MEMO

To: Members of the GE Negotiated Rulemaking Committee

From: Barmak Nassirian

Subject: New (and Transitional) Program Approvals

Date: September 24, 2013

I decided to take a stab at responding to the Department's questions in writing before our scheduled 

conference call tomorrow. You'll note that the following framework explicitly states—and implicitly 

suggests—assumptions about how other pieces of the puzzle might have to be rearranged for this 

approach to work.

As I have previously suggested, the underlying statute requires some form of upfront review for all 

programs seeking to access Title IV funding through the GE provisions of Sections 101 and 102 of the 

Higher Education Act. The Department, for reasons that I understand but continue to respectfully 

disagree with, has chosen the administrative convenience and procedural safety of using actual, but 

lagging, indicators of whether various GE programs actually meet a set of substantive criteria, in this 

case, ED's proposed debt-service-to-income and debt-service-to-discretionary income ratios. (I'll note 

my hope that we will all coalesce around some way of additionally factoring in the fate of noncompleters into whatever post facto metrics for establishing eligibility we devise.) The most troubling 

aspect of this approach, as many of you have pointed out, is that it relies on actual harm to multiple 

cohorts of borrowers in low-performing GE programs before it definitively determines that such 

programs should not be allowed to participate in Title IV. The Department's assertion that it would not 

consider false certification discharge as a remedy for the borrowers that would be used as the 

regulatory equivalents of canaries in the coal mine only make matters worse for students. (I'll note my 

hope that we can reconsider allowing borrowers whose plight is used by the Department to terminate 

their program's eligibility to raise that federal determination as a defense against the repayment of the 

loans they took out to enroll in that program.)

Despite my reservations about the use of lagging indicators, I realize that it is unlikely that we can 

agree on a completely different conceptual approach. I am therefore prepared to tentatively accept it, 

but hope that we could create a generally self-administered upfront process that would simplify GE for 

high-quality/low-risk providers, weed out the worst programs, and create safeguards for students and 

the taxpayers for programs that cannot be placed in one of the two previous categories until such time 

as they generate actual data.

Outline of the Proposed Approval Process

All GE programs would have to apply for approval at least 120 days before they can publicly announce 

or advertise the program. (I would argue that existing programs should also be plugged into this same 

analysis, except that they could report actuals where appropriate. The D/E and D/dE estimates might 

have some diagnostic value to them and the Department and might be worth collecting, but the 

Department would use actual ratios obtained from SSA.)

All programs whose instructional expenses exceed 50% of tuition and fees, and all GE programs 

offered by institutions with a median annual borrowing amount of $0 would be automatically approved. 
These institutions may have to provide general programmatic information (CIP and SOC codes, 

narrative explanations of how the program was developed, etc.) but could skip the more detailed 

financial calculations.

All other programs would submit complete applications that would demonstrate that the proposed 

program will meet the requirements of a fully eligible program as defined in 34 CFR 668.8.

As part of their application for program approval, institutions would provide:

• A description of the proposed GE program, including CIP codes and program length. The 

description should also specifically indicate whether the proposed program meets all statemandated programmatic and specialized accreditation requirements for employment in the 

associated profession, whether it provides guaranteed placement for such non-academic prelicensure requirements as clinical placements, internships, and apprenticeships, and whether it 

would otherwise fully qualify graduates to take any licensure or community/industry standard 

examinations and meet any other pre-conditions of professional employment in the state in 

which the student is enrolled. The description should also provide information on how the 

institution developed the program, including all relevant internal and external reviews

• The specific occupation for which the program will prepare students for gainful employment, 

including SOC code and any required state licensure or community/industry-standards or 

certifications for practitioners. The institution should also include information on how market 

needs, professional qualifications, and starting salaries for the occupation were determined, 

including all relevant internal and external surveys, studies, or reviews

• Actual tuition and fees (changes to these data after approval may trigger Secretarial review)

• Projected per FTE instructional costs as defined in IPEDS

• Projected enrollments, including projected attrition and completion rates

• Projected annual percentage of students who will borrow

• Projected federal and private loan volumes

• Description of any institutional or private loan financing, including upfront fees and interest 

rates 

• Projected starting income, including detailed description of how the institution arrived at the 

estimate

• Projected debt-service-to-income and debt-service-to-discretionary income of graduates

• Projected estimate of whatever we decide is the appropriate metric for non-completers

• Actual dollar amounts of institutional expenditures on advertising, marketing and recruitment 

activities, and what percentage of institutional expenditures these activities represent

• Institutions must report any material changes in the assumptions and/or projected numbers 

within 30 days of learning of them. 

• The CEO and CFO of the institution (and its parent company if applicable) would be required 

certify the accuracy of the submission, and attest that the submitted information is true and 

complete, and that there are no substantial contrary internal information or relevant and material 

planning documents on any of the requested data points that are being withheld. Institutions and 

parent companies (and any agents they use to prepare for or conduct any of the required 

submissions) shall retain any material evidential matter for two years after the date when each 

cohort's data have been used to calculate actual GE compliance. The CEO and CFO would 

assume personal liability for a percentage of the Title IV aid inappropriately disbursed based on 

any omissions or distortions that prove to have been willful or grossly negligent.
As already stated, high quality/low risk programs would be automatically approved, and programs that 

by their own institution's projections would fail to fully qualify (i.e., in the zone or failed, or not 

preparing graduates for licensure/certification due to lack of necessary accreditation or non-academic 

placements) would be automatically denied. All other programs would be allowed to participate 

pending the collection and analysis of their actual data based on representations made in their 

applications, except that the Secretary would review that subset of providers whose application or other 

data places their programs in a high-risk category. (I would add that, to the extent that institutions 

would be self-certifying their eligibility, they'd be required to disclose some of their projections—

starting salaries, debt-to-income, debt-to-discretionary-income, non-completer metrics—in all 

communications with prospective applicants.)

Characteristics of high risk would include:

High loan dependency

High cost

Low instructional expenditures

High advertising recruiting expenditures

Questionable or inadequate data provided in support of projections

Low starting wages (i.e., earnings>X% of poverty or minimum wage)

In addition to risk-based reviews, the Department would be well-advised to conduct a small number of 

randomly selected reviews for compliance purposes.

Programs whose self-certified application is denied based on Secretarial review would be allowed to 

conditionally participate until such time as their actual GE data becomes available if they post an 

irrevocable letter of credit payable to the Secretary and intended for a borrower restitution fund in the 

amount of total pre-approved loan volume. This same conditional approval would be applied to any 

existing programs that land in the zone or that fail based on their actual D/E and D/dE ratios. (This 

would do away with the odd transition proposal about attributing earnings of more recent borrowers to 

past cohorts' debt.) In addition, the Secretary may impose programmatic enrollment caps, limitations on 

various expenditures including specific restrictions on advertising, recruitment, marketing, executive 

compensation, bonuses, award of stock options, insiders’ sale of stock, payment of dividends, or stock 

buy-backs during the period when any institution's GE program is conditionally approved. Conditional 

approval and these same limitations may also be triggered upon institutional notification of material 

changes to an original GE application, as well as during any year in which an institutional GE offering 

is in the zone or failing.

This is intended as a general reaction to the Department's questions, and will certainly need to be 

modified in numerous respects, but I thought it might help speed up the conversation.