United States: Gainful Employment Reporting: Institutional Debt And Unpaid Charges

As REGucation readers know, on July 1, 2015, the U.S. Department of Education's new "gainful employment" or "GE" regulations finally took effect. Among other things, the new rules require institutions to report a wide range of data to the Department for each student who was enrolled in one (or more) of the institution's GE programs during a designated period.

As we've previously discussed in our five-part blog series, the reporting requirements, located at 34 C.F.R. 668.411, are considerable. Moreover, this reporting burden has increased significantly in 2015 due to the fact that schools are required, for this year only, to report data for multiple periods. By July 31, 2015, institutions must report data for award years 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, and 2013-14. And by October 1, 2015, institutions must report data for award year 2014-15.

With the reporting deadline approaching fast, we've been fielding an increasing number of inquiries from clients seeking guidance on some of the more opaque elements of the reporting scheme. One such element that has arisen on several occasions is the reporting of institutional debt, and specifically, the treatment of unpaid charges.

Pursuant to 34 CFR 668.411(a)(2)(iii), institutions are required to report the total amount of institutional debt accumulated by each GE student who withdrew or completed during the applicable award year. The term "institutional debt" is defined at 34 CFR 668.404(d)(1)(iii) as follows:

"The amount outstanding, as of the date the student completes the program, on any other credit (including any unpaid charges) extended by or on behalf of the institution for enrollment in any GE program attended at the institution that the student is obligated to repay after completing the GE program, including extensions of credit described in clauses (1) and (2) of the definition of, and excluded from, the term ''private education loan'' in 34 CFR 601.2."

Institutions attempting to parse this definition for reporting purposes have noted that it is unclear whether all fees and other charges assessed to a student's account should be included in the institutional debt number. On the one hand, the regulation plainly states that "any unpaid charges" a student is obligated to repay as of graduation should be included, suggesting that the regulation does not draw any distinction based on the type of charge. On the other hand, the regulation does limit the universe of applicable charges to those incurred by the student "for enrollment in any GE program." This language at least suggests the possibility that charges incurred by the student while in attendance, but unrelated to his or her enrollment in the GE program, might be properly excluded.

In the Frequently Asked Questions (FAQ) section of its Gainful Employment page, the Department offered some additional, but ultimately inconclusive, commentary on this topic (see question R-Q11). Responding to a request for more guidance on the subject of institutional debt, the Department observed:

"[I]n addition to institutional loans and other forms of institutional financing, institutional debt also includes debt arising from any other outstanding obligations the student owes at the time the student withdraws from or completes the GE program. Examples of these other financial obligations include library fees, graduation or withdrawal fees, laboratory fees, etc."

There is no question that the Department intends for institutions to include unpaid charges resulting from various institutional fees. It is notable, however, that each of the Department's examples appear to be fees that would be required of every student enrolled in a GE program, and that relate directly to the student's enrollment in the program. It thus remains unclear whether institutions are required to include charges that may appear on a student's ledger, but which are not required of every student, and which, at least arguably, are unrelated to the student's enrollment. Examples of this type of charge might include parking fees, late return fees, optional recreational facility fees or meal plans, or immunization and other medical services.

At times these fees can be significant. We worked with one client that makes expensive professional equipment available to students during their final term. The institution has a strong relationship with the maker of the equipment, and arranged for its students to have the option to purchase the equipment from the institution at a discounted cost. The equipment is not required for the program, is not purchased by many students, and is not even available until the final weeks of the program. But many professionals in the field ultimately own such equipment, and each term a handful of students take advantage of the opportunity. Because students actually purchase the equipment from the institution, it can be rolled into their student payment plan and appears on the student ledger. This significant charge is not incurred "for enrollment" in the program, but it is an "unpaid charge" owed at graduation.

At this point, absent further guidance from the Department, we have counseled clients to take a conservative approach toward excluding any unpaid charges from their student's institutional debt totals. Based on the language of the regulation, it certainly is conceivable that select charges could properly be excluded. But we expect the Department generally would take the view that such charges are few and far between.

Institutions can, however, proactively evaluate whether there are charges that presently appear on student ledgers, and that can easily be removed (and as such, improve the debt-to-earnings rates for future periods). For example, for immunization and other services, institutions might require students to pay vendors directly. Similarly, the client we noted above is arranging for students to pay the manufacturer, instead of the school, for the professional equipment. We appreciate that institutions permitted students to charge many such services to their student accounts as a convenience to the student. But the reality of the gainful employment regulations is that any fee charged to a student by the institution likely has a negative impact on the school's debt-to-earnings ratios.

With regard to parking, late fee, and other such charges, institutions also may wish to consider requiring that any such charges be cleared prior to the student completing and graduating from the program (recall that the definition of institutional debt only includes debt outstanding as of the date the student completes the program). Many institutions already have such policies in place. In addition to generally reducing bad debt, such policies also will ensure that fees of this sort are not rolled into students' institutional debt totals for gainful employment reporting, thereby decreasing debt-to-earnings ratios.

Looking for more information on the new Gainful Employment rules?

In an effort to assist the many institutions working to review and digest the new gainful employment regulations, Thompson Coburn's Higher Education practice offered a two-part webinar series discussing the new rules. Both webinars are free and available on demand. The first webinar, titled " Getting a Grip on Gainful," aired on November 18, 2014. The webinar offers a complete overview of the new gainful employment rules, including reporting, certification, and disclosure requirements. The second webinar, " Projecting Debt-to-Earnings Rates," aired on December 9, 2014, and discusses and expand upon the step-by-step process for estimating D/E rates covered in our desk guide, How to Project Gainful Employment Rates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions