ED's new rule to decide and disclose the “financial value” of every Title IV program at every school

On May 19, 2023, the U.S. Department of Education (ED) published in the Federal Register the official version of its latest notice of proposed rulemaking (NPRM).  While this proposed rule covers a number of important topic areas for Title IV-participating institutions, including financial responsibility, administrative capability, and certification procedures, the most substantial element of ED’s proposal is the reintroduction of the “gainful employment” or “GE” framework. Now officially titled the “Financial Value Transparency and Gainful Employment” rule, this latest version of the GE regulation is significantly different from its predecessors in many respects. Most notably, ED’s proposed rule covers all Title IV programs at all Title IV-participating institutions of higher education, and its consequences are significant.  

Historically, ED’s GE rule has included two debt-to-earnings (D/E) rates designed to assess whether a program offers graduates a reasonable return on their investment. These rates compared the typical debt a GE program’s graduates took on with their typical earnings after graduation. If a GE program’s D/E rates did not consistently meet certain thresholds established by ED, the program would lose its Title IV eligibility.  

Under the proposed rule, each year, ED would calculate D/E rates for all Title IV programs at all Title IV-participating institutions. To be clear, this would include both GE programs (non-degree programs offered by public and private non-profit institutions and all programs offered by proprietary institutions) and non-GE programs (degree programs offered by public and private non-profit institutions). The D/E rates and earnings premium would be calculated utilizing data obtained from institutions, the agency’s systems, and a yet-to-be-determined federal agency that would provide the earnings information (e.g., IRS, SSA). 

ED would then issue a notice of determination to all Title IV-participating institutions informing them of the D/E rates and earnings premium measure ED calculated for each Title IV program, as well as whether the program is passing or failing, and the consequences of that determination.  It still would be the case that Title IV eligibility determinations would only be made for GE programs. But ED indicates in the proposed rule that it would create and maintain a website that would disclose the D/E rates and earnings premium for all non-GE programs.  For any year ED notifies an institution that its non-GE program has failed the D/E rates test, the institution would have to ensure that students review ED’s website and acknowledge having seen ED’s determination regarding the program. Significantly, under the proposed rule, an institution would not be permitted to disburse Title IV funds to a student until the student provided the required acknowledgment.

We anticipate that this proposal will be of significant concern to leadership, business office, and admissions teams, as they contemplate directing current and prospective students to a federal website that proposes to “categorize programs based on those measures as low-earning or high-debt-burden, provide information about the financial value of programs to students, and require, when applicable, acknowledgments from students who are enrolled—and prospective students who are seeking to enroll—in programs with high debt burdens.”  88 Fed. Reg. 32322 (May 19, 2023).  

In particular, we expect this proposal will create discomfort for institutions with programs graduating significant numbers of individuals who may be subject to wage discrimination, work in rural markets, or work in professions with underreported income. The earnings for such programs may be depressed, with the result that they may produce less favorable D/E rates and be labeled as “low-earning or high-debt-burden.”

Under the proposed regulations, all Title IV institutions also would be required to annually report to ED an extraordinary array of data for their Title IV eligible programs (GE programs and non-GE programs), including, for each student, the student’s dates of enrollment; the total tuition and fees assessed; residency tuition status by state or district; total annual allowance for books, supplies, and equipment; total annual allowance for housing and food from their cost of attendance; the amount of institutional grants and scholarships disbursed to the student; the amount of other State, Tribal, or private grants disbursed to the student; and the amount of any private education loans disbursed, including private education loans made by the institution.  

Institutions would be required to begin reporting this data “no later than July 31 following the date these regulations take effect…,” which likely would be July 31, 2024. 88 Fed. Reg. 32339 (May 19, 2023).

Institutions and other members of the public wishing to comment on this proposed rule have a short, 30-day window in which to do so.  Comments must be submitted no later than June 20, 2023, via the Federal eRulemaking Portal at regulations.gov. The official title of the NPRM is Financial Value Transparency and Gainful Employment (GE), Financial Responsibility, Administrative Capability, Certification Procedures, Ability to Benefit (ATB) and the Docket ID is Docket ID ED-2023-OPE-0089.

We strongly encourage institutional counsel, compliance officers, and federal financial aid professionals to communicate with campus leadership, professional colleagues, and appropriate trade organizations regarding this proposed rule, and to consider commenting.   

Institutions interested in learning more about the proposed rule are welcome to join us on June 6, 2023, for a 90-minute webinar, during which we will discuss ED’s proposal in detail. This webinar, titled ED’s Proposed Financial Value Transparency and Gainful Employment Rule, will be led by Aaron Lacey, the Chair of Thompson Coburn’s Higher Education Practice and will pay particular attention to the expanded application of the rule to non-GE programs (degree programs offered by public and private non-profit institutions), including the proposed D/E rate and earnings premium calculations, the consequences of failure, and the associated data reporting requirements. Click here to register for the webinar.

Institutions with questions are welcome to contact Aaron Lacey or Hope Watson for assistance.