• April 19, 2014

Education Dept. to Renew Efforts at Gainful-Employment and State-Authorization Rules

The Obama administration is not giving up on efforts to hold colleges accountable for their students' employability and to force states to step up their oversight of distance education.

In a notice to appear in Tuesday's Federal Register, the Education Department says it will revisit its controversial "gainful employment" and "state authorization" regulations as part of expanded rule-making sessions on fraud in the student-aid system. Both rules have been struck down in court, following challenges by for-profit colleges.

The original "gainful employment" rule, which the department published in 2011, would have cut off federal student aid to career-oriented programs whose graduates had high debt-to-income ratios and low loan-repayment rates. A federal judge blocked the core piece of the rule before it took effect, finding that the department had the authority to define "gainful employment" but had offered no reasoned basis for its debt-repayment threshold.

The department did not appeal the full decision but asked the court to reinstate a requirement that institutions report information about their students' loan-repayment rates and debt-to-income ratios. The judge denied that request last month.

Though the administration has not said whether it will appeal the latest ruling, Tuesday's notice suggests that it is open to other ways of defining gainful employment. In the notice, the department says it is seeking feedback on the "best measures" and "their thresholds" for distinguishing "successful and unsuccessful programs."

Expansion to Foreign Locations

The department will also revisit the requirement that colleges seek approval from each state in which they enroll students in online programs. That portion of the "state authorization" rule was blocked in 2011, on the grounds that institutions did not have time to review it, and remanded to the department for further review. In the coming rule-making sessions, the department will seek to expand the rules to foreign locations of domestic institutions.

The new topics will be added to a rule-making process that was supposed to focus on the use of debit cards for disbursing federal student aid and ways to streamline the campus-based student-aid programs. The department held a pair of hearings on those issues last May but had yet to schedule any negotiating sessions.

Tuesday's notice will add several new topics to the agenda. In addition to gainful employment and state authorization, the department will seek to revise rules on student-aid refunds and revamp underwriting criteria for PLUS loans. It will also put in place new reporting requirements stemming from the 2013 reauthorization of the Violence Against Women Act, focused on domestic violence, dating violence, sexual assault, and stalking.

Hearings on the new topics will be held in May, in San Francisco, Minneapolis, and Washington. Negotiations are expected to begin this fall.

In its notice, the department says it plans to hold additional rule-making sessions on college affordability and quality, as part of a "long-term agenda" that "will take several years to complete."

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