Have We Decided What ‘Gainful Employment’ Means Yet?

Opinion | Higher Education

Have We Decided What ‘Gainful Employment’ Means Yet?

By David DeSchryver and Alison Griffin     Feb 5, 2018

Have We Decided What ‘Gainful Employment’ Means Yet?

The Obama Administration’s “gainful employment” regulations are among the most contentious federal education regulations. Ever. For the last nine (!) years, the U.S. Department of Education (ED) has been trying to define the term, and definition may determine whether a school is eligible to receive federal student aid for its programs under the Higher Education Act (HEA).

This week, ED will continue with the latest effort to define the term—and this push is likely to be the final and definitive one.

The process is being closely watched by, among others, the postsecondary investment community because the for-profit sector has been a testing ground for non-traditional online education. Consider, for example, Capella University’s FlexPath program offerings, which operate on a competency-based education (CBE) approach that allows learners to move through coursework at their own pace and schedule. The program has made important contributions to the meaning of “quality” for CBE programing, and it is influencing how and postsecondary online programs will help students to realize “gainful employment” in the future.

At the same time, the sector has been troubled by fraudulent and predatory actors, whose misconduct triggers legitimate consumer protection concerns. Over nine years ED has tried to strike a balance between supporting innovation and cracking down on schools that take federal money but fail to serve students. But the agency has yet to bring the parties to a stable agreement on the underlying methodology for calculating “gainful employment” and the consequences for those schools that do not pass muster.

While the details of the proposed rules are important, this article intends to clarify what has happened with the negotiation process to date because it has been so long and arduous. (As for the details of the rules, bookmark them for another time, but know that the consumer protection advocates are no longer driving the discussions).

Review: What’s Happened to Date

The debate is rooted in the meaning of “gainful employment.” As a condition of receiving federal student aid, the HEA requires that programs at nonprofit or public institution lead to a degree, and that career education programs “prepare students for gainful employment in a recognized occupation.”

However, lawmakers did not define “gainful employment.” Rather, they left it to ED to clarify the issue through regulations, but only after convening representatives of the stakeholder communities who will be most affected by the new federal rules. They vary depending on the type of program. There is, for example, a difference between a medical program and a teaching program because the student of the former may need more years to realize the “gainful” part of employment due to residencies.

Administrative law and policy wonks call this process “negotiated rulemaking” or “Neg Reg” (because, well, because everything in Washington is abbreviated).

Here is how it works: After choosing the representatives, ED hosts a series of meetings (typically three) that a neutral professional mediator facilitates. The representatives react to proposed issues and draft regulatory language that ED presents. The objective is to reach consensus on ED’s proposed definition of “gainful employment” and what happens when a school meets or fails to meet that definition. If the representatives reach consensus, then ED must publish the regulations as agreed upon for public comment. If they do not reach an agreement, ED may craft its own rules that are based on—but not bound by—the negotiations.

Here is what has happened to date. Be warned: even the summary is exhausting.

  • In 2009, ED announced its intent to establish negotiated rulemaking committees to define what, exactly, “gainful employment” means, marking the beginning of a nine-year process (and counting).
  • Throughout 2010, ED held additional public meetings and hosted negotiations, but to no avail. The committee did not reach consensus, allowing the agency to craft its rules based-on (but not bound by) the negotiations.
  • After delays, ED published the first version of final rules in the summer of 2011. That included fairly complex debt-to-earning ratios and school program student debt calculations. This triggered a lawsuit by the for-profit postsecondary sector that resulted in a district court nullifying key parts of the effort.
  • In 2013, ED licked its wounds and restarted another round of Neg Reg. Seeking to avoid the procedural errors identified by the court, ED reconvened new committees and proceeded with measured steps. Once again, the committee dutifully tried—but failed—to come to a consensus on the detailed methodology of the underlying calculations. (There is a good summary of the events leading up to the revised proposed rules here.)
  • ED issued a second set of final rules in 2014 that went into effect in the summer of 2015 for implementation in the fall/winter of 2016-2017.
  • January 2017, president Trump was sworn into office.

As expected, the Trump administration is embracing a different perspective on the issue than their predecessors. It favors less government prescription and more laissez-faire when it comes to defining “gainful employment.” But the law requires another round of negotiations to change an existing definition, so here we go again.

That’s three “Neg Reg” sessions over a span of nine years which, even for the most dedicated bureaucrat, is a test of stamina and attention.

Preview: What’s Ahead

What lies ahead? This third round, now underway, will likely result in a rule that’s more favorable to non-degree and educational programs offered at for-profit institutions than its attempted predecessors. The administration recently released proposed rules that would delete the term “gainful employment” and replace it with a universal debt-to-earnings rating for all schools. ED would also eliminate the loss of eligibility to receive federal student aid. These proposed changes are already arousing the passions of consumer protection advocates, and they will produce energized debates in the months ahead. (To clarify what is ahead, we have created a timetable here.)

Once this round is done, it is likely that the “gainful employment” saga will conclude and that education entrepreneurs will, once again, be able to operate with a clearer sense of the regulatory landscape. But, then again, regulatory experts have said that before.

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