Ed Department fails to reach agreement on most new regulatory proposals

Dive Brief:

  • The US Department of Education failed to reach agreement this week with key higher education representatives on the Biden administration’s proposals for several new regulations, including those that would heavily affect the for-profit sector and monitoring of colleges’ financial health.
  • The Ed Department capped off three months of negotiated rulemaking on this set of regulations with a wide contingent of higher ed, including representatives for nonprofit institutions, for-profit colleges, student veterans and consumer advocates. The agency discussed seven regulatory proposals with the groups but only reached consensus on new 90/10 and ability to benefit rules, which both govern federal financial aid.
  • Because the Ed Department reached consensus on a 90/10 rule, it is bound — with few exceptions — to use the agreed-upon language for that regulatory proposal. For those that didn’t obtain consensus, the agency has broad power to keep or alter the language it put forth during negotiated rulemaking when it formally proposes new regulations.

Dive Insight:

The Ed Department’s positions during the negotiated rulemaking sessions reflect the Biden administration’s desire to crack down on for-profit colleges. Several of the agency’s proposals would tighten regulations governing proprietary colleges and further limit how much of their revenue can come from federal financial aid.

After private talks with representatives for student veterans and for-profit colleges Friday, the department reached a compromise on new language for the 90/10 rule, which bars for-profit colleges from receiving more than 90% of their revenue from federal financial aid.

Military education funds, such as GI Benefits, do not currently count toward the 90% calculation, which has led parts of the for-profit sector to focus their recruiting efforts on veterans. However, Congress changed federal law last year to begin counting those funds toward the calculation, starting in 2023. The regulatory proposal being negotiated reflects those changes.

“We have worked hard to find some common ground here,” said Gregory Martin, the Ed Department’s negotiator.

The Ed Department also reached consensus on regulatory language governing the ability of students without high school diplomas to receive federal financial aid if they meet certain criteria and enroll in eligible programs. The Ed Department’s proposal adds student success benchmarks to ensure enough learners lacking high school degrees were successfully completing those programs.

However, the Ed Department did not reach consensus on several contentious proposals.

They include the agency’s version of a new gainful employment rule, a measure that would hold career education programs responsible for ensuring their graduates can find work and pay off their student loans. Failing programs would risk losing access to federal financial aid.

The Ed Department proposed using two metrics to assess career education programs: one that would compare graduates’ earnings to their student loan debts and one that would compare their earnings to those of high school graduates in their states. The rule covers almost all programs at for-profit colleges as well as nondegree programs at nonprofit institutions.

The agency released a memo this week estimating how many programs would fail its proposed gainful employment rule if it were implemented. It found that 5.9% of for-profit certificate programs failed the agency’s debt-to-earnings measure, compared to only 0.4% of those offered by private nonprofits. Degree programs at for-profits had failing rates ranging from 9.5% to 12.3% depending on the credential level.

A much greater share of certificate programs didn’t meet the department’s proposed earnings threshold, with 30.8% of for-profit certificates failing the metric. In comparison, 1.6% of certificates at private nonprofit institutions that would be subject to the rule failed to meet the threshold. Failing rates for different levels of degree programs at for-profits ranged from 0% to 9.2%.

However, the Ed Department noted several caveats with the analysis, including that it had to use estimates for some data that it does not currently collect.

Six negotiators — including representatives for community colleges, private nonprofits and for-profit institutions — voted against the department’s proposal this week. At least one negotiator wanted to return to the Obama-era version of the rule, which did not have an earnings threshold.

The rulemaking committee also didn’t reach consensus on other issues, including how the department monitors the financial health of institutions and the rules that govern for-profit colleges’ conversions into nonprofit institutions. Depending on when the Ed Department publishes final regulations, they could go into effect as early as next year.

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