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Understanding Gainful Employment Regulations

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When boiled down, education is primarily about experience and outcome. Prospective students and families weighing their college and/or career preparation options often consider several key factorsamong them, affordability and financial aid, program completion time, courses of study, location and potential co-curricular or professional opportunities. And while students are often trying to piece together the educational experience that will best fit them, they are also seeking to understand the likely outcome of that education in the long runthe anticipated return on a hefty investment.

When Title IV financial aid funds are at play in that very investment, the federal government also wants to see that taxpayer dollars are allocated to schools and programs that set students up for success, which is where gainful employment (GE) disclosure and reporting come in. It’s important for institutions to understand what gainful employment is, what regulations surround it, why it matters and how to accurately disclose and report required information.

An Introduction to Gainful Employment

After an extensive rulemaking process, new gainful employment regulations were published on October 31, 2014 and went into effect on July 1, 2015. The new regulations have more rigorous standards for accountability and transparency to further protect students from poor and sometimes fraudulent career preparation programs that have historically left them saddled with debt they cannot repay. To ensure that students are being put on a path to success, the Department of Education requires certain schools to demonstrate that they adequately prepare students for “gainful employment in a recognized occupation” in order to be eligible to receive (and continue receiving) Title IV student financial aid funds.

Gainful employment regulations apply to roughly 3,700 institutions around the country, including non-degree educational programs at public and private nonprofit institutions and virtually all educational programs at for-profit and proprietary institutions. These often include post-secondary certificate and diploma programs, training programs and technical and vocational education. Programs leading to an associate’s, bachelor’s, graduate or professional degree at public and private nonprofit institutions of higher education are not considered gainful employment programs in this sense and do not need to comply with the gainful employment standards.

What is “Gainful Employment in a Recognized Occupation”?

Three debt measures are used to determine whether or not institutions are preparing their students for gainful employment in a recognized occupation: repayment rate, debt-to-earnings ratios based on annual income, and debt-to-earnings ratios based on discretionary income. These measures are intended to show that students are prepared for adequate job placement in recognized occupations that pay reasonable living wages, and that students are not so buried in educational debt that their loan payments absorb the bulk of their income.

  • Repayment Rate
    The rate of loan repayment must be at least 35 percent for gainful employment programs to remain eligible for Title IV funds. Repayment rate = original outstanding principal balance of loans paid in full plus the original outstanding principal balance of payments-made loans, divided by the original outstanding principal balance. The value of the fraction is multiplied by 100 to get the repayment rate.
  • Debt-to-Earnings
    For every gainful employment program, the Department of Education will calculate debt-to-earnings ratios based on information supplied by the institution for a specified cohort period (two or four years) as well as from the Social Security Administration.
  • Annual Earning Rate = median annual loan payment divided by the greater of the mean or median annual earnings of graduates. The “pass” threshold for gainful employment standards is that graduates’ annual loan payments are less than or equal to 8 percent of their annual earnings. The “fail” threshold is that the annual loan payment is greater than 12 percent of annual earnings.
  • Discretionary Income Rate = median annual loan payment divided by the discretionary income of graduates (i.e. the higher of the mean or median annual earnings, less 1.5 times the Health and Human Services Poverty Guidelines). The “pass” threshold for gainful employment regulations is that graduates’ annual loan payments are less than or equal to 20 percent of their discretionary income. The “fail” threshold is that the annual loan payment is greater than 30 percent of discretionary income.

Programs are considered in the “zone” if their calculations fall between the “pass” and “fail” thresholds. “Fail” marks for two out of three consecutive years or a combination of “fail” and “zone” marks for four consecutive years will render a gainful employment program ineligible for Title IV funding.

Understanding Disclosure and Reporting

Schools must disclose information about their gainful employment programs to the public using the Gainful Employment Disclosure Template to help students make informed decisions. In addition, they must submit an official, comprehensive report about students enrolled in these programs to the Department of Education’s central database for student aid, the National Student Loan Data System (NSLDS).

According to the Department of Education, disclosure of the following data on the institution's website and in promotional materials is required for each gainful employment program:

  • Occupations associated with program (by name and SOC code)
  • Typical program completion time
  • On-time completion rate  
  • Program costs  
  • Placement rate
  • Median loan debt

Also according to the Department of Education, reporting of the following data to the NSLDS is required for each student who received Title IV funds for a gainful employment program that they either completed or withdrew from:

  • Tuition and fees assessment before aid or credits are applied
  • Cost of books, supplies and equipment
  • Institutional debt owed apart from Title IV debt (e.g. obligations such as library or laboratory fees)
  • Private loans

The Gainful Employment Reporting Process

Institutions must report on an award year (July 1 through June 30). A student enrolled for more than one award year must be reported in each award year, and a student enrolled in more than one program must be reported for each program. This is accomplished through batch reporting (fixed width or comma separated value formats) through an institution’s Student Aid Internet Gateway (SAIG) Mailbox or online reporting through the NSLDS Professional Access website (NSLDSFAP).

The fully integrated financial aid module in Campus Café’s Student Information System (SIS) streamlines what can be a confusing and cumbersome government reporting process. Our integrated SIS collects and compiles data for NSDLS reporting as well as other required reports for state and government agencies. In addition, it services student communication, billing and packaging related to financial aid and ensures accurate tracking of student placements and hiring metrics. Campus Café complies with federal reporting and keeps tabs on changes in regulations to ensure that the specific needs of your career or vocational school are met. 

View the complete Gainful Employment User Guide >

View the Gainful Employment Operations Manual >

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