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Gainful Employment Final Rule. Debt Measures Module 2. Agenda. Final Rule published in the Federal Register on June 13, 2011 Gainful Employment—debt measures Measures that determine if a program prepares students for gainful employment in a recognized occupation

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Gainful employment final rule

Gainful EmploymentFinal Rule

Debt Measures

Module 2


Agenda
Agenda

  • Final Rule published in the Federal Register on June 13, 2011

    • Gainful Employment—debt measures

      • Measures that determine if a program prepares students for gainful employment in a recognized occupation

    • Final regulations are effective July 1, 2012

  • Resources


Debt measures
Debt measures

  • To determine which programs do an adequate job of preparing students for gainful employment, ED has established two measures:

    • Loan repayment rate

    • Debt-to-earnings ratios (two separate but related measures)

      • Earnings rate

      • Discretionary income rate

§ 668.7



Loan repayment rate1
Loan repayment rate

  • Determines if former students who entered repayment on their FFELP or FDLP loans for the program have reduced the outstanding principal balance of the loans from the beginning of the most recently completed fiscal year to the end of the same fiscal year

    • Former students include both completers and non-completers

    • Includes Stafford and Grad PLUS loans

§ 668.7 (b)


Terminology
Terminology

  • Federal fiscal year (FY): October 1 - September 30 of the following year

  • Loans Paid in Full (LPF): Non-defaulted loans paid in full by the borrower except via a Consolidation loan

  • Original Outstanding Principal Balance (OOPB): Total loan balance, including capitalized interest, when a loan first entered repayment.

§ 668.7 (b)


Terminology1
Terminology

  • Payments-Made Loans (PML): Borrower payments during the most recently completed FY reduced the loan’s outstanding balance (principal and interest) since the beginning of that FY by at least one cent; applicable to non-defaulted loans

    • Typically includes loans in the 3rd and 4th year of repayment

§ 668.7 (b)


Terminology2
Terminology

  • Excluded loans: The following types of loans are excluded from the calculation:

    • Loans in an in-school or military-related deferment status during any part of the FY

    • Loans that have been discharged due to a borrower’s total and permanent disability, as well as loans that have been transferred or assigned to ED for this reason

    • Loans that have been discharged due to death of the borrower

§ 668.7 (b)


Loan repayment rate2
Loan repayment rate

  • A loan is successfully being repaid if:

    • Its balance is reduced over the course of the fiscal year or the loan is paid in full

    • It is on track for Public Service Loan Forgiveness

    • Borrower is making payments under an interest-only or income-based repayment plan, with certain limitations

    • For post-baccalaureate programs, the balance on a Consolidation loan is less than or equal to the balance at the beginning of the year

§ 668.7 (b)


Loan repayment rate3
Loan repayment rate

Annual calculation for a GE program:

OOPB of LPF + OOPB of PML

OOPB of all FFELP and FDLP loans obtained by students enrolled in the program

§ 668.7 (b)



Earnings rate
Earnings rate income rate

  • Determines the percentage of a typical program completer’s annual earnings needed for loan payment

  • Generally includes all students who completed the program during the prior 3rd and 4th fiscal years

  • Includes FFELP and FDLP loans, private education loans, and institutional financing debt

§ 668.7 (c)


Earnings rate1
Earnings rate income rate

  • Key terminology:

    • Mean: the mathematical average of a set of numbers

    • Median: the “middle” value in a list of numbers

      • To find the median, the list of numbers has to be in numerical (ascending or descending) order

§ 668.7 (c)


Earnings rate2
Earnings rate income rate

  • Key terminology

    • Median loan debt is based on either:

      • The total amount of loan debt a student incurred to complete the program, or

      • The total tuition and fees charged to a student to complete the program

    • If the school reports both amounts, ED will calculate median loan debt for the program using the lower of these two amounts

§ 668.7 (c)


Earnings rate3
Earnings rate income rate

  • Annual Loan Payment (ALP) is calculated using the median loan debt and the current 6.8% interest rate on unsubsidized Stafford loans, based on a:

    • 10-year repayment schedule for a program that leads to an undergraduate or post-baccalaureate certificate, or to an associate’s degree;

    • 15-year repayment schedule for a program that leads to a bachelor’s or master’s degree; or

    • 20-year repayment schedule for a program that leads to a doctoral or first professional degree

§ 668.7 (c)


Earnings rate4
Earnings rate income rate

  • Annual Earnings (AE) is calculated using the higher of the most recent mean or median wage data available to ED from the Social Security Administration (SSA) for a calendar year

    • Schools can verify the lists of individuals submitted to SSA. However, the earnings data will be subject to SSA’s strict protections on individual privacy

§ 668.7 (c)


Earnings rate5
Earnings rate income rate

Annual calculation for a GE program:

Average Annual Loan Paymentof program completers

Mean or Median Annual Earningsof program completers

§ 668.7 (c)


Discretionary income rate
Discretionary income rate income rate

  • Determines the percentage of a typical program completer’s discretionary income that is needed for loan repayment

  • Generally includes all students who completed the program during the applicable 2-year (or 4-year) period

    • Same exceptions noted in earnings rate apply

  • Includes FFELP and FDLP loans, private education loans, and institutional financing debt

§ 668.7 (c)


Terminology3
Terminology income rate

  • Refer to previously-defined terminology under the earnings rate

  • Discretionary Income (DI): Difference between Annual Earnings (AE) and 150% of current federal Poverty Guideline amount for a single person living in the continental U.S.

§ 668.7 (b); (c)


Discretionary income rate1
Discretionary income rate income rate

Annual calculation for a GE program:

Average Annual Loan Payment of program completers

Mean or Median Annual Earnings

of program completers

minus 150% of Poverty Guideline Amount

§ 668.7 (c)


Minimum standards
Minimum standards income rate


Minimum standards1
Minimum standards income rate

  • A program adequately prepares students for gainful employment if it meets at least one of the three debt standards:

    • Loan repayment rate is 35% or greater

    • Earnings rate is 12% or less

    • Discretionary income rate is 30% or less

§ 668.7 (a)


Minimum standards2
Minimum standards income rate

  • A program is a failing program for a year if it fails all of the debt standards:

    • Loan repayment rate is less than 35%

    • Earnings rate is greater than 12%

    • Discretionary income rate is greater than 30%

  • For a single fiscal year: failing program

  • For three of four fiscal years: ineligible program

§ 668.7 (a)


Temporary comparison
Temporary comparison income rate

  • For FYs 2012, 2013, and 2014, ED will calculate two loan repayment rates for a program using:

    • 1st and 2nd FYs

    • 3rd and 4th FYs

  • ED will use the higher of those rates to determine whether the program meets the 35% minimum standard

§ 668.7 (b)(1)(iv)


Small numbers
Small numbers income rate

  • For a program with 30 or fewer students, the 2-year period is extended to a 4-year period

  • In lieu of minimum standards, program satisfies the debt measures if the 4-year period represents:

    • 30 or fewer borrowers whose loans entered repayment; or

    • 30 or fewer students who completed the program.

    • SSA did not provide mean and median earnings; or

    • Median loan debt is zero.

§ 668.7(d)


Informational rates
Informational rates income rate

  • For FY 2011, ED will provide informational-only data (no consequences) for each GE program offered by a school including:

    • Loan repayment rate for the 2-year period covering FYs 2007 and 2008

    • Earnings and discretionary income rates for the same period

    • Median loan debt and the mean and median annual earnings based on SSA data

  • Data will enable schools to assess programs

§ 668.7 (c)



Review and challenge process1
Review and challenge process income rate

  • ED will issue draft results for the program debt measures, starting with the FY 2012 rates to be released in 2013

  • Schools can review and correct or update certain data before debt measures are finalized

§ 668.7 (e)


Review and challenge process2
Review and challenge process income rate

  • Pre-draft corrections process

    • ED provides a school with the list of students to be submitted to SSA to obtain data used for debt-to-earnings ratios

    • School has 30 days to review the list and provide evidence to ED if a student should be included on or removed from the list

    • If approved, ED updates the student list before requesting earnings information from SSA

§ 668.7 (e)


Review and challenge process3
Review and challenge process income rate

  • Post-draft corrections process

    • School may challenge the accuracy of the:

      • List of borrowers

      • Borrower loan data used to calculate the draft loan repayment rate

      • Median loan debt used to calculate the draft debt-to-earnings ratios

    • School has 45 days to review the data and provide evidence of incorrect data to ED

§ 668.7 (e)


Review and challenge process4
Review and challenge process income rate

  • Recalculation of a draft rate

    • If a school’s challenge is accepted, ED recalculates the debt measures

    • For a failing program, if SSA is unable to provide earnings data for one or more students in the final list of program completers, ED adjusts the median loan debt by removing the highest loan debt for that number of students

    • Once updates are made, ED provides the school with the final debt measures for the program

§ 668.7 (e); (f)


Review and challenge process5
Review and challenge process income rate

  • For a failing program, a school may demonstrate that the program would meet a debt-to-earnings standard using median loan debt and alternative earnings from:

    • State data

    • School survey data in accordance with NCES standards that can be accessed at: http://nces.ed.gov/statprog/2002/stdtoc.asp

    • Bureau of Labor Statistics (BLS) earnings data, for FYs 2012, 2013, and 2014 only

§ 668.7 (g)


Debt warnings
Debt warnings income rate


Debt warnings1
Debt warnings income rate

  • If a school’s program fails to meet the minimum standards for all of the debt measures, the school must provide certain information to current and prospective students for the program in a “debt warning” notice:

    • First-year warning

    • Second-year warning

§ 668.7 (i)


Debt warnings2
Debt warnings income rate

  • First-year warning

    • Must be issued the first time a program fails to meet all debt measure minimum standards

    • Must include:

      • A plain-language explanation of the debt measures

      • The amount by which the program did not meet the minimum standards

      • The steps the school plans to take, if any, to improve the program’s performance under the debt measures

§ 668.7 (i)


Debt warnings3
Debt warnings income rate

  • Second-year warning

    • Must be issued after a program fails to meet all minimum standards for two consecutive FYs or for two of the three most recently completed FYs

    • Must include:

      • The information required for a first-year warning

      • A plain-language explanation of the actions the school plans to take in response to the second failure, including any plans to voluntarily discontinue the program

§ 668.7 (i)


Debt warnings4
Debt warnings income rate

  • The second-year warning must also include:

    • Explanation of the risks to students associated with enrolling or continuing in the program (e.g., inability to receive Title IV funds)

    • Explanation of resources available, including www.collegenavigator.gov, that a student may use to research other options and compare costs; and

    • A “clear and conspicuous statement” that a student who enrolls or continues to enroll in the program should expect to have difficulty repaying loan debt

§ 668.7 (i)


Debt warnings5
Debt warnings income rate

  • Timely first- or second-year warnings:

    • Current students

      • Warnings must be provided no later than 30 days after the school is notified that the program failed all of the minimum standards

    • Prospective students

      • Warnings must be provided at the time a student first contacts the school requesting information about the program

§ 668.7 (i)


Debt warnings6
Debt warnings income rate

  • Enrolling a prospective student

    • School may not enroll the student until three days after the warnings are provided

    • If more than thirty days elapse from the date the warnings are first provided, the school must provide the warnings again

      • School may not enroll the student until three days after the warnings are provided again

§ 668.7 (i)


Program improvement
Program improvement income rate

  • Failing programs do not lose Title IV eligibility immediately

  • Standards help programs raise performance

  • ED analysis indicates that with the opportunities for improvement, it is estimated that—

    • 8% of GE programs will fail at least once

    • 2% of GE programs will ultimately lose eligibility



Restrictions
Restrictions failing programs

  • An ineligible program or a failing program that a school voluntarily discontinues remains ineligible until the school reestablishes the eligibility of the program

    • Effective on the date the school provides written notice to ED that it relinquishes Title IV eligibility of that program

§ 668.7 (l)


Periods of ineligibility
Periods of ineligibility failing programs

  • Voluntarily discontinued failing program

    • School may not seek to reestablish eligibility of that program until the:

      • End of the 2nd FY following the FY in which the school discontinued the program’s eligibility once it was identified as failing, but not later than 90 days after the date ED notified the school that it was required to provide second-year debt warnings; or

      • End of the 3rd FY following the FY in which the school discontinued the program’s eligibility, if more than 90 days after the date ED notified the school that it was required to provide second-year debt warnings

§ 668.7 (l)


Periods of ineligibility1
Periods of ineligibility failing programs

  • Ineligible program

    • School may not seek to reestablish eligibility of that program until the:

      • End of the 3rd FY following the FY the program became ineligible

      • Substantially similar program also may not be established during the 3-year period

§ 668.7 (l)


Resources
Resources failing programs


Resources1
Resources failing programs

  • Final Rule published in the Federal Register on June 13, 2011

    http://ifap.ed.gov/fregisters/FR061311GEDebtMeasures.html

  • ED’s Gainful Employment Information page

    http://ifap.ed.gov/GainfulEmploymentInfo/index.html

  • To submit questions to ED, email:

    [email protected]


Resources2
Resources failing programs

  • NCHELP resources

    • GE Final Rule side-by-side analysis

      http://www.nchelp.org/?page=e0198

    • Integrated regulations that include the Program Integrity and GE Final Rules

      http://www.nchelp.org/?page=e0053

    • GE training modules

      http://www.nchelp.org/?page=e0032b


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