United States: New USED Gainful Employment Rule Warrants Immediate Attention

On July 1, 2019, the U.S. Department of Education published in the Federal Register a new Gainful Employment (GE) rule (the "2019 GE Rule"). If your institution is (1) a proprietary school, or (2) a public or private nonprofit institution that offers non-degree programs that are Title IV eligible (e.g., diploma, certificate, or graduate certificate programs), you are impacted by this new rule and have important, immediate decisions to make.  

The prior administration promulgated its final GE rule on October 31, 2014 (the "2014 GE Rule"). The 2014 GE Rule is located at 34 C.F.R. 668 Subpart Q and remains in effect. The 2014 GE Rule framework features two debt-to-earnings metrics, as well as significant reporting, disclosure, and certification requirements. It applies to all Title IV-eligible programs offered by proprietary institutions, as well as to most Title IV-eligible, non-degree programs offered by public and private non-profit institutions (hereafter referred to as "GE programs"). A more detailed discussion of the programs covered by the 2014 GE Rule is available here.

The 2019 GE Rule rescinds the 2014 GE Rule in its entirety. Because the 2019 GE Rule will not become effective until July 1, 2020, the 2014 GE Rule will remain in effect for the next year. However, as detailed in the preamble to the 2019 GE Rule (see page 31396), the Department is exercising its statutory right to designate the 2019 GE Rule for early implementation "beginning on July 1, 2019, at the discretion of each institution."

This option for early implementation has instant impact. In accordance with the 2014 GE Rule, the Department previously designated July 1, 2019, as the day institutions offering GE programs must begin including the GE Disclosure Template in all promotional materials, and begin directly distributing the Disclosure Template to prospective students, in compliance with 34 C.F.R. 668.412(d) and (e). Information regarding these specific disclosure requirements is available in the Department's GE Electronic Announcement #119 - Release of the 2019 GE Disclosure Template.

The Department has clearly indicated, however, that institutions electing early implementation will not be required to comply with these requirements, or any other aspect of the 2014 GE Rule. In the Department's GE Electronic Announcement #122 – Early Implementation of the Rescission of the Gainful Employment Rule, which was posted on Friday, June 28, 2019, the Department plainly stated:

Institutions that early implement the rescission of the GE rule will not be required to report GE data for the 2018-2019 award year to NSLDS, which will be due October 1, 2019. Additionally, those institutions that early implement will not be required to comply with the current requirements in 34 CFR 668.412 (d) and (e) that require institutions to include the disclosure template, or a link thereto, in their GE program promotional materials and directly distribute the disclosure template to prospective students, which will be required starting on July 1, 2019. Institutions that early implement will no longer be required to post the GE Disclosure Template and may remove the template and any other GE disclosures that are required under 34 CFR 668.412 from their web pages. Finally, an institution that early implements will not be required to comply with the certification requirements for GE programs under 34 CFR 668.414.

Conversely, the Department also made clear that institutions that do not early implement "are expected to comply with the [2014 GE Rule] until the rescission becomes effective on July 1, 2020."

There is no formal or official election process for those institutions wishing to early implement the rescission of the 2014 GE Rule. The Department simply indicates that an institution that early implements "must document its early implementation internally." The Department also notes that while an institution does not have to publish its decision to early implement, it will be required to make the documentation of its decision available to the Department upon request.

In an effort to assist those institutions that may decide to early implement the 2019 GE Rule, we have drafted this model early implementation document. We emphasize that this model document is for informational purposes only, and does not constitute legal advice. Institutions should consult with their legal or compliance counsel regarding the best means by which to finalize and document early implementation. Our Higher Education practice also stands ready to help institutions with early implementation and any other questions concerning the 2019 GE Rule.

As indicated in our model early implementation document, we suggest that institutions specify their Office of Postsecondary Education Identification (OPE ID) number. For those institutional groups or systems that include more than one OPE ID number, we suggest executing a separate early implementation document for each OPE ID. We also suggest that the early implementation document be signed by the individual listed as "chief executive officer/president/chancellor" on the institution's official Eligibility and Certification Approval Report, a document maintained by the Department and with which senior financial aid personnel will be familiar.

On a final note, we observe that in addition to rescinding the 2014 GE Rule, the 2019 GE Rule outlines the Department's plans to significantly expand the College Scorecard to include program-level data for all institutions of higher education. For each program offered by an institution of higher education, the revised and enhanced College Scorecard would include "(1) Program size; (2) the median Federal student loan debt and the monthly payment associated with that debt based on a standard repayment period; (3) the median Graduate PLUS loan debt and the monthly payment associated with that debt based on a standard repayment period; (4) the median Parent PLUS loan debt and the monthly payment associated with that debt based on a standard repayment period; and (5) student loan default and repayment rates." (see pg. 31394 of the 2019 GE Rule). This information, the Department notes, would be in addition to the existing institution-level data, "such as admissions selectivity, student demographics, and student socioeconomic status."

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.

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