Revised Gainful Employment Rule Due in “Early Part” of 2011

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The U.S. Department of Education will release final changes to the so-called gainful employment rule affecting for-profit colleges in the “early part of this year” that will satisfy some of the career college sector’s concerns,  a top department official said this morning.

Assistant Secretary for Postsecondary Education Eduardo Ochoa said the gainful employment definition announced last July will be updated to address fears of for-profit college owners that the new regulations would eliminate students’ eligibility to receive federal financial aid, thereby forcing these businesses to shut down.

“The regulations will be different. They’re going to be better; more nuanced,” Ochoa said, speaking to a small group of reporters after he addressed the Council for Higher Education Accreditation’s annual conference in Washington, D.C.

Last November Ochoa was among three Education Department officials who listened and took notes as  numerous stakeholders in the higher education field gave public comments on the previously released gainful employment amendments. He said that a recent advertising blitz that criticizes the proposed changes by accusing the Department of Education of denying low-income, minority students the opportunity to attend college merely repeats what the for-profit college sector has already argued.

“It’s a little frustrating to watch the ads because these are things we heard about at the public hearings,” Ochoa said.

While declining to discuss details of what the second round of changes would be or an exact date to expect their release, he said, with some hesitation, that the Department will release the second round of changes “at a time that can be called the early part of this year.”

The controversy involves the department’s plan to establish minimum requirements schools would have to meet in order for their students to be eligible for federal student loans. These minimum requirements are in debt-to-income ratios – the amount of student debt at graduation compared to the amount they earn after graduation – and students’ loan repayment rates.

Jane Glickman, an Education Department spokeswoman, said this afternoon that the department also will issue a "Dear Colleague" letter sometime during the first three months of this year to clarify and explain -- but not change -- regulations for for-profit colleges issued last year and set to go into effect in July.

In his speech to the conference attendees, Ochoa mostly addressed accreditation issues, but did briefly discuss for-profit colleges, agreeing with Secretary of Education Arne Duncan’s statement that these schools do play a critical role in helping America improve college completion rates and warning of the bad actors in the field who are motivated to achieve business results, not necessarily student achievement results.

“In the case of for-profits, they’ve been able to develop a business model from scratch. They’ve identified a segment of the market that was not being served,” said Ochoa, a former provost in the California State University system. “They understand they have to reach the consumers they have to market their product. That’s a very different culture than the one we have [had] in higher education.”

Proprietary colleges are also trying to stop other rules for for-profit colleges that are set to become effective in July.  Late last week, the Career College Association (The Association of Private Sector Colleges and Universities) filed suit in U.S. District Court in Washington, D.C., alleging that other rules affecting pay to recruiters, misrepresentations to students and state authority to regulate the schools were hastily approved without affording sufficient public comment.  No hearings have been set in the case.


  • Riley Alexander

    The White House itself a co-conspirator in this. Mary Ellen Mc Guire was the chief contact inside the White House on Gainful Employment. She too, was in communication with short sellers one month after she left the White House.

    On August 12, 2010 Mary Ellen Mc Guire, conducted a conference call with Morgan Stanley.
    Mc Guire said: “The White House was extremely involved in this from start to finish.” When asked about the numbers and thresholds in the Gainful Employment rule pending at the Office of Management and Budget, she responded: “I can not imagine any circumstance where the administration would pull back on those numbers. If anything they are going to hit harder on the consumer side.”

    This investment advice was given to investors WHILE the rule was pending at OMB.