Transcript Slide 1

Gainful Employment
Final Rule
Debt Measures
Module 2
Agenda

Final Rule published in the Federal Register on
June 13, 2011



Gainful Employment—debt measures
 Measures that determine if a program
prepares students for gainful employment in a
recognized occupation
Final regulations are effective July 1, 2012
Resources
2
Debt measures

To determine which programs do an adequate
job of preparing students for gainful
employment, ED has established two measures:


Loan repayment rate
Debt-to-earnings ratios (two separate but related
measures)
 Earnings rate
 Discretionary income rate
§ 668.7
3
Loan repayment rate
Loan repayment rate

Determines if former students who entered
repayment on their FFELP or FDLP loans for
the program have reduced the outstanding
principal balance of the loans from the
beginning of the most recently completed fiscal
year to the end of the same fiscal year


Former students include both completers and
non-completers
Includes Stafford and Grad PLUS loans
§ 668.7 (b)
5
Terminology

Federal fiscal year (FY): October 1 September 30 of the following year

Loans Paid in Full (LPF): Non-defaulted loans
paid in full by the borrower except via a
Consolidation loan

Original Outstanding Principal Balance
(OOPB): Total loan balance, including
capitalized interest, when a loan first entered
repayment.
§ 668.7 (b)
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Terminology

Payments-Made Loans (PML): Borrower
payments during the most recently completed
FY reduced the loan’s outstanding balance
(principal and interest) since the beginning of
that FY by at least one cent; applicable to
non-defaulted loans

Typically includes loans in the 3rd and 4th year
of repayment
§ 668.7 (b)
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Terminology

Excluded loans: The following types of loans
are excluded from the calculation:

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
Loans in an in-school or military-related
deferment status during any part of the FY
Loans that have been discharged due to a
borrower’s total and permanent disability, as
well as loans that have been transferred or
assigned to ED for this reason
Loans that have been discharged due to death
of the borrower
§ 668.7 (b)
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Loan repayment rate
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A loan is successfully being repaid if:
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Its balance is reduced over the course of the
fiscal year or the loan is paid in full
It is on track for Public Service Loan Forgiveness
Borrower is making payments under an interestonly or income-based repayment plan, with
certain limitations
For post-baccalaureate programs, the balance on
a Consolidation loan is less than or equal to the
balance at the beginning of the year
§ 668.7 (b)
9
Loan repayment rate
Annual calculation for a GE program:
OOPB of LPF + OOPB of PML
OOPB of all FFELP and FDLP loans obtained
by students enrolled in the program
§ 668.7 (b)
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Debt-to-earnings ratios:
earnings rate and
discretionary income rate
Earnings rate
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

Determines the percentage of a typical
program completer’s annual earnings needed
for loan payment
Generally includes all students who completed
the program during the prior 3rd and 4th fiscal
years
Includes FFELP and FDLP loans, private
education loans, and institutional financing
debt
§ 668.7 (c)
12
Earnings rate

Key terminology:
 Mean: the mathematical average of a set of

numbers
Median: the “middle” value in a list of numbers
 To find the median, the list of numbers has to
be in numerical (ascending or descending)
order
§ 668.7 (c)
13
Earnings rate

Key terminology
 Median loan debt is based on either:
The total amount of loan debt a student
incurred to complete the program, or
 The total tuition and fees charged to a student
to complete the program
If the school reports both amounts, ED will
calculate median loan debt for the program using
the lower of these two amounts


§ 668.7 (c)
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Earnings rate
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Annual Loan Payment (ALP) is calculated using
the median loan debt and the current 6.8%
interest rate on unsubsidized Stafford loans,
based on a:
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10-year repayment schedule for a program that
leads to an undergraduate or post-baccalaureate
certificate, or to an associate’s degree;
15-year repayment schedule for a program that
leads to a bachelor’s or master’s degree; or
20-year repayment schedule for a program that
leads to a doctoral or first professional degree
§ 668.7 (c)
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Earnings rate

Annual Earnings (AE) is calculated using the
higher of the most recent mean or median
wage data available to ED from the Social
Security Administration (SSA) for a calendar
year

Schools can verify the lists of individuals
submitted to SSA. However, the earnings data
will be subject to SSA’s strict protections on
individual privacy
§ 668.7 (c)
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Earnings rate
Annual calculation for a GE program:
Average Annual Loan Payment
of program completers
Mean or Median Annual Earnings
of program completers
§ 668.7 (c)
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Discretionary income rate


Determines the percentage of a typical program
completer’s discretionary income that is needed
for loan repayment
Generally includes all students who completed the
program during the applicable 2-year (or 4-year)
period


Same exceptions noted in earnings rate apply
Includes FFELP and FDLP loans, private education
loans, and institutional financing debt
§ 668.7 (c)
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Terminology


Refer to previously-defined terminology under
the earnings rate
Discretionary Income (DI): Difference between
Annual Earnings (AE) and 150% of current
federal Poverty Guideline amount for a single
person living in the continental U.S.
§ 668.7 (b); (c)
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Discretionary income rate
Annual calculation for a GE program:
Average Annual Loan Payment of
program completers
Mean or Median Annual Earnings
of program completers
minus 150% of Poverty Guideline Amount
§ 668.7 (c)
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Minimum standards
Minimum standards

A program adequately prepares students for
gainful employment if it meets at least one of
the three debt standards:
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Loan repayment rate is 35% or greater
Earnings rate is 12% or less
Discretionary income rate is 30% or less
§ 668.7 (a)
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Minimum standards
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A program is a failing program for a year if it
fails all of the debt standards:
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Loan repayment rate is less than 35%
Earnings rate is greater than 12%
Discretionary income rate is greater than 30%
For a single fiscal year: failing program
For three of four fiscal years: ineligible program
§ 668.7 (a)
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Temporary comparison

For FYs 2012, 2013, and 2014, ED will calculate
two loan repayment rates for a program using:
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1st and 2nd FYs
3rd and 4th FYs
ED will use the higher of those rates to
determine whether the program meets the
35% minimum standard
§ 668.7 (b)(1)(iv)
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Small numbers
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For a program with 30 or fewer students, the 2year period is extended to a 4-year period
In lieu of minimum standards, program satisfies
the debt measures if the 4-year period represents:

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30 or fewer borrowers whose loans entered
repayment; or
30 or fewer students who completed the program.
SSA did not provide mean and median earnings; or
Median loan debt is zero.
§ 668.7(d)
25
Informational rates
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For FY 2011, ED will provide informational-only
data (no consequences) for each GE program
offered by a school including:
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Loan repayment rate for the 2-year period
covering FYs 2007 and 2008
Earnings and discretionary income rates for the
same period
Median loan debt and the mean and median
annual earnings based on SSA data
Data will enable schools to assess programs
§ 668.7 (c)
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Review and challenge process
Review and challenge process

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ED will issue draft results for the program debt
measures, starting with the FY 2012 rates to be
released in 2013
Schools can review and correct or update certain
data before debt measures are finalized
§ 668.7 (e)
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Review and challenge process
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Pre-draft corrections process
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ED provides a school with the list of students to
be submitted to SSA to obtain data used for
debt-to-earnings ratios
School has 30 days to review the list and
provide evidence to ED if a student should be
included on or removed from the list
If approved, ED updates the student list before
requesting earnings information from SSA
§ 668.7 (e)
29
Review and challenge process
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Post-draft corrections process
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School may challenge the accuracy of the:
 List of borrowers
 Borrower loan data used to calculate the draft
loan repayment rate
 Median loan debt used to calculate the draft
debt-to-earnings ratios
School has 45 days to review the data and
provide evidence of incorrect data to ED
§ 668.7 (e)
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Review and challenge process
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Recalculation of a draft rate
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If a school’s challenge is accepted, ED
recalculates the debt measures
For a failing program, if SSA is unable to provide
earnings data for one or more students in the
final list of program completers, ED adjusts the
median loan debt by removing the highest loan
debt for that number of students
Once updates are made, ED provides the school
with the final debt measures for the program
§ 668.7 (e); (f)
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Review and challenge process

For a failing program, a school may
demonstrate that the program would meet a
debt-to-earnings standard using median loan
debt and alternative earnings from:



State data
School survey data in accordance with NCES
standards that can be accessed at:
http://nces.ed.gov/statprog/2002/stdtoc.asp
Bureau of Labor Statistics (BLS) earnings data,
for FYs 2012, 2013, and 2014 only
§ 668.7 (g)
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Debt warnings
Debt warnings

If a school’s program fails to meet the minimum
standards for all of the debt measures, the
school must provide certain information to
current and prospective students for the
program in a “debt warning” notice:


First-year warning
Second-year warning
§ 668.7 (i)
34
Debt warnings
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First-year warning
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Must be issued the first time a program fails to
meet all debt measure minimum standards
Must include:
 A plain-language explanation of the debt
measures
 The amount by which the program did not
meet the minimum standards
 The steps the school plans to take, if any, to
improve the program’s performance under the
debt measures
§ 668.7 (i)
35
Debt warnings
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Second-year warning
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
Must be issued after a program fails to meet all
minimum standards for two consecutive FYs or
for two of the three most recently completed FYs
Must include:
 The information required for a first-year warning
 A plain-language explanation of the actions the
school plans to take in response to the second
failure, including any plans to voluntarily
discontinue the program
§ 668.7 (i)
36
Debt warnings
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The second-year warning must also include:
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Explanation of the risks to students associated
with enrolling or continuing in the program (e.g.,
inability to receive Title IV funds)
Explanation of resources available, including
www.collegenavigator.gov, that a student may
use to research other options and compare costs;
and
A “clear and conspicuous statement” that a
student who enrolls or continues to enroll in the
program should expect to have difficulty repaying
loan debt
§ 668.7 (i)
37
Debt warnings

Timely first- or second-year warnings:
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Current students
 Warnings must be provided no later than 30 days
after the school is notified that the program failed
all of the minimum standards
Prospective students
 Warnings must be provided at the time a student
first contacts the school requesting information
about the program
§ 668.7 (i)
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Debt warnings

Enrolling a prospective student
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School may not enroll the student until three days
after the warnings are provided
If more than thirty days elapse from the date the
warnings are first provided, the school must
provide the warnings again
 School may not enroll the student until three days
after the warnings are provided again
§ 668.7 (i)
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Program improvement
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Failing programs do not lose Title IV eligibility
immediately
Standards help programs raise performance
ED analysis indicates that with the opportunities
for improvement, it is estimated that—


8% of GE programs will fail at least once
2% of GE programs will ultimately lose eligibility
40
Restrictions for ineligible
and voluntarily discontinued
failing programs
Restrictions

An ineligible program or a failing program that
a school voluntarily discontinues remains
ineligible until the school reestablishes the
eligibility of the program

Effective on the date the school provides written
notice to ED that it relinquishes Title IV eligibility
of that program
§ 668.7 (l)
42
Periods of ineligibility

Voluntarily discontinued failing program

School may not seek to reestablish eligibility of
that program until the:
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
End of the 2nd FY following the FY in which the school
discontinued the program’s eligibility once it was
identified as failing, but not later than 90 days after
the date ED notified the school that it was required to
provide second-year debt warnings; or
End of the 3rd FY following the FY in which the school
discontinued the program’s eligibility, if more than 90
days after the date ED notified the school that it was
required to provide second-year debt warnings
§ 668.7 (l)
43
Periods of ineligibility

Ineligible program

School may not seek to reestablish eligibility of
that program until the:
 End of the 3rd FY following the FY the program
became ineligible
 Substantially similar program also may not be
established during the 3-year period
§ 668.7 (l)
44
Resources
Resources

Final Rule published in the Federal Register on
June 13, 2011
http://ifap.ed.gov/fregisters/FR061311GEDebtMeasure
s.html

ED’s Gainful Employment Information page
http://ifap.ed.gov/GainfulEmploymentInfo/index.html

To submit questions to ED, email:
[email protected]
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Resources

NCHELP resources
GE Final Rule side-by-side analysis
http://www.nchelp.org/?page=e0198


Integrated regulations that include the Program
Integrity and GE Final Rules
http://www.nchelp.org/?page=e0053
 GE training modules
http://www.nchelp.org/?page=e0032b
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