MEMORANDUM

TO: John	Kolotos,	U.S.	Department	of	Education

FROM: Kevin	Jensen,	College	of	Western	Idaho

Rich	Heath,	Anne	Arundel	Community	College

DATE: December	9,	2013

RE: 11/20/13	Draft	Gainful	Employment	Rule:	Proposals	for	Low-Risk	Programs

Overview

As	defined	under	federal	law,	the	majority	of	programs	required	to	prepare	students	for	gainful	

employment	are	offered	by	the	nearly 1,200	community	colleges	across	the	country. Community	

colleges	pride	themselves	on	offering	low-cost	degrees	and	certificates	so	that	the	vast	majority	of	

students do	not	need	to	borrow. As	stated	by	the	U.S.	Department	of	Education in	2010,	standards	for

gainful	employment	programs	“are	necessary	to	protect	taxpayers	against	wasteful	spending	on	

educational	programs	of	little	or	no	value	that	also	lead	to	high	indebtedness	for	students.”	1 The	

Department	would	consider	that	a	program	prepares	students	for	gainful	employment	if	the	loan	debt	

incurred	by	the	typical	student	attending	that	program	is	reasonable.

Unfortunately,	under	the	current	GE	proposal,	low-cost	programs – where	borrowing	is	largely	

unnecessary	and	where	the	majority	of	students	choose	not	to	borrow	– are	likely	to	be	unfairly	

jeopardized	because	the	proposed	metrics will	in	many	cases consider	only small,	unrepresentative	

portions of	the	students	who	actually	enroll	in	and	benefit	from	these	programs. By	definition,	program

performance	will	be	measured	by	students	who	are	NOT	“typical.”

For	nearly	all	of	these	low-cost	community	college	programs,	the	loan	debt	incurred	by	a	typical	student	

is	better	than “reasonable.” The	loan	debt	incurred	by	a typical	student	is	zero.	

While	there	certainly	are	local	and	regional	variations,	the national	data	suggest	that	low-cost	programs	

do	result	in	lower	borrowing	rates	and	therefore,	are	relatively	“low-risk” in	terms	of	taxpayers’	

investment	of	Title	IV	dollars	and	the	potential	to	produce	high	levels	of	student	indebtedness. For	

example,	while	59 percent	of	certificate-seeking	students	at	all	other institutions	borrow	federal	loans,	

just	9	percent	of	certificate-seeking	community	college	students	do.2

The	Department	has	already	acknowledged that	programs	with	low	borrowing	rates	should	be	positively	

recognized. The	final	2011	gainful	employment	rule	stated	that	programs	with	a	median	loan	debt	of	

zero	would	automatically	meet	the	metrics	based	on	the	sound	policy	and	“logical	extension	of	the	debt	

measures” that	federal	policy	should	encourage	institutions	to	keep	borrowing	to	a	minimum.

Unfortunately,	the	Department	abandoned	this	concept	in	more recent	proposals.	While	the	decision	to	

remove	this	concept	may	be	a	response to	the	court	decision	prohibiting	the	collection	of	student-level	

information	for	non-Title-IV students,	there	is	no	reason	why	the	rule	cannot	retain	a protection	for	lowborrowing	programs	even	without	student-level	information (suggestions	below).

 1 Preamble,	Notice	of	Proposed	Rulemaking,	Federal	Register:	July	26,	2010	(Volume	75,	Number	142)

2 U.S.	Department	of	Education,	National	Center	for	Education	Statistics,	2011-12	National	Postsecondary	Student	Aid	Study

(NPSAS:12).	Computation	by	NCES	PowerStats	on	December	4,	2013.
Page	2 of	5

In	contrast	with	a	stated	goal	of	the	Department	to	“reward” colleges	and	programs	that	are	serving	

students	well,	abandoning	this	provision	moves	the	rule	backwards	in	that	it	fails	to	acknowledge	low	

levels	of	risk	to	students	and	taxpayers from	affordable	programs	with	low	rates	of	borrowing.	

The	liability	placed	upon	institutions	to	meet	complex	metrics	and	borrower	relief	provisions	that	may	

be	triggered	by	an	extremely	small	percentage	of	overall	participants	will	ultimately	increase	program	

costs and	reduce	access	for all	students,	and	especially low-income,	first	generation, and	minority	

students who	community	colleges	typically	serve.	At	a	minimum,	the	metrics	will	challenge some

institutions’	ability	to	remain	in	the	Direct	Loan	program,	and	will	potentially	lead	to	the	closure	of	

smaller	programs	that	provide	low-risk,	low-cost opportunities	for	students.

Sample	of	students	inaccurately represents community	college	programs

The	current	proposal	tries	to	measure	low-cost programs	through	an	inappropriate lens	leading	to	an	

inaccurate	representation	and	collateral	damage	to	effective	programs.	Under	the current	draft	rules,	

program	completer	debt	levels would	be	judged	on	two	measures:	annual	and	discretionary	debt-toearnings	ratios that	calculate annual	debt	payments	relative	to	yearly	income.	National	data	indicate	

that	typical community	college	completers	have	no	federal	loan	debt	and	therefore	are	likely	to	carry	

low	ratios	of	debt-to-earnings on	average.

However,	under	the	current	draft	rules,	debt	measures	will	be	based	on	data	matches	with	Title	IV	

completers	only. This sample	skews the	data	to	a	highly	unrepresentative subgroup of	completers,

because	64	percent	of	certificate	students	at	public	two-year	institutions	nationally	receive	no	Title	IV	

federal	aid	whatsoever,	subsequently	discounting	the	outcomes	of	a	majority	of	completers.

Certificate	Students	Receiving	any	Federal	Aid	(excluding	Veterans’/DOD) by	Sector,

Award	Year	2011-12

Source:	U.S.	Department	of	Education,	National	Center	for	Education	Statistics,	2011-12	National	Postsecondary	Student	Aid	Study	(NPSAS:12).

Computation	by	NCES	PowerStats	on	December	4,	2013.
Page	3 of	5

Certificate	Students	Borrowing Federal	Student	Loans by	Sector,	Award	Year	2011-12

Source:	U.S.	Department	of	Education,	National	Center	for	Education	Statistics,	2011-12	National	Postsecondary	Student	Aid	Study	(NPSAS:12).

Computation	by	NCES	PowerStats	on	December	4,	2013.

The Title	IV sample also	artificially	inflates	borrowing	statistics among	completers. Low-income	federal	

aid	recipients	often	borrow	to	account	for	non-tuition	and	fees related	expenses.	Overall,	26	percent	of	

federal	aid	recipients in	community	college	certificate	programs	borrow compared	to	the	9	percent	of	all

community	college	certificate	students	who	do.	While	restricting	the	universe	of	students	to	Title	IV	

completers	is	partly	in	response	to	the	court’s	opinion on the	2011	rules,	it	does	not	preclude	ED	from	

collecting or	reporting aggregate	information	about	program	borrowing	in	order	to	protect	low-risk	

programs. There	are	multiple	ways	that	the	Department	can	collect	aggregate-level	information to	

identify	programs	that	have	low	levels	of	indebtedness.

At	colleges	and	programs	where	few	students	borrow,	the	risk	to	students of	enrolling

and	attending is	relatively	low

For	students,	low	levels	and	rates of	borrowing	means that few	face	the	risks	of	unaffordable	payments,	

or	eventual	default.	Students	who	attend	and	complete	these affordable programs	can	enter	highpaying	jobs	and	begin	to	build	their	financial	future	without	the	specter	of	student	loan	debt	hanging	

over	them.	Many	students	who	start	search	for	postsecondary	education	and	training	are	specifically	

looking	for	programs	that	allow	them	to	do	just	that	– attend	a	valuable	program	that	won’t	saddle	

them	with	any	debt.

Even	when	most	don’t	borrow,	there	will	be	some	students	who	do.	But	for	those	who	do,	their	financial	

risk	remains	low	because	their	educational	costs	remain	low.	That’s	because	the	average	tuition	and	

fees	for	one year	of	full-time	study	at	a	community	college	is	less	than	the	maximum	Pell	grant,	and	has	

been	for	years. Low	borrowing	almost	always	goes	hand-in-hand	with	low	tuition	and	fee	charges.

Further,	no	measure	will	adequately	capture	every	student	outcome. Individual	students	from	any	

program	may	graduate	with	no	debt,	or	with	burdensome	debt. What	is	important	in	crafting	a	rule	to	

assess	outcomes	at	the	programmatic	level	is	how	students	overall	are	faring. In	this	case,	assessments	

of	the	extent	of	problematic	debt	should	take	into	account	how	the	majority	of	students	are	doing. If	the	

Have	Federal	Loans

No	Debt
Page	4 of	5

majority	of	completers	have	no	debt,	then	the	program	should	pass	the	gainful	employment	test. If	the	

majority	of	completers	do	have	debt,	then	the	appropriateness	of	the	level	of	debt	must	be	assessed.

At	colleges	and	programs	where	few	students	borrow,	the	risk	to	federal	taxpayers of	

offering	aid	is	relatively	low

Typical	students	at	community	colleges,	which	offer	most	

gainful	employment	programs,	are	far	less	likely	to receive	

federal	aid	than	students	at	any	other	type	of	college,	and	

even	those	who	do	receive	aid	get	far	less	on	average.4 On	

a	per	capita	basis,	community	college	certificate	students

receive	less	than one-fourth	of	the	aid	that	students	at	all	

other	sectors	of	higher	education receive.

While	provisions	crafted	to	address	low-risk	or	low-borrowing	programs	should	not	be	limited	to	

institutions of	any	one	particular	sector,	data	limitations	make	it	challenging	to	assess	low-risk	or	lowborrowing	colleges	individually.	Therefore,	the	gainful	employment	metrics	should	ensure	that	all	lowrisk	programs	are	rewarded	for	keeping	borrowing	to	a	minimum.	

Shutting	down	low-risk	options	for	students

Consider	an	aircraft	maintenance	and	repair	program	with	50 students	each	award	year.	Wages	are	

strong	and	employment	prospects	positive, and	only	5	students	borrow,	primarily	to	cover	non-tuition	

and	fee	related	expenses as	tuition	is	just	$4,800	per	year.	Over	a	two-year	period,	the	number	of	

borrowers	reaches	10,	making	the	program	eligible	for	the	repayment	performance	metric.	Of	those	10	

borrowers	(among	100	total students)	just	2	enter	standard	repayment	in	their	first	year	– consistent	

with	national	trends	– making	minimum	payments,	while	the	rest	enter	forbearance,	deferment,	or	

income-based	repayment	plans	and	accumulate	interest.	The	total	cohort	principal	balance	is	slightly	

negatively	amortized.	The	program	then	fails	the	repayment	performance	metric	based	on	the	

repayment	choices	of	just	8%	of	the	students	who	enrolled in or	completed the	program.	State	officials,	

already	struggling	to	absorb	budget	shortfalls, are	unwilling	to	provide	borrower	relief	provisions,	and

without	Title	IV	eligibility the	program	must	close.

Consider	a	surgical	technician	program	near	a	large	and	expanding	hospital	complex	that	will	provide	

many	new	positions	for	program	graduates.	Of	approximately	120	students	each	year,	15	decide	to	

borrow	in	order	to	cover	tuition	and	fees,	as	they	are	not	eligible	for	federal grants	but	can’t	afford	to	

pay	the	$5,100	tuition,	fees,	and	living	expenses out	of	pocket.	The	majority	of	these	borrowers	enter	

repayment	upon	completing	or	leaving	the	program.	Over	a	two-year	period,	the	number	of	borrowers	

entering	repayment	reaches	30,	making	the	program	eligible	for	the	pCDR	metric	for	that	cohort.	The	

program	has	never	had	a	previous	problem	with	loan	repayment,	but	the	local	economy	suffers	a	

slowdown	and	the	hospital	must	lay	off	staff.	Other	related	employers	will	not	be	hiring	new	graduates	

for	a	few	years. Of	the	program	borrowers,	12	default	on	their	loans	because	they	are	unable	to	afford	

 3 U.S.	Department	of	Education,	National	Center	for	Education	Statistics,	2011-12	National	Postsecondary	Student	Aid	Study

(NPSAS:12). Computation	by	NCESPowerStats	on	December	4,	2013. 4 Average	total	federal	aid	(excluding	Veterans’/DOD)	received	by	public	two-year	certificate	students	who	receive	any	federal	

aid	is	$3,653,	compared	to	$8,350 for	certificate	students	in	all	other	sectors.	Source:	NPSAS:12.

Per-Capita	Federal	Aid	for	Certificate

Students,	Award	Year	2011-123

Public	two-year $1,320

All	Other	Sectors $5,904
Page	5 of	5

payments	and	find	work.	The	successful	program	reaches	an	unprecedented	40%	pCDR	threshold,	

making	them	immediately	ineligible	for	Title	IV	aid. State	officials,	already	struggling	to	absorb	budget	

shortfalls, move	to	close	the	program	with	no	opportunity	to	improve	or	survive	temporary	economic	

conditions.

Examples	like	these	– where	the	failing	debt	loads	or	repayment	status	of	a	small	fraction of	students	is	

inappropriately	projected	onto	the	entire	student	body,	even	when	it	is	clearly	known	that	most	

students	do	not	have	problems	with	debt	– are	likely	to	be	quite	common	under	the	current	

construction	of	the	gainful	employment	regulations.	In order	to	meet	the	metrics	as	conceived,	colleges	

will	streamline	or	close	certificate	programs	or	leave	the	Direct	Loan	program	entirely.	If	low-risk	

programs	are	shut	down	because	regulations	inadequately	accounted	for	their	low	risk,	then	students	

are	left	with	only	higher	risk	and	higher	cost	options	– the	opposite	goal	of	the	gainful	rule.

Recommendations	to	modify	the	gainful	employment	proposal	to	acknowledge	the	

value	of	low-risk	career	education	programs

The	Department	can	easily	acknowledge	low-risk	programs	without	colleges	needing	to	verify	any	

information	independently by	using	existing	reporting	mechanisms,	such	as	IPEDS. Alternatively,	ED	

could	allow	institutions	to	sign	statements	about	their	median	debt	levels	or	borrowing	rates	that	are	

subject	to	audit.	Neither	requires	student-level	information or	any	data	matches on	individual	students.

We	urge	the	Department	to	reinstate	provisions	similar	to	the	2011	final	rule	to	recognize	low-risk,	lowcost	programs.	The	following	proposal	is	an	effective	way	to	recognize	low-cost	programs	with	low	

borrowing	rates	while	not	automatically	passing	programs	with	higher	rates	of	borrowing.

UNDER:

§668.403 Gainful employment program framework:

INSERT:

(d) Low-risk programs

(1) A program is "passing" the GE measures if the program--

(i) has a federal median loan debt of zero for all program 

completers, both those who received title IV, HEA program funds 

and those who did not, as established by an institution or state 

reporting GE program borrowing rates below 50.0 percent or,

alternatively, a certification signed by the institution’s most 

senior executive officer; AND

(ii) has a published cost of tuition and fees that a full-time 

student would incur during an award year that is less than or 

equal to the maximum Pell Grant for that award year.