e-mail. Please submit your comments only
one time, in order to ensure that we do not receive duplicate copies.
In addition, please include the Docket ID at the top of your comments.
Federal eRulemaking Portal. Go to http://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 ``How To Use This Site.''
Postal Mail, Commercial Delivery, or Hand Delivery. If you
mail or deliver your comments about these proposed regulations, address
them to Jessica Finkel, U.S. Department of Education, 1990 K Street,
NW., Room 8031, Washington, DC 20006-8502.
Privacy Note: The Department's policy for comments received from
members of the public (including those comments submitted by mail,
commercial delivery, or hand delivery) is to make these submissions
available for public viewing in their entirety on the Federal
eRulemaking Portal at http://www.regulations.gov. Therefore,
commenters should be careful to include in their comments only
information that they wish to make publicly available on the
Internet.
FOR FURTHER INFORMATION CONTACT: For general information, John Kolotos
or Fred Sellers. Telephone: (202) 502-7762 or (202) 502-7502, or via
the Internet at: [email protected] or [email protected].
Information regarding the regulatory impact analysis or other data,
can be found at the following Web site: http://www2.ed.gov/policy/highered/reg/hearulemaking/2009/integrity.html.
If you use a telecommunications device for the deaf (TDD), call the
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
Individuals with disabilities can obtain this document in an
accessible format (e.g., Braille, large print, audiotape, or computer
diskette) on request to one of the contact persons listed under FOR
FURTHER INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION:
Invitation To Comment
As outlined in the section of this notice entitled Negotiated
Rulemaking, significant public participation, through a series of three
regional hearings and three negotiated rulemaking sessions, occurred in
developing this notice of proposed rulemaking (NPRM). In accordance
with the requirements of the Administrative Procedure Act, the
Department invites you to submit comments regarding these proposed
regulations on or before September 9, 2010. 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 to
arrange your comments in the same order as the proposed regulations.
We invite you to assist us in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any additional opportunities we
should take to reduce potential costs or increase potential benefits
while preserving the effective and efficient administration of the
programs.
During and after the comment period, you may inspect all public
comments about these proposed regulations by accessing Regulations.gov.
You may also inspect the comments, in person, in Room 8031, 1990 K
Street, NW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m.,
Eastern time, Monday through Friday of each week except Federal
holidays.
Assistance to Individuals With Disabilities in Reviewing the Rulemaking
Record
On request, we will supply an appropriate aid, such as a reader or
print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of aid, please contact one of the
persons listed under FOR FURTHER INFORMATION CONTACT.
Negotiated Rulemaking
Section 492 of the HEA requires the Secretary, before publishing
any proposed regulations for programs authorized by title IV of the
HEA, to obtain public involvement in the development of the proposed
regulations. After obtaining advice and recommendations from the
public, including individuals and representatives of groups involved in
the Federal student financial assistance programs, the Secretary must
subject the proposed regulations to a negotiated rulemaking process.
All proposed regulations that the Department publishes on which the
negotiators reached consensus must conform to final agreements
resulting from that process unless the Secretary reopens the process or
provides a written explanation to the participants stating why the
Secretary has decided to depart from the agreements. Further
information on the negotiated rulemaking process can be found at:
http://www.ed.gov/policy/highered/leg/hea08/index.html.
On September 9, 2009, the Department published a notice in the
Federal Register (74 FR 46399) announcing our intent to establish two
negotiated rulemaking committees to prepare proposed regulations. One
committee would develop proposed regulations governing foreign
institutions, including the implementation of the changes made to the
HEA by the Higher Education Opportunity Act (HEOA), Public Law 110-315,
that affect foreign institutions. A second committee would develop
proposed regulations to improve integrity in the title IV, HEA
programs. The notice requested nominations of individuals for
membership on the committees who could represent the interests of key
stakeholder constituencies on each committee.
Team I--Program Integrity Issues (Team I) met to develop proposed
regulations during the months of November 2009 through January 2010.
The Department developed a list of proposed regulatory provisions,
including provisions based on advice and recommendations submitted by
individuals and organizations as testimony to the Department in a
series
[[Page 43617]]
of three public hearings held on the following dates:
June 15, 2009, at Community College of Denver in Denver,
CO.
June 18, 2009, at University of Arkansas in Little Rock,
AR.
June 22, 2009 at Community College of Philadelphia in
Philadelphia, PA.
In addition, the Department accepted written comments on possible
regulatory provisions submitted directly to the Department by
interested parties and organizations. A summary of all oral and written
comments received is posted as background material in the docket for
this NPRM. Transcripts of the regional meetings can be accessed at
http://www2.ed.gov/policy/highered/reg/hearulemaking/2009/negreg-summerfall.html#ph.
Department staff also identified issues for discussion and
negotiation.
At its first meeting, Team I reached agreement on its protocols.
These protocols provided that for each community identified as having
interests that were significantly affected by the subject matter of the
negotiations, the non-Federal negotiators would represent the
organizations listed after their names in the protocols in the
negotiated rulemaking process.
Team I included the following members:
Rich Williams, U.S. PIRG, and Angela Peoples (alternate), United
States Student Association, representing students.
Margaret Reiter, attorney, and Deanne Loonin (alternate), National
Consumer Law Center, representing consumer advocacy organizations.
Richard Heath, Anne Arundel Community College, and Joan Zanders
(alternate), Northern Virginia Community College, representing two-year
public institutions.
Phil Asbury, University of North Carolina, Chapel Hill, and Joe
Pettibon (alternate), Texas A & M University, representing four-year
public institutions.
Todd Jones, Association of Independent Colleges and Universities of
Ohio, and Maureen Budetti (alternate) National Association of
Independent Colleges and Universities, representing private, nonprofit
institutions.
Elaine Neely, Kaplan Higher Education Corp., and David Rhodes,
(alternate), School of Visual Arts, representing private, for-profit
institutions.
Terry Hartle, American Council on Education, and Bob Moran
(alternate), American Association of State Colleges and Universities,
representing college presidents.
David Hawkins, National Association for College Admission
Counseling, and Amanda Modar (alternate) National Association for
College Admission Counseling, representing admissions officers.
Susan Williams, Bridgeport University, and Anne Gross (alternate),
National Association of College and University Business Officers,
representing business officers.
Val Meyers, Michigan State University, and Joan Berkes (alternate),
National Association of Student Financial Aid Administrators,
representing financial aid administrators.
Barbara Brittingham, Commission on Institutions of Higher Education
of the New England Association of Schools and Colleges, Sharon Tanner
(1st alternate), National League for Nursing Accreditation Commission,
and Ralph Wolf (2nd alternate), Western Association of Schools and
Colleges, representing regional/programmatic accreditors.
Anthony Mirando, National Accrediting Commission of Cosmetology
Arts and Sciences, and Michale McComis (alternate), Accrediting
Commission of Career Schools and Colleges, representing national
accreditors.
Jim Simpson, Florida State University, and Susan Lehr (alternate),
Florida State University, representing work force development.
Carol Lindsey, Texas Guaranteed Student Loan Corp, and Janet Dodson
(alternate), National Student Loan Program, representing the lending
community.
Chris Young, Wonderlic, Inc., and Dr. David Waldschmidt
(alternate), Wonderlic, Inc., representing test publishers.
Dr. Marshall Hill, Nebraska Coordinating Commission for
Postsecondary Education, and Dr. Kathryn Dodge (alternate), New
Hampshire Postsecondary Education Commission, representing State higher
education officials.
Carney McCullough and Fred Sellers, U.S. Department of Education,
representing the Federal Government.
These protocols also provided that, unless agreed to otherwise,
consensus on all of the amendments in the proposed regulations had to
be achieved for consensus to be reached on the entire NPRM. Consensus
means that there must be no dissent by any member.
During the meetings, Team I reviewed and discussed drafts of
proposed regulations. At the final meeting in January 2010, Team I did
not reach consensus on the proposed regulations. The proposed
regulations in this document focus on the issue of whether certain
programs lead to gainful employment in recognized occupations. A
separate NPRM for all of the other Program Integrity issues discussed
during the meetings was published on June 18, 2010.
Background
For-profit postsecondary education, along with occupationally
specific training at other institutions, has long played an important
role in the nation's system of postsecondary education and training.
Many of the institutions offering these programs have recently
pioneered new approaches to enrolling, teaching, and graduating
students. In recent years, enrollment has grown rapidly, nearly
tripling to 1.8 million between 2000 and 2008. This trend is promising
and supports President Obama's goal of leading the world in the
percentage of college graduates by 2020. The President's goal cannot be
achieved without a healthy and productive higher education for-profit
sector.
However, the programs offered by the for-profit sector must lead to
measurable outcomes, or those programs will devalue postsecondary
credentials through oversupply. The Government Accountability Office
(GAO) had noted this problem in its work dating to the 1990's.
Specifically, GAO found that occupation-specific training programs that
lacked a general education component made graduates of for-profit
institutions less versatile and limited their opportunities for
employment outside their field. GAO also found that there were labor
oversupplies when the numbers of expected job openings were compared to
the corresponding number of postsecondary graduates who completed
training programs. Oversupply in the labor market results in
unemployment and a decline in real wages. Generally, the impact is felt
most significantly by recent graduates and adversely affects their
ability to support themselves and their families, as well as their
ability to repay their student loans.
The Department of Education Organization Act gives the Secretary
broad responsibility to establish the regulatory requirements necessary
for appropriately managing the Department and its programs.
Additionally, under the Higher Education Act of 1965, as amended (HEA),
the Department has the responsibility to ensure that institutions of
higher education, including for-profit institutions, meet minimum
standards if they choose to participate in the title IV, HEA programs
(Federal student aid programs). For the programs that would
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be subject to these proposed regulations, one of these minimum
standards is that the programs must lead to gainful employment in a
recognized occupation.
Many for-profit institutions derive most of their income from the
Federal student aid programs. In 2009, the five largest for-profit
institutions received 77 percent of their revenues from the Federal
student aid programs. This figure that does not include revenue
received from certain Federal student loans (not authorized by the HEA)
that are exempted under the so-called 90/10 rule, or other revenue
derived from government sources including Federal Veterans' education
benefits, Federal job training programs, and State student financial
aid programs. A recent study completed for the Florida legislature
concluded that for-profit institutions were more expensive for
taxpayers on a per-student basis due to their high prices and large
subsidies.
The proposed standards for institutions participating in the title
IV, HEA programs are necessary to protect taxpayers against wasteful
spending on educational programs of little or no value that also lead
to high indebtedness for students. The proposed standards will also
protect students who often lack the necessary information to evaluate
their postsecondary education options and may be mislead by skillful
marketing, resulting in significant student loan debts without
meaningful career opportunities. Unlike public or private nonprofit
institutions, for-profit institutions are legally obligated to make
profitability for shareholders the overriding objective. Furthermore,
for-profit institutions may be subject to less oversight by States and
other entities.
There are reasons for concern that some students attending for-
profit institutions have not been well served. Student loan debt is
higher among graduates of for-profit institutions. For example, the
median debt of a graduate of a two-year for-profit institution is
$14,000, while most students at community colleges have no student loan
debt. There are 18 title IV, HEA loan defaults for every 100 graduates
of for-profit institutions, compared to only 5 title IV, HEA loan
defaults for every 100 graduates of public institutions. Investigations
and news reports have also produced anecdotal evidence of low-quality
programs that leave students with large debts and poor prospects for
employment. Despite these concerns, these institutions and suspect
programs have never been required to substantiate their claim that they
meet the statutory requirement of preparing students for ``gainful
employment.''
Summary of Proposed Regulations
Under these proposed regulations, the Department would assess
whether a program provides training that leads to gainful employment by
applying two tests: One test based upon debt-to-income ratios and the
other test based upon repayment rates. Based on the program's
performance under these tests, the program may be eligible, have
restricted eligibility, or be ineligible. A program that meets both of
these tests, or whose debt-to-income ratio is very low, would continue
to be eligible for title IV, HEA program funds without restrictions,
while a program that does not meet any of the tests would become
ineligible. A program that meets only one of the tests would be placed
in a restricted eligibility status, unless it has a high repayment
rate.
Under certain circumstances, the proposed regulations would also
require an institution to disclose the test results and alert current
and prospective students that they may difficulty repaying their loans.
This proposed use of two measures is a balanced approach that gives
institutions flexibility in how to demonstrate that they prepare
students for gainful employment. The debt-to-income ratio provides a
measure of program completers' ability to repay their loans, and the
proposed targets were set based upon industry practices and expert
recommendations. The use of discretionary income would recognize that
borrowers with higher incomes can afford to devote a larger share of
their income to loan repayments, while the use of annual income would
benefit programs whose borrowers have lower earnings.
Under the debt-to-income test, programs whose completers typically
have annual debt service payments that are 8 percent or less of average
annual earnings or 20 percent or less of discretionary income would
continue to qualify, without restrictions, for title IV, HEA program
funds. Programs whose completers typically face annual debt service
payments that exceed 12 percent of average annual earnings and 30
percent of discretionary income may become ineligible.
Debt service rates have a connection to whether borrowers will
default on their loans. Borrowers with rates above the 8 percent
threshold, for example, have a default rate of 10.2 percent, compared
to a rate of 5.4 percent for those below the threshold.\1\ Borrowers
with debt rates above the 12 percent threshold, for example, have a
default rate of 10.9 percent.\2\
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\1\ Source: U.S. Department of Education, National Center for
Education Statistics, B&B: 93/03 Baccalaureate and Beyond
Longitudinal Study.
\2\ Source: U.S. Department of Education, National Center for
Education Statistics, B&B: 93/03 Baccalaureate and Beyond
Longitudinal Study.
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The repayment rate is a measure of whether program enrollees are
repaying their loans, regardless of whether they completed the program.
This measure would provide some assurance to programs that may have
high debt-to-income ratios for completers but enroll prepared and
responsible students who understand their financial obligations.
Programs whose former students have a loan repayment of at least 45
percent will continue to be eligible. Programs whose former students
have loan repayment rates below 45 percent but at least 35 percent may
be placed on restricted status. Programs whose former students have
loan repayment rates below 35 percent may become ineligible.
A program that does not satisfy either the debt-to-income ratio or
the 45 percent rate but has a loan repayment rate of at least 35
percent would be subject to restrictions and additional oversight by
the Department.
The proposed regulations also would require an institution whose
program does not have a loan repayment rate of at least 45 percent and
an annual loan payment that is either 20 percent or less of
discretionary income or 8 percent or less of average annual income, to
alert current and prospective students that they may have difficulty
repaying their loans.
Recognizing the potential impact of the proposed regulations on
some students seeking a postsecondary education, the proposed
regulations would provide for a one-year transition period during which
the Department would limit the number of programs declared ineligible
to the lowest-performing programs producing no more than five percent
of completers during the prior award year. Additional programs and
programs that fail to meet the debt thresholds but fall outside the
five percent cap during the transition year would be subject to the
same requirements as programs on a restricted eligibility status.
Significant Proposed Regulations
We group major issues according to subject, with appropriate
sections of the proposed regulations referenced in parentheses. We
discuss other substantive issues under the sections of the proposed
regulations to which they pertain. Generally, we do not address
proposed regulatory provisions that are technical or otherwise minor in
effect.
[[Page 43619]]
Part 668 Student Assistance General Provisions
Gainful Employment in a Recognized Occupation (Sec. 668.7)
Section 102(b) and (c) of the HEA defines, in part, a proprietary
institution and a postsecondary vocational institution, respectively,
as institutions that provide an eligible program of training that
prepares students for gainful employment in a recognized occupation.
Section 101(b)(1) of the 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.
The Department's current regulations in Sec. Sec.
600.4(a)(4)(iii), 600.5(a)(5), and 600.6(a)(4) mirror the statutory
provisions, and like the statute, do not define or further describe the
meaning of the phrase ``gainful employment.''
General
The proposed regulations are intended to address growing concerns
about unaffordable levels of loan debt for students attending
postsecondary programs that presumptively provide training that leads
to gainful employment in a recognized occupation. Under the proposed
regulatory framework, to determine whether these programs provide
training that leads to gainful employment, as required by the HEA, the
Department would take into consideration repayment rates on Federal
student loans, the relationship between total student loan debt and
earnings, and in some cases, whether employers endorse program content.
The Department would consider that a program prepares students for
gainful employment if the loan debt incurred by the typical student
attending that program is reasonable. The regulations would establish
measures of the relationship between loan debt and postcompletion
employment income (a loan repayment rate and debt-to-income measures
based on discretionary income and average annual earnings) and set
reasonable thresholds for each measure. As long as the program
satisfies the debt thresholds, an institution could continue to offer
title IV aid to students in the program without additional oversight
from the Department. Otherwise, the program would either become
ineligible for title IV, HEA program funds or the institution's ability
to disburse Federal funds to students attending that program would be
restricted.
The trends in earnings, student loan debt, loan defaults, and loan
repayment that underscore the need for the Secretary to act are
discussed more fully in Appendix A to this document.
Debt Measures and Thresholds
Under the loan repayment rate in proposed Sec. 668.7(a), the
relationship would be reasonable if students who attended the program
(and are not in a military or in-school deferment status) repay their
Federal loans at an aggregate rate of at least 45 percent. The rate
would be based on the total amount of loans repaid divided by the
original outstanding balance of all loans entering repayment in the
prior four Federal fiscal years (FFY). A loan would be counted as being
repaid if the borrower (1) made loan payments during the most recent
fiscal year that reduced the outstanding principal balance, (2) made
qualifying payments on the loan under the Public Service Loan
Forgiveness Program, as provided in 34 CFR 685.219(c), or (3) paid the
loan in full. Other borrowers who are meeting their legal obligations
but are not actively repaying their loans, such as those in deferment
or forbearance, are not considered to be in repayment.
Based on data available (see Appendix A for more information about
these data), the following chart shows the Department's estimate of the
distribution of loan repayment rates by sector of all institutions, not
only those subject to these regulations, that would satisfy loan
repayment thresholds of 45 and 35 percent.
Institutional-Level Repayment Rates
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Number of % Between 35-
Sector institutions % At least 45% 45% % Below 35%
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Private for-profit 2-year....................... 565 32.92 23.19 43.89
Private for-profit 4-year or above.............. 218 25.23 32.57 42.20
Private for-profit less-than-2-year............. 946 40.70 22.09 37.21
Private nonprofit 2-year........................ 156 76.28 9.62 14.10
Private nonprofit 4-year or above............... 1434 78.31 10.53 11.16
Private nonprofit less-than-2-year.............. 45 64.44 11.11 24.44
Public 2-year................................... 860 43.14 29.53 27.33
Public 4-year or above.......................... 590 74.24 14.92 10.85
Public less-than-2-year......................... 148 74.32 19.59 6.08
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Grand Total................................. 4962 56.75 19.21 24.04
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Because the loan repayment rate considers program completers and
noncompleters, a low rate may indicate that many noncompleters obtained
loans they are now unable to repay. Note that this chart gives an
indication of the rates at which graduates are entering into deferments
that are not related to military service or returning to postsecondary
education, entering into forbearances or are simply unwilling or unable
to pay more than interest accrued on their Federal student loans.
The number of institutions with very low loan repayment rates,
particularly in the for-profit sector, is alarmingly high. Based on
these data, we propose to allow a program with a loan repayment rate as
low as 35 percent to remain eligible, but may restrict that
eligibility. Under proposed Sec. 668.7(a) and (e), an institution
whose program is in a restricted status would have to provide annually
documentation from employers not affiliated with the institution
affirming that the curriculum of the program aligns with recognized
occupations at those employers' businesses and that there are projected
job vacancies or expected demand for those occupations at those
businesses. Moreover, the Department would limit the enrollment of
title IV aid recipients in that program to the average number enrolled
during the prior three award years. While we believe that these
restrictions are appropriate considering the poor performance of these
programs, we seek comment on whether programs with a loan repayment
rate of less than 45 percent but higher than 35 percent
[[Page 43620]]
should be subject to the loss of title IV, HEA program funds.
Even with a repayment rate of less than 35 percent, under the
proposed regulations a program would still be eligible for title IV,
HEA program funds, without restrictions, as long as the program has an
acceptable debt-to-income ratio. We seek comment on whether a program
with a loan repayment rate below a specified threshold should be
ineligible for title IV, HEA funds, regardless of the debt-to-income
ratio.
For the debt-to-income measures in proposed Sec. 668.7(a)(1)(ii)
and (iii), the relationship would be reasonable if the annual loan
payment (based on a 10-year repayment plan) of the typical student
completing the program is 30 percent or less of discretionary income or
12 percent or less of average annual earnings. The measure would use
the most current income available of the students who completed the
program in the most recent three years (three-year period or 3YP).
However, in cases where an institution could show that the earnings of
students in a particular program increase substantially after an
initial employment period, the measure would use the most current
earnings of students who completed the program four, five, and six
years prior to the most recent year (i.e., the prior three-year period
or P3YP). When prior three-year data are used, the relationship would
be reasonable if the annual loan payment is less than 20 percent of
discretionary income or less than 8 percent of average annual earnings.
The proposed debt-to-income measures, one based on discretionary
income and the other on average annual earnings, are alternatives to
the loan repayment rate. The debt measure for discretionary income is
modeled on the Income-Based Repayment (IBR) plan. IBR assumes that
borrowers with incomes below 150 percent of the poverty guideline are
unable to make any payment, while those with incomes above that level
can devote 15 percent of each added dollar of earnings (Congress
reduced that to 10 percent for new borrowers starting in 2014.) to loan
payments. While the Federal Government has established policies
allowing borrowers with financial hardships to reduce payments to 10 or
15 percent of their discretionary income, those thresholds are not
appropriate for defining gainful employment. The IBR formula is based
on research conducted by economists Sandy Baum and Saul Schwartz, who
recommended 20 percent of discretionary income as the outer boundary of
manageable student loan debt. This approach is recommended by others
including Mark Kantrowitz, publisher of Finaid.org. However, we cannot
rely solely on this approach because any program would fail the debt
measure if the average earnings of those completing the program were
below 150 percent of the poverty guideline, regardless of the level of
debt incurred. To avoid this consequence, we adopted the proposal made
during negotiated rulemaking that borrowers should not devote more than
8 percent of annual earnings toward repaying their student loans. This
percentage has been a fairly common credit-underwriting standard, as
many lenders typically recommend that student loan installments not
exceed 8 percent of the borrower's pretax income so that borrowers have
sufficient funds available to cover taxes, car payments, rent or
mortgage payments, and household expenses. Other studies have also
accepted the 8 percent standard, and some State agencies have
established similar guidelines ranging from 5 percent to 15 percent of
gross income. 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.
For these proposed regulations, we have increased the research-
based and industry-used debt-to-income measures by 50 percent (from 20
to 30 percent of discretionary income, and from 8 to 12 percent of
annual earnings) to establish thresholds above which it becomes
unambiguous that a program's debt levels are excessive.
[[Page 43621]]
[GRAPHIC] [TIFF OMITTED] TP26JY10.000
In prior generations, most graduates repaid their loans within 10
years of completing college. The standard repayment plan chosen by most
borrowers remains 10 years. Among bachelor's degree recipients in 1992-
93 who had student loan debt, about three-fourths fully repaid their
loans in less than 10 years. Those reporting higher incomes were most
likely to have repaid their loans (even though they had higher average
debt), indicating that earnings played a role in their ability--or at
least their willingness--to repay. For many adults, paying off student
loans is an important milestone. Many borrowers see a tradeoff between
making student loan payments and other important financial decisions
such as saving for retirement, buying a home, or saving for their own
children's education.
While the Federal Government is providing new options for repaying
loans over extended periods of time to protect a portion of the
borrower population from the adverse impact of nonpayment, these
repayment options should not be the norm.
All other things being equal, students would be better off without
student loan debt. The less debt they owe, the more of their income
they can devote to home purchases, retirement savings, or serving the
community. Student loan debt must be weighed against the education and
training (and increased employment income) that higher education can
provide. To the extent that the education and its accompanying student
loan debt do not provide the necessary skills to provide increased
wages and employment, public policy should attempt to minimize or
eliminate that cost to students and society.
Excess student debt affects students and society 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).
Loan repayments that outweigh the benefits of the education and
training are an inefficient use of the borrower's resources. If a
student makes that choice fully informed and using his or her own
funds, it is not a matter for public policy. But if the availability of
Federal student aid increases the likelihood that a student will enroll
at an institution of higher education, the Federal Government should
consider ways to ensure that student borrowers are not unduly burdened,
even if they would
[[Page 43622]]
eventually repay the loans. This concern motivates the debt-to-income
ratio, a measure of the potential individual burden incurred by taking
out loans, to ensure that students on an individual basis benefit from
the receipt of Federal funds.
The second cost is taxpayer subsidies. When a borrower is
unemployed or is forced because of low income to obtain a forbearance
or deferment, the Government waives the interest on subsidized Stafford
and Perkins loans. For example, the cost to the Government of three
years of deferment is up to 20 percent of the value of the loan. Also,
borrowers who have low incomes but high debt may reduce their payments
through income-based or income-contingent repayment programs. These
programs can either be at little or no cost to the Government or as
much as the full amount of the loan with interest.
Deferments and repayment options are important protections for
borrowers because while higher 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:
They tell all Americans that the Federal Government will take on the
potential risk of an education not ``paying off'' for a specific
individual. However, these policies should not mean that institutions
should increase the level of risk to the individual student or the
taxpayer--just as the existence of homeowners insurance does not mean
builders should make houses more flammable. The insurance is important;
but public policy must protect against the moral hazard of it being
seen as a license for providing a worse product to consumers or to
taxpayers.
The third cost is default. The Government covers the cost of
defaults on Federal student loans, $9.2 billion in fiscal year 2009.
Ultimately this cost is mitigated by the Department's success in
collection, using such tools as wage garnishment, Federal and State tax
refund seizure, seizure of any other Federal payment, and Federal court
actions. Nonetheless, the taxpayer costs can be significant. Based on
historical collections, the net present value cost of the $9.2 billion
of loans that defaulted in fiscal year 2009 is estimated at
approximately $1 billion. This concern--protecting the taxpayer--
motivates the repayment rate measure, which indicates the taxpayer's
exposure to delayed repayment or default.
An additional cost of default is the damage to students and their
family and community. Although the decision to enter into loans is made
voluntarily by students, a wealth of evidence suggests that many
individuals lack sufficient information--or may be manipulated with
false information or assurances--regarding future employment prospects
and program costs, and thus are unable to properly evaluate their
eventual ability to repay loans. Former students who default on Federal
loans cannot receive additional title IV aid for postsecondary
education. Their credit rating is destroyed, 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. In some States, they may
be denied certain occupational licenses. And, increasingly, employers
consider credit records in their hiring decisions. Furthermore,
particularly for former students from disadvantaged neighborhoods, the
stigma of default can send an unfortunate message to others--that
seeking an education can have disastrous results. Combined with the
evidence suggesting that individuals may not have the ability to
evaluate fully the costs and benefits of entering into loans, the
potential for substantial adverse outcomes motivates the consumer
protection approach the Department is taking through these proposed
regulations.
At all types of institutions, student debt is growing and will
cause more students to allocate more of their future income toward
repayment, whether through larger or longer payments. (See Tables A-1
and A-2 of Appendix A for additional details). Student loan data show
that this problem is particularly problematic at for-profit
institutions. For certificate, associate's degree, and bachelor's
degree programs, debt levels are highest at for-profit institutions.\3\
For example, in 2007-08: \4\
---------------------------------------------------------------------------
\3\ For graduate and professional programs, separate data are
not available on for-profit colleges. For professional degrees, the
known debt levels at public and nonprofit institutions could be
problematic if earnings are not sufficient.
\4\ National Postsecondary Student Aid Survey, as reported in
Trends in Student Aid 2009, College Board.
---------------------------------------------------------------------------
13 percent of baccalaureate recipients from public four-
year institutions carried at least $30,000 of Federal and private
student loan debt. Among graduates of private nonprofit colleges, 25
percent had that level of student debt. And at for-profit institutions,
57 percent of the baccalaureate recipients carried student loan debts
of $30,000 or more.
At the associate's degree level, only about five percent
of public college graduates have debt of $20,000 or more, while 42
percent of for-profit graduates have debt at those levels.
For certificate recipients, less than 2 percent at public
institutions and 11 percent at for-profit institutions have debt of
$20,000 or more.
The proposed regulations would lessen the potential for these
negative consequences by ensuring that programs subject to the gainful
employment standards actually produce students with sufficient incomes
(relative to their debt) to make their debt payments.
Calculating the Loan Repayment Rate
Under proposed Sec. 668.7(b), the Department would calculate the
loan repayment rate annually using the ratio:
[GRAPHIC] [TIFF OMITTED] TP26JY10.078
The OOPB (original outstanding principal balance) would be the
amount of the outstanding balance on FFEL and/or Direct loans owed by
students who attended the program, including capitalized interest, as
of the date those loans entered repayment. The OOPB of all loans would
include the FFEL and Direct loans that entered repayment in the four
preceding Federal fiscal years (FFYs). LPF (loans paid in full) would
be loans to the program's students that have been paid in full.
However, the LPF would not include any loans paid through a
consolidation loan until the consolidation loan is paid in full. The
OOPB of LPF in the numerator of the ratio would be the total amount of
OOPB for these loans.
RPL (reduced principal loan) would be calculated using loans where
borrower payments during the most recently completed FFY reduced the
outstanding principal balance of that loan in that year. RPL would also
include loans for borrowers whose
[[Page 43623]]
payments and employment during that FFY qualify for the Public Service
Loan Forgiveness program under 34 CFR 685.219(c). The OOPB of RPL in
the numerator of the ratio would be the total amount of the OOPB for
these loans.
Finally, the ratio would not include the OOPB of borrowers on an
in-school deferment or a military-related deferment status or the OOPB
of borrowers entering repayment in the final six months of the most
recent FFY.
Calculating the Debt-to-Income Measures
Under proposed Sec. 668.7(c), the Department would calculate
annually the debt-to-income measures for each program to determine
whether the annual loan payment is less than the discretionary (30 and
20 percent) and earnings (12 and 8 percent) thresholds using the
following formulas:
Annual loan payment < Discretionary threshold * (Average
Annual Earnings - (1.5 * Poverty Guideline)).
Annual loan payment < Earnings threshold * Average Annual
Earnings.
Both debt measures would examine the annual loan payment of program
completers in relationship to the average annual earnings of those
completers to calculate whether a program met the gainful employment
standard.
The annual loan payment would be the median loan debt of students
who completed a program during the three-year period under standard
repayment terms (i.e., 10-year repayment schedule and the current
annual interest rate on Federal unsubsidized loans). Loan debt would
include title IV, HEA program loans, except Parent PLUS loans, and any
private educational loans or debt obligations arising from
institutional financing plans. However, it would not include any
student loan that a student incurred at prior institutions or at
subsequent institutions unless the other and current institutions are
under common ownership or control, or are otherwise related entities.
The Department would calculate the average annual earnings by using
most currently available actual, average annual earnings, obtained from
the Social Security Administration (SSA) or another Federal agency, of
the students who completed the program during the three-year period.
However, in certain cases, the measure could include the current
earnings data for students who completed the program for a longer
employment period (students who completed the program in the fourth,
fifth, and sixth award years preceding the most recent three-year
period) if the institution could show that students completing the
program typically experience a significant increase in earnings after
the first three years. The institution would have to provide
information to the Department such as survey results of employers or
former students, or through other empirical evidence, documenting the
increased earnings.
As discussed in the Paperwork Reduction Act portion of this notice,
institutions will have an opportunity to review and provide comments on
the collection of new data associated with this provision. Interested
parties will have an opportunity to provide input into this requirement
through that process or in response to this notice of proposed
rulemaking.
Under proposed Sec. 668.7(a), a program would meet the gainful
employment standard if the annual loan payment of its students is 30
percent or less of discretionary income or 12 percent or less of
average annual earnings of its students. Discretionary income would be
defined as the difference between average annual income and 150 percent
of the most current Poverty Guideline for a single person in the
continental United States (available at http://aspe.hhs.gov/poverty).
We specifically seek comment on whether the 30 percent threshold for
the first three years of employment is appropriately rigorous or
whether the Department should consider using the 20 percent of
discretionary income or 8 percent of average annual earnings to define
programs as ineligible. The less restrictive standard is used here
because, as a general matter, the Department would be assessing the
programs during a borrower's first three years after leaving the
postsecondary education institution. In any case, however, where the
prior three-year period is used, the annual loan payment would have to
be less than 20 percent of discretionary income or less than 8 percent
of average annual earnings.
Consequences of Meeting or Not Meeting the Thresholds; Timelines;
Transition
Effective July 1, 2012, under proposed Sec. 668.7(d), an
institution would be required to alert prospective and currently
enrolled students they may have difficulty in repaying their loans
under certain circumstances. The institution would have to provide a
prominent warning in its promotional, enrollment, registration, and
other materials, including those on its Web site, and to prospective
students when conducting person-to-person recruiting activities. The
institution must also provide the most recent debt-to-income ratios and
the loan repayment rate for that program. An institution must provide
the warning if the program's repayment rate is less that 45 percent
and, using 3YP and, if applicable, P3YP, the debt-to-income ratio is
greater than 8 percent of average annual earnings or 20 percent of
discretionary income.
Under proposed Sec. 668.7(a) and (e), the Department would place a
program on a restricted status if the program's repayment rate is less
than 45 percent and the program's annual loan payment is more than 20
percent of discretionary income and more than 8 percent of average
annual income. For a restricted program, the institution would be
required to work with employers to assure that the training program is
meeting their needs, and limit new students enrollments in that program
to the average enrollment level for the prior three years. These
restrictions are intended to encourage an institution to improve the
program to better meet the needs of students and the relevant employers
identified by the institution.
Moreover, under proposed Sec. 668.7(a) and (f), if the program
does not satisfy at least one of the debt thresholds in paragraph
(a)(1) of this section, effective July 1, 2012, it would not meet the
gainful employment standard. The Department would notify the
institution of the program's ineligibility, and new students attending
the program would not qualify for title IV, HEA program funds. However,
an institution would be allowed to disburse title IV, HEA program funds
to current students who began attending the program before it became
ineligible for the remainder of the award year and for the award year
following the date of the Department's notice.
For the award year beginning on July 1, 2012, a program could fail
to meet one of the measures but still remain eligible. For this
transition year, the Department would cap the number of programs
declared ineligible to the lowest-performing programs producing no more
than five percent of completers during the prior award year,
eliminating the risk of large and immediate displacement of students.
Specifically, under proposed Sec. 668.7(f)(2), the Department would
determine which programs would fall within the five percent cap by:
(1) Sorting all programs subject to this section by category based
solely on the credential awarded as determined by the Department (e.g.,
certificate, associate degree, baccalaureate degree, and graduate and
professional degree) and then within each category, by loan
[[Page 43624]]
repayment rate, from lowest rate to highest rate.
(2) For each category of programs, beginning with the ineligible
program with the lowest loan repayment rate, identifying the ineligible
programs that account for a combined number of students that completed
the programs in the most recently completed award year that do not
exceed five percent of the total number of students who completed
programs in that category.
For each ineligible program that falls within the five percent
grouping for each category, the Department would notify the institution
that the program no longer qualifies as an eligible program. For every
other ineligible program, the Department would notify the institution
that it must limit the enrollment of title IV, HEA program recipients
in that program to the average number of title IV, HEA program
recipients enrolled during the prior three award years and provide the
same employer affirmations and debt disclosures that apply to programs
with low repayment rates and high debt-to-income ratios.
Additional Programs
Under proposed Sec. 668.7(g), before an institution could offer a
new program that is eligible for title IV aid, it would apply to have
the program approved by the Department. As part of its application, the
institution would need to provide (1) the projected enrollment for the
program for the next five years for each location of the institution
that will offer the additional program, (2) documentation from
employers not affiliated with the institution that the program's
curriculum aligns with recognized occupations at those employers'
businesses, and that there are projected job vacancies or expected
demand for those occupations at those businesses, and (3) if the
additional program constitutes a substantive change, documentation of
the approval of the substantive change from its accrediting agency.
In determining whether to approve the new program, under proposed
Sec. 668.7(g)(2), the Department could restrict the approval for an
initial period based on the institution's enrollment projections and
demonstrated ability to offer programs that lead to gainful employment.
If the new program constitutes a substantive change based solely on
program content, it would be subject to the gainful employment measures
as soon as data on the loan repayment rate and debt measures are
available. Otherwise, the loan repayment rate and debt measures for the
new program would be based, in part, on loan data from the
institution's other programs currently or previously offered that are
in the same job family. The Bureau of Labor Statistics (BLS) describes
a job family as a group of occupations based on work performed, skills,
education, training, and credentials and identifies the SOC code
(Standard Occupational Classification code) for each occupation in a
job family at http://www.bls.gov/oes/current/oes_stru.htm.
The following charts provide in summary form a description of the
consequences of meeting or not meeting the thresholds as well as the
Department's proposed timelines.
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Provisional Certification (Sec. 668.13)
The Department's current regulations in Sec. 668.13(c) identify
the conditions or reasons for which the Department may provisionally
certify an institution. We are proposing to amend Sec. 668.13(c)(1) to
provide that the Department may provisionally certify an institution if
one or more of its programs becomes restricted or ineligible under the
gainful employment provisions in proposed Sec. 668.7. The Department
believes that provisional certification may be warranted in cases where
an institution fails to take the actions necessary to keep its programs
in compliance with the gainful employment provisions in Sec. 668.7.
This failure would be one factor considered by the Department when
reviewing an institution's application for recertification of its
program participation agreement.
Hearing Official (Sec. 668.90(a))
Current Sec. 668.90(a)(3) sets forth the limitations on the
matters that may be considered, or limitations on decisions that may be
rendered by hearing officials in proceedings arising under subpart G of
part 668. Under proposed Sec. 668.90(a)(3)(vii), in a termination
action against a program for not meeting the standards for gainful
employment in Sec. 668.7(a), the hearing official would accept as
accurate the average annual earnings calculated by another Federal
agency, so long as the other Federal agency provided that calculation
for the list of program completers identified by the institution and
accepted by the Department. The hearing official may consider evidence
from an institution about earnings from its graduates to establish a
different average annual earnings amount to be used with the debt
measure, so long as that information is for the same individuals and
determined to be reliable by the hearing official.
During the negotiated rulemaking sessions, some non-Federal
negotiators highlighted the difficulty that institutions could
encounter in obtaining earnings information from students who completed
their programs. During these meetings, a separate proposal was
discussed to use wage information from the Bureau of Labor Statistics
(BLS) to represent earnings for program graduates. Some of the
negotiators voiced concerns that the reported salaries might not be
representative for a number of reasons such as regional variations and
job classifications and that self-employed individuals might not be
included in the BLS wage records, (although other information suggested
that this information was included). Nevertheless, the Department is
proposing to obtain average annual
[[Page 43629]]
earnings by program from another Federal agency, using actual wage
information maintained by that Federal agency for a program's students.
This information is and will be the best information available but, to
preserve the confidentiality of individuals that may or may not have
received a Federal benefit, neither the Department nor the institution
will be able to review the wage information for specific program
graduates. The Department and the institution will, however, be able to
ensure that the data includes only those program completers that were
included in the information provided by the institution under the
notice of proposed rulemaking published by the Department on June 18,
2010.
Since the specific individuals' actual earnings information will
not be available to the institution or to the Department, the proposed
regulations limit the discretion of the hearing official to determining
whether the average annual earnings at issue in a hearing were provided
by the other Federal agency to the Department for the list of program
completers identified by the institution and accepted by the
Department. Since the average annual earnings will be calculated using
an automated process that matches the program graduates with the wage
information the other Federal agency is required to maintain, the
Department believes it is sufficient to limit the review by a hearing
official to whether the average annual earnings were provided for the
list of program graduates that were identified by the institution and
accepted by the Department. The hearing official may consider whether
the institution can demonstrate that a program is eligible using a
different amount for the average annual earnings of the program
graduates with the debt measures for that program, so long as the
institution demonstrates the average annual earnings information is
reliable and for the same individuals who completed the program in
question.
Executive Order 12866
Regulatory Impact Analysis
Under Executive Order 12866, the Secretary must determine whether
the regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the 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 set forth in the Executive order.
Pursuant to the terms of the Executive order, we have determined
this proposed regulatory action will have an annual effect on the
economy of more than $100 million. Therefore, this action is
``economically significant'' and subject to OMB review under section
3(f)(1) of Executive Order 12866. Notwithstanding this determination,
we have assessed the potential costs and benefits--both quantitative
and qualitative--of this regulatory action and have determined that the
benefits justify the costs.
The Summary of Effects tables that follow describe the estimated
impact on programs that would be subject to these proposed regulations
along with the number of students that would be affected.
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[[Page 43631]]
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BILLING CODE 4000-01-C
The preceding table shows the estimated impact when the proposed
regulations are fully implemented by July 1, 2012. A detailed analysis
is found in Appendix A to this NPRM.
Paperwork Reduction Act of 1995
Proposed Sec. 668.7 contains information collection requirements.
Under the Paperwork Reduction Act of 1995 (44
[[Page 43634]]
U.S.C. 3507(d)), the Department has submitted a copy of this section to
OMB for its review.
Section 668.7--Gainful Employment in a Recognized Occupation
The proposed regulations would impose new requirements on certain
programs that by law must, for purposes of the title IV, HEA programs,
prepare students for gainful employment in a recognized occupation. For
public and private nonprofit institutions, a program that does not lead
to a degree would be subject to the eligibility requirement that the
program lead to gainful employment in a recognized occupation, while a
program leading to a degree, including a two-academic-year program
fully transferable to a baccalaureate degree, would not be subject to
this eligibility requirement. For proprietary institutions, all
eligible degree and nondegree programs would be required to lead to
gainful employment in a recognized occupation, except for a liberal
arts baccalaureate program under section 102(b)(1)(A)(ii) of the HEA.
As proposed in Sec. 668.7(a)(3)(viii), in accordance with
procedures established by the Department for the purposes of
calculating the loan repayment rate under Sec. 668.7(b), an
institution must report the CIP codes for all students who attended a
program at the institution whose FFEL or Direct Loan entered repayment
in the prior four FFYs. As indicated earlier, there has been tremendous
growth in occupational programs between 2000 and 2008, averaging
200,000 new students per year. Based upon data from our institutional
eligibility and program participation unit within Federal Student Aid,
the Department estimates the following number of affected institutions
that offer programs that currently prepare students for gainful
employment in recognized occupations. The Department estimates there
are 2,086 proprietary institutions with occupational programs, there
are 238 private, non-profit institutions with occupational programs,
and there are 2,139 public institutions with occupational programs.
The Department estimates that in the first year of reporting CIP
codes for all students who attended a program whose FFEL and Direct
Loans entered repayment in the preceding four Federal fiscal years the
burden would be as follows.
With respect to the 2,086 proprietary institutions, the Department
estimates that 376,000 student (47 percent times 800,000) attended
programs at those institutions during the preceding four FFYs. Of those
376,000, we estimate that 90 percent or 338,400 had title IV, HEA loans
that entered repayment. At an average of .08 hours (5 minutes) per
student to determine and report the CIP code, the Department estimates
an increase in burden for proprietary institutions of 27,072 hours in
OMB 1845-NEW4.
With respect to the 238 private non-profit institutions, the
Department estimates that 40,000 students (5 percent times 800,000)
attended programs at those institutions during the preceding four FFYs.
Of those 40,000, we estimate that 60 percent or 24,000 had title IV,
HEA loans that entered repayment. At an average of .08 hours (5
minutes) per student to determine and report the CIP code, the
Department estimates an increase in burden for private non-profit
institutions of 1,920 hours in OMB 1845-NEW4.
With respect to the 2,139 public institutions, the Department
estimates that 384,000 students (48 percent times 800,000) attended
those institutions during the preceding four FFYs. Of those 384,000, we
estimate that 38 percent or 145,920 had title IV, HEA loans that
entered repayment. At an average of .08 hours (5 minutes) per student
to determine and report the CIP code, the Department estimates an
increase in burden for public institutions of 11,674 hours in OMB 1845-
NEW4.
Collectively, the Department estimates that the burden associated
with determinations and reporting related to CIP codes for all students
who attended an occupational program will increase to the affected
institutions by 40,666 hours in OMB 1845-NEW4.
As proposed in Sec. 668.7(c)(3)(i) and (ii), the Secretary
determines annually for each program whether the annual loan payment is
less than the discretionary income and the earnings thresholds in Sec.
668.7(a). For annual earnings, the Secretary uses the most currently
available actual, average annual earnings obtained from a Federal
agency, of the students who completed the program during the 3YP and,
if the data are available, during the P3YP. P3YP data are used if, in
accordance with procedures established by the Secretary, the
institution shows that students completing the program typically
experience a significant increase in earnings after an initial
employment period and the institution explains the basis for that
earnings pattern. For each of the P3YP student completers, the
institution is required to provide the Secretary with the following
information; the program CIP code, the student's completion date, the
amount of private educational loans that the student received, and the
amount of debt incurred from institutional financing plans.
We estimate that 60 percent of the proprietary institutions would
meet the loan repayment rate of 45 percent; therefore 40 percent of the
2,086 proprietary institutions with programs that prepare students for
gainful employment or 834 institutions would have a loan repayment rate
less than 45 percent. Under the proposed regulations, the debt measure
as calculated by the Department would be used to determine if a program
would be eligible and therefore unrestricted, or to what extent
restrictions would apply. We estimate that 65.3 percent of the 834
institutions would pass the initial 3YP debt measure and therefore,
34.7 percent (.347 times 834 institutions equal 289 institutions) would
not pass the initial 3YP debt measure. Of the remaining 289
institutions that would not pass the initial 3YP debt measure, 75
percent would pass the prior 3YP threshold of the annual loan repayment
not exceeding 20 percent of discretionary income, or 8 percent of
annual earnings. We estimate that for the explanation of the increase
in earnings after the initial employment period and the submission of
the P3YP information (to include for each student that completed the
program: the CIP code of the program, the completion date, the amount
of private educational loans, and the amount of debt incurred from
institutional financing plans), to average 10 hours per proprietary
institution for a total of 2,890 hours of burden in OMB 1845-NEW4.
We estimate that 89 percent of the private nonprofit institutions
would meet the loan repayment rate of 45 percent; therefore 11 percent
of the 238 private nonprofit institutions with programs that prepare
students for gainful employment or 26 institutions would have a loan
repayment rate less than 45 percent. Under the proposed regulations,
the debt measure as calculated by the Department would be used to
determine if a program would be eligible and unrestricted, or to what
extent restrictions would apply. We estimate that 95 percent of the 26
private nonprofit institutions would pass the initial 3YP debt measure
and therefore, 5 percent (.05 times 26 institutions equal 1
institution) would not pass the initial 3YP debt measure. Of the
remaining 1 institution that would not pass the initial 3YP debt
measure, we estimate that this institution would explain the increase
in earnings after the initial employment
[[Page 43635]]
period and submit the alternative debt threshold data. We estimate that
this institution would pass the P3YP threshold of the annual loan
payment not exceeding 20 percent of discretionary income, or 8 percent
of average annual earnings. We estimate that the submission of the
explanation of increased earnings and the P3YP information (to include
for each student that completed the program: The CIP code of the
program, the completion date, the amount of private educational loans,
and the amount of debt incurred from institutional financing plans), to
average 10 hours per private nonprofit institution for a total of 10
hours of burden in OMB 1845-NEW4.
We estimate that 82 percent of the public institutions would meet
the loan repayment rate of 45 percent; therefore 18 percent of the
2,139 public institutions with programs that prepare students for
gainful employment or 385 institutions would have a loan repayment rate
less than 45 percent and therefore the debt measure as calculated by
the Department would be used to determine if a program would be
eligible and unrestricted, or to what extent restrictions would apply.
We estimate that 98 percent of the 385 public institutions would pass
the initial 3YP debt measure and therefore, 2 percent (.02 times 385
institutions equal 8 institutions) would not pass the initial 3YP debt
measure. Of the remaining 8 institutions that would not pass the
initial 3YP debt measure, we estimate that virtually all would explain
the increase in earnings beyond the initial employment period and
submit the alternative debt threshold data. We estimate that 90 percent
would pass the P3YP threshold of the annual loan payment not exceeding
20 percent of discretionary income, or 8 percent of average annual
earnings. We estimate that the submission of the explanation of the
increased earnings and the P3YP information (to include for each
student that completed the program: The CIP code of the program, the
completion date, the amount of private educational loans, and the
amount of debt incurred from institutional financing plans), to average
10 hours per public institution for a total of 80 hours of burden in
OMB 1845-NEW4.
Collectively, under proposed Sec. 668.7(c)(3), we estimate the
burden for institutions to explain the increase in earnings after the
initial 3YP and the submission of data on students that completed the
program during the P3YP would result in a burden of 2,980 hours.
Under proposed Sec. 668.7(d), on or after July 1, 2012, unless the
program has a loan repayment rate of at least 45 percent or an annual
loan payment that is at least 20 percent of discretionary income or 8
percent of average annual income, the Department would notify the
institution that it must include a prominent warning in its
promotional, enrollment, registration, and other materials describing
the program, including those on its Web site, designed and intended to
alert prospective and currently enrolled students they may have
difficulty repaying loans obtained for attending that program.
We estimate that 60 percent of the proprietary institutions would
have a loan repayment rate of 45 percent or above and that 40 percent
would not pass this rate (.4 times 2,086 equal 834 proprietary
institutions that have programs that prepare students for gainful
employment that would not pass this rate). We estimate that for the
initial 3YP, that 65.3 percent of the remaining 834 proprietary
institutions would meet or surpass the debt measures of at least 20
percent of discretionary income or at least 8 percent of average annual
income. We estimate that the remaining 34.7 percent (.347 times 834
equal 289 proprietary institutions) would not pass the debt measures
and therefore under the proposed regulations would be required to
provide a debt warning disclosure. We estimate that it will take the
affected 289 proprietary institutions, on average, 1 hour to meet these
reporting requirements for their occupational training programs for a
total estimated increase in burden of 289 hours in OMB 1845-NEW4.
We estimate that 89 percent of the private nonprofit institutions
would have a loan repayment rate of 45 percent or above and that 11
percent would not pass this rate (.11 times 238 equal 26 private
nonprofit institutions that have programs that prepare students for
gainful employment that would not pass this rate). We estimate that for
the initial 3YP, 95 percent of the remaining 26 private nonprofit
institutions would meet or surpass the debt measures of at least 20
percent of discretionary income or at least 8 percent of average annual
income. We estimate that the remaining 5 percent (.05 times 26 equal 1
private nonprofit institution) would not pass the debt measures and
therefore under the proposed regulations would be required to provide a
debt warning disclosure. We estimate that it will take the affected
private non-profit institution, on average, 1 hour to meet these
reporting requirements for its occupational training programs for a
total estimated increase in burden of 1 hour in OMB 1845-NEW4.
We estimate that 82 percent of the public institutions would have a
loan repayment rate of 45 percent or above and that 18 percent would
not pass this rate (.18 times 2,139 equal 385 public institutions that
have programs that prepare students for gainful employment that would
not pass this rate). We estimate that for the initial 3YP, 98 percent
of the remaining 385 public institutions would meet or surpass the debt
measures of at least 20 percent of discretionary income or at least 8
percent of average annual earnings. We estimate that the remaining 2
percent (.02 times 385 equal 8 public institutions) would not pass the
debt measures and therefore under the proposed regulations would be
required to provide a debt warning disclosure. We estimate that it will
take the affected 8 public institutions, on average, 1 hour to meet
these reporting requirements for their occupational training programs
for a total estimated increase in burden of 8 hours in OMB 1845-NEW4.
Collectively, under proposed Sec. 668.7(d), we estimate that
burden for institutions to meet these proposed disclosure requirements
in accordance with procedures established by the Department would
increase by 298 hours in OMB Control Number 1845-NEW4.
Under proposed Sec. 668.7(e), a restricted program would be
required to report to the Department additional information annually.
The additional information would include documentation from employers
not affiliated with the institution, affirming that the curriculum of
the program aligns with recognized occupations at those employers'
businesses. The number and locations of the businesses, as well as the
number of projected job vacancies at those businesses must be
commensurate with the anticipated size of the programs.
We estimate that 22.7 percent of the proprietary institutions will
be subject to the proposed requirements of the restricted status (.227
times 2,086 proprietary institutions that have programs that prepare
students for gainful employment equal 474 affected institutions). We
estimate that on average, each institution would take 11 hours to
obtain the independent employer affirmations as proposed for submission
to the Department. These institutions would already be required to
provide a debt warning disclosure, so there is no additional burden
associated with that requirement in this section. Therefore, we
estimate an increase in burden of 5,214 hours (474 affected
[[Page 43636]]
institutions times 11 hours equal 5,214 hours).
We estimate that 15 percent of the private nonprofit institutions
will be subject to the proposed requirements of the restricted status
(.15 times 238 private nonprofit institutions that have programs that
prepare students for gainful employment equal 36 affected
institutions). We estimate that on average, each institution would take
11 hours to obtain the independent employer affirmations as proposed
for submission to the Department. These institutions would already be
required to provide a debt warning disclosure, so there is no
additional burden associated with that requirement in this section.
Therefore, we estimate an increase in burden of 396 hours (36 affected
institutions times 11 hours equal 396 hours).
We estimate that 11.8 percent of the public institutions will be
subject to the proposed requirements of the restricted status (.118
times 2,139 public institutions that have programs that prepare
students for gainful employment equal 252 affected institutions). We
estimate that on average, each institution would take 13 hours to
develop its five year enrollment projections and obtain the independent
employer affirmations as proposed for submission to the Department.
These institutions would already be required to provide a debt warning
disclosure, so there is no additional burden associated with that
requirement in this section. Therefore, we estimate an increase in
burden of 2,772 hours (252 affected institutions times 11 hours equal
2,772 hours).
Collectively, under proposed Sec. 668.7(e), we estimate that
burden would increase by 8,382 hours in OMB 1845-NEW4.
Under proposed Sec. 668.7(f), the Department would notify an
institution whenever one or more of its programs become ineligible.
During the initial year of implementation as proposed, for the award
year beginning July 1, 2012, the number of ineligible programs would be
limited to five percent. The Department estimates that there would be
3,000 programs in the ineligible category initially. Five percent of
the 3,000 ineligible program or 450 programs would not be able to award
title IV, HEA program assistance to new students after the notification
date. The other 2,550 ineligible programs would be subject to
additional reporting requirements including providing employer
affirmations under Sec. 668.7(g)(1)(iii) and providing the debt
warning disclosures under Sec. 668.7(d).
With respect to the 2,550 ineligible programs, the Department
estimates that 65 percent or 1,658 of the ineligible programs would be
at proprietary institutions. At an average of 11 hours to obtain and
report employer affirmation per program, we estimate that burden would
increase by 18,238 hours in OMB 1845-NEW4.
With respect to the 2,550 ineligible programs, the Department
estimates that 65 percent or 1,658 of the ineligible programs would be
at proprietary institutions. At an average of 11 hours to obtain and
report employer affirmation per program, we estimate that burden would
increase by 18,238 hours. At an average of 1 hour to place debt warning
disclosure information in its promotional, enrollment, and other
materials, including its Web site, we estimate that burden will
increase by 1,658 hours in OMB 1845-NEW4. Collectively, the Department
estimates that burden would increase for proprietary institutions by
19,896 hours in OMB 1845-NEW4.
With respect to the 2,550 ineligible programs, the Department
estimates that 5 percent or 128 of the ineligible programs would be at
private nonprofit institutions. At an average of 11 hours to obtain and
report employer affirmation per program, we estimate that burden would
increase by 1,408 hours. At an average of 1 hour to place debt warning
disclosure information in its promotional, enrollment, and other
materials, including its Web site, we estimate that burden will
increase by 128 hours in OMB 1845-NEW4. Collectively, the Department
estimates that burden would increase for private nonprofit institutions
by 1,536 hours in OMB 1845-NEW4.
With respect to the 2,550 ineligible programs, the Department
estimates that 30 percent or 764 of the ineligible programs would be at
public institutions. At an average of 11 hours to obtain and report
employer affirmation per program, we estimate that burden would
increase by 8,404 hours. At an average of 1 hour to place debt warning
disclosure information in its promotional, enrollment, and other
materials, including its Web site, we estimate that burden will
increase by 764 hours in OMB 1845-NEW4. Collectively, the Department
estimates that burden would increase for public institutions by 9,168
hours in OMB 1845-NEW4.
In total, under proposed Sec. 668.7(f), the Department estimates
that burden would increase by 30,600 hours in OMB 1845-NEW4.
Under proposed Sec. 668.7(g), before an institution can offer an
additional program, the institution would have to apply to the
Department by providing documentation of the approval of the
substantive change by its accrediting agency, providing projected five
year enrollment estimates, as well as, obtaining documentation from
employers not affiliated with the institution, that the program
curriculum aligns with recognized occupations at those employers'
businesses, the number and locations of the businesses, and that the
projected number of job vacancies are commensurate with the anticipated
size of the program. We estimate that during the initial three year
period there will be 650 submissions of additional programs for which
institutions would submit to the Department this information. We
estimate that, of the 4,463 institutions with programs that prepare
student for gainful employment in a recognized occupation, 47 percent
are in the proprietary sector, 5 percent are in the private nonprofit
sector, and 48 percent are in the public sector.
We estimate that 47 percent of the 650 additional programs or 306
programs would be at proprietary institutions and that on average it
will take 13 hours to develop the five-year projections and to collect
the proposed employer documentation for a total increase of 3,978 hours
of burden.
We estimate that 5 percent of the 650 additional programs or 32
programs would be at private nonprofit institutions and that on average
it will take 13 hours to develop the five-year projections and to
collect the proposed employer documentation for a total increase of 416
hours of burden.
We estimate that 48 percent of the 650 additional programs or 312
programs would be at public institutions and that on average it will
take 13 hours to develop the five-year projections and to collect the
proposed employer documentation for a total increase of 4,056 hours of
burden.
Collectively, under Sec. 668.7(g), we estimate that the increase
in burden to institutions would be 8,450 hours in OMB Control 1845-
NEW4.
[[Page 43637]]
Collection of Information
----------------------------------------------------------------------------------------------------------------
Regulatory section Information collection Collection
----------------------------------------------------------------------------------------------------------------
668.7(a)(3)(viii)............. As proposed in Sec. 668.7(a)(3)(viii), in OMB 1845-NEW4. This
accordance with procedures established by the collection would be a new
Department for the purposes of calculating the collection. The burden
loan repayment rate under paragraph (b) of this increases by 40,666 hours.
section, an institution must report the CIP
codes for all students who attended a program at
the institution whose FFEL or Direct Loan
entered repayment in the prior four FFYs.
668.7(c)(3)................... The Department uses the current earnings of the OMB 1845-NEW4. This
student who completed the program during the collection would be a new
prior 3-year period if, in accordance with collection. The burden
procedures established by the Department, the increases by 2,980 hours.
institution shows that students completing the
program typically experience a significant
increase in earnings after an initial employment
period. The institution also provides the
information to the Department needed to
calculate the annual debt measures under this
section, including the CIP codes, the completion
date, the amount received in private loans or
institutional financing for attendance in the
program and the amount of debt incurred from
institutional financing plans for each graduate
for the prior three-year period.
668.7(d)...................... On or after July 1, 2012, if a program exceeds OMB 1845-NEW4. This
the debt threshold, the Department notifies the collection would be a new
institution that it must include a prominent collection. The burden
warning in its promotional, enrollment, increases by 298 hours.
registration, and other materials describing the
program, including those on its Web site,
designed and intended to alert prospective and
currently enrolled students that they may have
difficulty repaying loans obtained for attending
that program.
668.7(e)...................... Restricted programs as defined in proposed OMB 1845-NEW4. This
668.7(e) are required annually to report collection would be a new
employer affirmations specified in paragraph collection. The burden
(g)(1)(iii) of this section. increases by 8,382 hours.
668.7(f)...................... On or after July 1, 2012 a program becomes OMB 1845-NEW4. This
ineligible if it does not meet at least one of collection would be a new
the debt thresholds in Sec. 668.7(a)(1). collection. The burden
During the initial year, 95 percent of the increases by 30,600 hours.
ineligible programs may continue to participate
in the title IV, HEA programs if the institution
submits employer affirmations consistent with
the requirements in proposed Sec.
668.7(g)(1)(iii) and provides the debt warning
disclosures in proposed Sec. 668.7(d).
668.7(g)...................... Before an institution offers an additional OMB 1845-NEW4. This
program that is subject to the requirements of collection would be a new
this section, the institution must apply to the collection. The burden
Department and also provide documentation of the increases by 8,450 hours.
approval of the substantive change by its
accrediting agency, projected enrollment for the
next five years for each location of the
institution that will offer the additional
program, and documentation from employers not
affiliated with the institution affirming the
curriculum of the additional program aligns with
recognized occupations at those employers'
businesses.
----------------------------------------------------------------------------------------------------------------
If you want to comment on the proposed information collection
requirements, please send your comments to the Office of Information
and Regulatory Affairs, OMB, Attention: Desk Officer for U.S.
Department of Education. Send these comments by e-mail to [email protected] or by fax to (202) 395-5806. You may also send a
copy of these comments to the Department contact named in the ADDRESSES
section of this preamble.
The Department and OMB will consider your comments on these
proposed collections of information in--
Deciding whether the proposed collections are necessary
for the proper performance of its functions, including whether the
information will have practical use;
Evaluating the accuracy of its estimate of the burden of
the proposed collections, including the validity of its methodology and
assumptions;
Enhancing the quality, usefulness, and clarity of the
information it collects; and
Minimizing the burden on those who must respond. This
consideration includes exploring the use of appropriate automated,
electronic, mechanical, or other technological collection techniques or
other forms of information technology, e.g., permitting electronic
submission of responses.
OMB is required to make a decision concerning the collections of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, to ensure that OMB gives your comments full consideration,
OMB must receive the comments within 30 days of publication. This
additional time to provide comments to OMB does not affect the deadline
for your comments on the proposed regulations.
The Department notes that a federal agency cannot conduct or
sponsor a collection of information unless it is approved by OMB under
the PRA, and displays a currently valid OMB control number, and the
public is not required to respond to a collection of information unless
it displays a currently valid OMB control number. Also, notwithstanding
any other provisions of law, no person shall be subject to penalty for
failing to comply with a collection of information if the collection of
information does not display a currently valid OMB control number. The
Department will publish a notice at the final rulemaking stage
announcing OMB's action regarding the collections of information
contained in this proposed rule.
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 these proposed regulations would require transmission of
information that any other agency or
[[Page 43638]]
authority of the United States gathers or makes available.
Electronic Access to This Document
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) on the Internet at the following site: http://www.ed.gov/news/fedregister. To use PDF, you must have Adobe Acrobat
Reader, which is available free at this site.
Note: 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 on GPO Access at: http://www.gpoaccess.gov/nara/index/html.
(Catalog of Federal Domestic Assistance: 84.007 FSEOG; 84.032
Federal Family Education Loan Program; 84.033 Federal Work-Study
Program; 84.037 Federal Perkins Loan Program; 84.063 Federal Pell
Grant Program; 84.069 LEAP; 84.268 William D. Ford Federal Direct
Loan Program; 84.376 ACG/SMART; 84.379 TEACH Grant Program)
List of Subjects in 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: July 16, 2010.
Arne Duncan,
Secretary of Education.
For the reasons discussed in the preamble, the Secretary proposes
to amend part 668 of title 34 of the Code of Federal Regulations as
follows:
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
1. The authority citation for part 668 continues to read as
follows:
Authority: 20 U.S.C. 1001, 1002, 1003, 1070g, 1085, 1088, 1091,
1092, 1094, 1099c, and 1099c-1, unless otherwise noted.
2. Section 668.7 is added to subpart A to read as follows:
Sec. 668.7 Gainful employment in a recognized occupation.
(a) Gainful employment--(1) Debt thresholds. A program is
considered to provide training that leads to gainful employment in a
recognized occupation if, as calculated under paragraph (b) and (c) of
this section--
(i) The program's annual loan repayment rate is at least 35
percent;
(ii) Using the three-year period (3YP), the program's annual loan
payment is 30 percent or less of discretionary income or 12 percent or
less of average annual earnings; or
(iii) Using the prior three-year period (P3YP), the program's
annual loan payment is less than 20 percent of discretionary income or
less than 8 percent of average annual earnings.
(2) Restricted status. Unless a program is ineligible under
paragraph (f) of this section, the Secretary places the program on a
restricted status under the following conditions--
(i) The program has an annual loan repayment rate of less than 45
percent; and
(ii) The program has an annual loan payment that is more than 20
percent of discretionary income and more than 8 percent of average
annual income using 3YP, and if applicable P3YP.
(3) General. For purposes of this section--
(i) A program refers to any educational program offered by the
institution under Sec. 668.8(c)(3) or (d);
(ii) A Federal fiscal year (FFY) is the 12-month period starting
October 1 and ending September 30;
(iii) A three-year period (3YP) is the period covering the three
most recently completed award years prior to the earnings year;
(iv) A prior three-year period (P3YP) is the period covering the
fourth, fifth, and sixth most recently completed award years prior to
the earnings year (i.e., the three years preceding the 3YP);
(v) Earnings year is the most recent calendar year for which
earnings data are available;
(vi) Discretionary income is the difference between average annual
earnings and 150 percent of the most current Poverty Guideline for a
single person in the continental U.S. The Poverty Guidelines are
published annually by the U.S. Department of Health and Human Services
(HHS) and are available at http://aspe.hhs.gov/poverty;
(vii) The Classification of Instructional Programs (CIP) is a
taxonomy of instructional program classifications and descriptions
developed by the U.S. Department of Education's National Center for
Education Statistics; and
(viii) In accordance with procedures established by the Secretary
for purposes of calculating the loan repayment rate under paragraph (b)
of this section, an institution must report the CIP code for all
students who attended a program at the institution whose FFEL or Direct
Loans entered repayment in the prior four FFYs.
(b) Loan repayment rate. The Secretary calculates the loan
repayment rate for a program annually using the following ratio:
[GRAPHIC] [TIFF OMITTED] TP26JY10.079
(1) Original Outstanding Principal Balance (OOPB). (i) The OOPB is
the amount of the outstanding balance on FFEL or Direct loans owed by
students who attended the program, including capitalized interest, on
the date those loans entered repayment.
(ii) The OOPB of all loans includes the FFEL and Direct loans that
entered repayment for the prior four FFYs.
(2) Loans Paid in Full (LPF). (i) LPF are loans to students who
attended the program that have been paid in full. However, a loan that
is paid through a consolidation loan is not counted as paid in full for
this purpose until the consolidation loan is paid in full.
(ii) The OOPB of LPF in the numerator of the ratio is the total
amount of OOPB for these loans.
(3) Reduced Principal Loan (RPL). (i) RPL represents a loan where
payments made by a borrower during the most recently completed FFY
reduced the outstanding principal balance of that loan from the
beginning of that FFY. RPL also includes loans for borrowers whose
payments during that FFY qualify for the Public Service Loan
Forgiveness program under 34 CFR 685.219(c), even if there is no
reduction during the FFY in the outstanding principal balance of those
loans.
(ii) The OOPB of RPL in the numerator of the ratio is the total
amount of the OOPB for these loans.
(4) Exclusions. The following are excluded from both the numerator
and the denominator of the ratio:
(i) The OOPB of borrowers on an in-school deferment or a military-
related deferment status.
[[Page 43639]]
(ii) The OOPB of borrowers entering repayment after March 31 of the
most recent FFY.
(c) Debt measures--(1) General. The Secretary determines annually
for each program whether the annual loan payment is less than the
discretionary income and earnings thresholds in paragraph (a) of this
section using the following formulas:
(i) Annual loan payment < Discretionary threshold * (Average Annual
Earnings-(1.5 * Poverty Guideline)). For example, under paragraph
(a)(1)(ii) of this section, the Discretionary threshold is 20 percent
or .20.
(ii) Annual loan payment < Earnings threshold * Average Annual
Earnings. For example, under paragraph (a)(1)(iii) of this section the
Earnings threshold is 12 percent or .12.
(2) Annual loan payment. The Secretary determines the median loan
debt of students who completed the program at the institution during
the 3YP and uses this amount to calculate an annual loan payment based
on a 10-year repayment schedule and the current annual interest rate on
Federal Direct Unsubsidized Loans. If data are available, the Secretary
also calculates the median loan debt of students who completed the
program during the P3YP. In general, loan debt includes title IV, HEA
program loans, other than Parent PLUS loans, and any private
educational loans or debt obligations arising from institutional
financing plans. Loan debt does not include any debt obligations
arising from student attendance at prior or subsequent institutions
unless the other and current institutions are under common ownership or
control, or are otherwise related entities.
(3) Average annual earnings. The Secretary uses the most currently
available actual, average annual earnings obtained from a Federal
agency, of the students who completed the program during the 3YP and,
if the data are available, during the P3YP. P3YP data are used if, in
accordance with procedures established by the Secretary--
(i) The institution shows that students completing the program
typically experience a significant increase in earnings after an
initial employment period and explains the basis for that earnings
pattern; and
(ii) The institution provides the Secretary the information needed
to calculate the annual debt measures under this section, including the
CIP code, and for each student who completed the program, the
completion date, the amount received from private educational loans,
and the amount of debt incurred from institutional financing plans.
(d) Debt warning disclosure. On or after July 1, 2012, unless the
program has a loan repayment rate of at least 45 percent and an annual
loan payment that is at least 20 percent of discretionary income or 8
percent of average annual income, the Secretary notifies the
institution that it must--
(1) Include a prominent warning in its promotional, enrollment,
registration, and in all other materials, including those on its Web
site, and in all admissions meetings with prospective students, that is
designed and intended to alert prospective and currently enrolled
students that they may have difficulty repaying loans obtained for
attending that program; and
(2) Disclose to current and prospective students, the program's
most recent loan repayment rate under paragraph (b) of this section,
and most recent debt measures under paragraph (c) of this section.
(e) Restricted programs. The Secretary notifies an institution
whenever one of its program's is placed on a restricted status under
paragraph (a)(2) of this section, that--
(1) The institution must provide annually to the Secretary the
employer affirmations specified in paragraph (g)(1)(iii) of this
section;
(2) The institution must make the debt warning disclosures
specified in paragraph (d) of this section; and
(3) The Secretary limits the enrollment of title IV, HEA program
recipients in that program to the average number enrolled during the
prior three award years.
(f) Ineligible program--(1) General. Except for the transition year
under paragraph (f)(2) of this section, on or after July 1, 2012 a
program becomes ineligible if it does not satisfy at least one of the
debt thresholds in paragraph (a)(1) of this section. The Secretary
notifies the institution that the program is ineligible on this basis,
and the institution may not disburse any title IV, HEA program funds to
students who begin attending that program after the date specified in
the Secretary's notice. However, the institution may disburse title IV,
HEA program funds to students who began attending the program before it
became ineligible for the remainder of the award year and for the award
year following the date of the Secretary's notice.
(2) Transition year. (i) For the award year beginning July 1, 2012,
the Secretary caps the number of ineligible programs for which a notice
is sent under paragraph (f)(1) of this section by--
(A) Sorting all programs subject to this section by category based
solely on the credential awarded as determined by the Secretary (e.g.,
certificate, associate degree, baccalaureate degree, and graduate and
professional degree) and then within each category, by loan repayment
rate, from lowest rate to highest rate; and
(B) For each category of programs, beginning with the ineligible
program with the lowest loan repayment rate, identifying the ineligible
programs that account for a combined number of students that completed
the programs in the most recently completed award year that do not
exceed five percent of the total number of students who completed
programs in that category.
(ii) For each ineligible program that falls within the five percent
grouping by category during the transition period, the Secretary
notifies the institution under paragraph (f)(1) of this section that
the program no longer qualifies as an eligible program. For every other
ineligible program, the Secretary notifies the institution that--
(A) It must limit the enrollment of title IV, HEA program
recipients in that program to the average number of title IV, HEA
program recipients enrolled during the prior three award years;
(B) It must provide the employer affirmations under paragraph
(g)(1)(iii) of this section; and
(C) It must provide the debt warning disclosures specified in
paragraph (d) of this section.
(g) Additional programs. (1) Before an institution offers an
additional program that is subject to the requirements of this section,
the institution must apply to the Secretary under 34 CFR 600.10(c)(1)
to have that program approved as an eligible program. As part of its
application, the institution must provide--
(i) If the additional program constitutes a substantive change as
provided under 34 CFR 602.22(a)(1), documentation of the approval of
the substantive change by its accrediting agency;
(ii) Projected student enrollment for the next five years for each
location of the institution that will offer the additional program; and
(iii) Documentation from employers not affiliated with the
institution affirming that the curriculum of the additional program
aligns with recognized occupations at those employers' businesses, and
that there are projected job vacancies or expected demand for those
occupations at those businesses. The number and locations of
[[Page 43640]]
the businesses for which affirmation is required must be commensurate
with the anticipated size of the program.
(2) In determining whether to approve the additional program, the
Secretary may restrict the approval for an initial period based on the
projected growth estimates provided by the institution and the
demonstrated ability of the institution to offer programs subject to
this section.
(3) If the additional program constitutes a substantive change
based solely on program content as provided in 34 CFR
602.22(a)(2)(iii), the Secretary calculates the loan repayment rate and
debt measures for that program as soon as data are available.
Otherwise, the Secretary--
(i) Calculates the loan repayment rate under paragraph (b) of this
section by using loan data from the additional program and, for the
first three years, loan data from all other programs currently or
previously offered by the institution that are in the same job family
as the additional program. Any loans from the programs in the same job
family that enter repayment after the third year that the loan
repayment rate is calculated for the additional program, are not
included in that program's loan repayment rate. As described by the
Bureau of Labor Statistics (BLS), a job family is a group of
occupations based on work performed, skills, education, training, and
credentials. Occupations are grouped by Standard Occupational
Classification (SOC) codes. Information about job families and SOC
codes is available at http://www.bls.gov/oes/current/oes_stru.htm, or
http://online.onetcenter.org/find/family; and
(ii) Calculates the debt measures under paragraph (c) of this
section by using the loan debt incurred by students in the additional
program and in all other programs currently or previously offered by
the institution that are in the same job family as the additional
program, until loan debt data are available for a 3YP solely for the
additional program.
(Approved by the Office of Management and Budget under control
number 1845-NEW4)
(Authority: 20 U.S.C 1001(b), 1002(b) and (c))
3. Section 668.13 is amended by:
A. In paragraph (c)(1)(i)(D), removing the word ``or'' that appears
after the punctuation ``;''.
B. In paragraph (c)(1)(i)(E), removing the punctuation ``.'' and
adding, in its place, the word ``; or''.
C. Adding a new paragraph (c)(1)(i)(F).
The addition reads as follows:
Sec. 668.13 Certification procedures.
* * * * *
(c) * * *
(1)(i) * * *
(F) One or more programs offered by the institution--
(1) Are subject to the eligibility limitations under the gainful
employment provisions in Sec. 668.7(e); or
(2) Become ineligible under the gainful employment provisions in
Sec. 668.7(f).
* * * * *
4. Section Sec. 668.90 is amended by:
A. In paragraph (a)(3)(v), removing the word ``and'' that appears
after the punctuation'';''.
B. In paragraph (a)(3)(vi)(F), removing the punctuation ``.'' and
adding, in its place, the word ``; and''.
C. Adding a new paragraph (a)(3)(vii).
The addition reads as follows:
Sec. 668.90 Initial and final decisions.
(a) * * *
(3) * * *
(vii) In a termination action against a program based on the
grounds that the program does not meet the standards for gainful
employment in Sec. 668.7(a), the hearing official accepts as accurate
the average annual earnings calculated by another Federal agency, so
long as the other Federal agency provided that calculation for the list
of program completers identified by the institution and accepted by the
Department. The hearing official may consider evidence from an
institution about earnings from its graduates to establish a different
amount for the average annual earnings of the program graduates, so
long as that information is for the same individuals and determined to
be reliable.
* * * * *
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix A--Regulatory Impact Analysis
BILLING CODE 400-01-P
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[FR Doc. 2010-17845 Filed 7-23-10; 8:45 am]
BILLING CODE 4000-01-C