The Gainful Employment Regulation and You

There’s never been a better time to go to college! Spurred by the Obama administration, the United States Department of Education recently passed the “Gainful Employment Regulation,” a legislative move that protects students at private colleges and universities. The Gainful Employment Regulation basically screens schools for you, so that you can enroll in a program, use Title IV funds to pay your tuition, and be reasonably confident that you will achieve gainful employment when you have earned you credential.
Gainful Employment Regulation

To fully understand the Gainful Employment Regulation, you need to understand the background problem that it addresses. In recent years, some students took out high-interest loans and borrowed quite a bit of money to pursue degrees at universities that promised the students would land a job and start making good money as soon as they graduated. But some of these students found that they were not able to find good-paying jobs after graduation. Meanwhile, they had payments due on their college loans. When they couldn’t make their payments, the lenders added late fees and penalties. In some cases, the rate of interest on their loans rose because of failure to pay on time. So these students found themselves buried in debt and unable to find a job with any hope of repayment. The balance on their loans actually grew in some cases, because the accruing interest and fees outstripped the amount of payments they did actually make. Meanwhile, federal law says that a former student cannot evade a college loan by declaring bankruptcy. If, god forbid, you go through bankruptcy, your college loans will still be waiting for you on the other side of that humiliating process.

The Gainful Employment Regulation basically prevents colleges and universities from lying to students about their post-graduation prospects. The regulation evaluates many collegiate programs by looking at the success of its graduates. If the amount those graduates are (on average) paying on their loans exceeds twelve percent of their total income, the school they attended loses its Title IV eligibility. The regulation also looks at percentage of discretionary income–which is basically the money you have left over after paying your rent and buying your groceries. Under the Gainful Employment Regulation, graduates must on average be paying no more than thirty percent of their discretionary funds on their loans. It’s not an either or standard. Both standards must be met.

How does this affect you, you may be asking? Title IV eligibility is important because, without it, a student cannot get an educational loan. Title IV financial aid is a suite of products ranging from grants, like the Federal Pell Grant and the Federal Supplemental Educational Opportunity Grant (SEOG) to loans with varying rates of interest like the Federal Perkins Loan and Federal Subsidized and Unsubsidized Direct Loans. Typically the rate of interest on a federal education loan is quite a bit lower than the market rate for a home loan. As of this writing, the Federal Perkins Loan comes with a fixed rate of five percent. Obviously, you don’t want to put your tuition on your credit card and end up paying close to 20 percent interest! So students want and need federal loans. The Gainful Employment Regulation makes sure that you get your money’s worth out of a college loan. Beginning next year, when this regulation kicks in, schools that graduate students who can’t find decent paying jobs will lose their Title IV eligibility. I’m not saying that Title IV eligibility is the only thing you need to consider when choosing a school, but it is certainly an important factor.

To fully understand the Gainful Employment Regulation, you also need to understand the proliferation of proprietary schools that appeal specifically to non-traditional students. A non-traditional student is basically anybody who wants to return to school who does not fit comfortably into the full-time, on-campus college scene. Traditional students usually start college at age 17-19, go full time, live on or near campus, and graduate in four to six years. Everyone else who goes to college is a non-traditional student. It’s not just about age, although age can be a factor. A forty-year old man who decides to go back to school, even full time, is non-traditional. People who already have full-time jobs with heavy responsibilities, like nurses, often want and need to return to college to get promotions. They, too, are non-traditional students. Single mothers, even those still in their teens, are likely to be non-traditional students, because they have to wrap their college schedule around the needs of their children. Students with disabilities may also fall into the non-traditional category. So, as you can see, a lot of people want to go back to school, but don’t fit the mold of your average eighteen-year old tailgater!

The traditional framework for college–which is set up for young, single people who have no particular responsibilities–does not always serve non-traditional students well. That’s where private universities that offer technical degrees and certificates come in. A good example of a technical degree program would be a two-year full-time program in dental hygiene. Dental hygienists make decent money–an average of $70,000 a year, according to a 2012 survey. You can find such programs at technical colleges, community colleges, and some state universities. But these schools do not always offer the flexibility that non-traditional students need. That’s where private universities offering a wide range of online classes fill a niche. These schools create challenging online programs that teach students many, if not all, the skills they need to do a job without having to go to a lot of classes! At these online intensive schools, students can sign up for classes, study when they have the time–when the baby is napping, for instance–and take tests and write assigned papers when their schedule allows. Students can keep their full-time jobs and earn degrees by working hard at night and on the weekends. For the ambitious student, a certificate from a mostly online or fully online program can be a great way to increase earnings and land a job in a more exciting field of work. However, online career colleges are particularly vulnerable to loss of Title IV eligibility.

That said, some mostly online universities and some more traditional institutions have not delivered on their promises. Some offer very expensive programs which do not lead to gainful employment for enough of the students enrolled. The Gainful Employment Regulation is a way of holding colleges and universities accountable, not just to their present students, but to their future graduates. This regulation exists to keep you, the student, from wasting time and money on a degree that won’t get you where you want to go. How will you know whether your school passes the test? You need to do your research. Read the fine print. Universities are required to disclose their post-employment graduation rates any time they advertise a program. If in doubt, though, search the school’s website or call the financial aid office and get the low down. You don’t want to go to all the trouble of applying to a school and enrolling only to get turned down for federal financial aid. And, even if you don’t need to borrow, you should be wary of a school that can’t deliver on its career promises.

What do you do if you are already enrolled? In that case, you need to search your school’s site for its post-graduation employment statistics. If, at your school, graduates are paying eight percent or less of their total income and twenty percent or less of their discretionary income on their loans, the federal government has basically “passed” your school. It’s a reasonably safe bet that school will keep its Title IV eligibility. If, however, your school’s graduates are paying nine to twelve percent of their total income or twenty-one to thirty percent of their discretionary income on loan repayment, that school has been put on notice. That school has not lost its Title IV eligibility, but you should be aware that it could become ineligible in the future if its rates fall some more. You should also be aware that repaying your loan at that school could be a struggle. You may want to double down and complete your degree as quickly as possible or see if you can transfer to another school.

What do you do if you are enrolled in a school that simply fails the Gainful Employment Regulation standards? You need to be fully prepared for all the implications. Be aware that you will be responsible for any federal or private college debt already incurred. If you have completed half or less of your program, it may be worthwhile to see if you can transfer your credits to a school that is Title IV eligible. If transferring is simply not an option, visit your financial aid office to see what options you have. The school may provide in-school aid or work study options. You may want to pay as you go for the remainder of your classes, even if it means taking a little longer to graduate. About the last thing you should do is take out your credit cards to pay for classes! That’s a last resort that you want to use only if you have only one or two classes left to complete your program.

The Gainful Employment Regulation has its critics. Most of them are for-profit universities that do not meet the new federal standards. However, overall, this regulation does a lot to protect the consumer–that’s you, the student. After all, you’re not going back to school for your health. You want a good-paying job at the end. Education has always been one of the best ways that people achieve the American dream. Now, the Gainful Employment Regulation helps you sort out which schools will really help you get there.

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