Monday, 

July 26, 2010 

Part II 

Department of 

Education 

34 CFR Part 668 

Program Integrity: Gainful Employment; 

Proposed Rule 


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43616 Federal Register / Vol. 75, No. 142 / Monday, July 26, 2010 / Proposed Rules 

DEPARTMENT OF EDUCATION 

34 CFR Part 668 

RIN 1840–AD04 

[Docket ID ED–2010–OPE–0012] 

Program Integrity: Gainful Employment 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Secretary proposes to 

amend the Student Assistance General 

Provisions to establish measures for 

determining whether certain 

postsecondary educational programs 

lead to gainful employment in 

recognized occupations, and the 

conditions under which these 

educational programs remain eligible for 

the student financial assistance 

programs authorized under title IV of 

the Higher Education Act of 1965, as 

amended (HEA). 

DATES: We must receive your comments 

on or before September 9, 2010. 

ADDRESSES: Submit your comments 

through the Federal eRulemaking Portal 

or via postal mail, commercial delivery, 

or hand delivery. We will not accept 

comments by fax or by e-mail. Please 

submit your comments only one time, in 

order to ensure that we do not receive 

duplicate copies. In addition, please 

include the Docket ID at the top of your 

comments. 

• Federal eRulemaking Portal. Go to 

http://www.regulations.gov to submit 

your comments electronically. 

Information on using Regulations.gov, 

including instructions for accessing 

agency documents, submitting 

comments, and viewing the docket, is 

available on the site under ‘‘How To Use 

This Site.’’ 

• Postal Mail, Commercial Delivery, 

or Hand Delivery. If you mail or deliver 

your comments about these proposed 

regulations, address them to Jessica 

Finkel, U.S. Department of Education, 

1990 K Street, NW., Room 8031, 

Washington, DC 20006–8502. 

Privacy Note: The Department’s policy for 

comments received from members of the 

public (including those comments submitted 

by mail, commercial delivery, or hand 

delivery) is to make these submissions 

available for public viewing in their entirety 

on the Federal eRulemaking Portal at http:// 

www.regulations.gov. Therefore, commenters 

should be careful to include in their 

comments only information that they wish to 

make publicly available on the Internet. 

FOR FURTHER INFORMATION CONTACT: For 

general information, John Kolotos or 

Fred Sellers. Telephone: (202) 502–7762 

or (202) 502–7502, or via the Internet at: 

John.Kolotos@ed.gov or 

Fred.Sellers@ed.gov. 

Information regarding the regulatory 

impact analysis or other data, can be 

found at the following Web site: http:// 

www2.ed.gov/policy/highered/reg/ 

hearulemaking/2009/integrity.html. 

If you use a telecommunications 

device for the deaf (TDD), call the 

Federal Relay Service (FRS), toll free, at 

1–800–877–8339. 

Individuals with disabilities can 

obtain this document in an accessible 

format (e.g., Braille, large print, 

audiotape, or computer diskette) on 

request to one of the contact persons 

listed under FOR FURTHER INFORMATION

CONTACT. 

SUPPLEMENTARY INFORMATION: 

Invitation To Comment 

As outlined in the section of this 

notice entitled Negotiated Rulemaking, 

significant public participation, through 

a series of three regional hearings and 

three negotiated rulemaking sessions, 

occurred in developing this notice of 

proposed rulemaking (NPRM). In 

accordance with the requirements of the 

Administrative Procedure Act, the 

Department invites you to submit 

comments regarding these proposed 

regulations on or before September 9, 

2010. To ensure that your comments 

have maximum effect in developing the 

final regulations, we urge you to 

identify clearly the specific section or 

sections of the proposed regulations that 

each of your comments addresses and to 

arrange your comments in the same 

order as the proposed regulations. 

We invite you to assist us in 

complying with the specific 

requirements of Executive Order 12866 

and its overall requirement of reducing 

regulatory burden that might result from 

these proposed regulations. Please let us 

know of any additional opportunities 

we should take to reduce potential costs 

or increase potential benefits while 

preserving the effective and efficient 

administration of the programs. 

During and after the comment period, 

you may inspect all public comments 

about these proposed regulations by 

accessing Regulations.gov. You may also 

inspect the comments, in person, in 

Room 8031, 1990 K Street, NW., 

Washington, DC, between the hours of 

8:30 a.m. and 4 p.m., Eastern time, 

Monday through Friday of each week 

except Federal holidays. 

Assistance to Individuals With 

Disabilities in Reviewing the 

Rulemaking Record 

On request, we will supply an 

appropriate aid, such as a reader or 

print magnifier, to an individual with a 

disability who needs assistance to 

review the comments or other 

documents in the public rulemaking 

record for these proposed regulations. If 

you want to schedule an appointment 

for this type of aid, please contact one 

of the persons listed under FOR FURTHER

INFORMATION CONTACT. 

Negotiated Rulemaking 

Section 492 of the HEA requires the 

Secretary, before publishing any 

proposed regulations for programs 

authorized by title IV of the HEA, to 

obtain public involvement in the 

development of the proposed 

regulations. After obtaining advice and 

recommendations from the public, 

including individuals and 

representatives of groups involved in 

the Federal student financial assistance 

programs, the Secretary must subject the 

proposed regulations to a negotiated 

rulemaking process. All proposed 

regulations that the Department 

publishes on which the negotiators 

reached consensus must conform to 

final agreements resulting from that 

process unless the Secretary reopens the 

process or provides a written 

explanation to the participants stating 

why the Secretary has decided to depart 

from the agreements. Further 

information on the negotiated 

rulemaking process can be found at: 

http://www.ed.gov/policy/highered/leg/ 

hea08/index.html. 

On September 9, 2009, the 

Department published a notice in the 

Federal Register (74 FR 46399) 

announcing our intent to establish two 

negotiated rulemaking committees to 

prepare proposed regulations. One 

committee would develop proposed 

regulations governing foreign 

institutions, including the 

implementation of the changes made to 

the HEA by the Higher Education 

Opportunity Act (HEOA), Public Law 

110–315, that affect foreign institutions. 

A second committee would develop 

proposed regulations to improve 

integrity in the title IV, HEA programs. 

The notice requested nominations of 

individuals for membership on the 

committees who could represent the 

interests of key stakeholder 

constituencies on each committee. 

Team I—Program Integrity Issues 

(Team I) met to develop proposed 

regulations during the months of 

November 2009 through January 2010. 

The Department developed a list of 

proposed regulatory provisions, 

including provisions based on advice 

and recommendations submitted by 

individuals and organizations as 

testimony to the Department in a series 


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of three public hearings held on the 

following dates: 

• June 15, 2009, at Community 

College of Denver in Denver, CO. 

• June 18, 2009, at University of 

Arkansas in Little Rock, AR. 

• June 22, 2009 at Community 

College of Philadelphia in Philadelphia, 

PA. 

In addition, the Department accepted 

written comments on possible 

regulatory provisions submitted directly 

to the Department by interested parties 

and organizations. A summary of all 

oral and written comments received is 

posted as background material in the 

docket for this NPRM. Transcripts of the 

regional meetings can be accessed at 

http://www2.ed.gov/policy/highered/ 

reg/hearulemaking/2009/negregsummerfall.html#ph. 

Department staff also identified issues 

for discussion and negotiation. 

At its first meeting, Team I reached 

agreement on its protocols. These 

protocols provided that for each 

community identified as having 

interests that were significantly affected 

by the subject matter of the negotiations, 

the non-Federal negotiators would 

represent the organizations listed after 

their names in the protocols in the 

negotiated rulemaking process. 

Team I included the following 

members: 

Rich Williams, U.S. PIRG, and Angela 

Peoples (alternate), United States 

Student Association, representing 

students. 

Margaret Reiter, attorney, and Deanne 

Loonin (alternate), National Consumer 

Law Center, representing consumer 

advocacy organizations. 

Richard Heath, Anne Arundel 

Community College, and Joan Zanders 

(alternate), Northern Virginia 

Community College, representing twoyear public institutions. 

Phil Asbury, University of North 

Carolina, Chapel Hill, and Joe Pettibon 

(alternate), Texas A & M University, 

representing four-year public 

institutions. 

Todd Jones, Association of 

Independent Colleges and Universities 

of Ohio, and Maureen Budetti (alternate) 

National Association of Independent 

Colleges and Universities, representing 

private, nonprofit institutions. 

Elaine Neely, Kaplan Higher 

Education Corp., and David Rhodes, 

(alternate), School of Visual Arts, 

representing private, for-profit 

institutions. 

Terry Hartle, American Council on 

Education, and Bob Moran (alternate), 

American Association of State Colleges 

and Universities, representing college 

presidents. 

David Hawkins, National Association 

for College Admission Counseling, and 

Amanda Modar (alternate) National 

Association for College Admission 

Counseling, representing admissions 

officers. 

Susan Williams, Bridgeport 

University, and Anne Gross (alternate), 

National Association of College and 

University Business Officers, 

representing business officers. 

Val Meyers, Michigan State 

University, and Joan Berkes (alternate), 

National Association of Student 

Financial Aid Administrators, 

representing financial aid 

administrators. 

Barbara Brittingham, Commission on 

Institutions of Higher Education of the 

New England Association of Schools 

and Colleges, Sharon Tanner (1st 

alternate), National League for Nursing 

Accreditation Commission, and Ralph 

Wolf (2nd alternate), Western 

Association of Schools and Colleges, 

representing regional/programmatic 

accreditors. 

Anthony Mirando, National 

Accrediting Commission of 

Cosmetology Arts and Sciences, and 

Michale McComis (alternate), 

Accrediting Commission of Career 

Schools and Colleges, representing 

national accreditors. 

Jim Simpson, Florida State 

University, and Susan Lehr (alternate), 

Florida State University, representing 

work force development. 

Carol Lindsey, Texas Guaranteed 

Student Loan Corp, and Janet Dodson 

(alternate), National Student Loan 

Program, representing the lending 

community. 

Chris Young, Wonderlic, Inc., and Dr. 

David Waldschmidt (alternate), 

Wonderlic, Inc., representing test 

publishers. 

Dr. Marshall Hill, Nebraska 

Coordinating Commission for 

Postsecondary Education, and Dr. 

Kathryn Dodge (alternate), New 

Hampshire Postsecondary Education 

Commission, representing State higher 

education officials. 

Carney McCullough and Fred Sellers, 

U.S. Department of Education, 

representing the Federal Government. 

These protocols also provided that, 

unless agreed to otherwise, consensus 

on all of the amendments in the 

proposed regulations had to be achieved 

for consensus to be reached on the 

entire NPRM. Consensus means that 

there must be no dissent by any 

member. 

During the meetings, Team I reviewed 

and discussed drafts of proposed 

regulations. At the final meeting in 

January 2010, Team I did not reach 

consensus on the proposed regulations. 

The proposed regulations in this 

document focus on the issue of whether 

certain programs lead to gainful 

employment in recognized occupations. 

A separate NPRM for all of the other 

Program Integrity issues discussed 

during the meetings was published on 

June 18, 2010. 

Background 

For-profit postsecondary education, 

along with occupationally specific 

training at other institutions, has long 

played an important role in the nation’s 

system of postsecondary education and 

training. Many of the institutions 

offering these programs have recently 

pioneered new approaches to enrolling, 

teaching, and graduating students. In 

recent years, enrollment has grown 

rapidly, nearly tripling to 1.8 million 

between 2000 and 2008. This trend is 

promising and supports President 

Obama’s goal of leading the world in the 

percentage of college graduates by 2020. 

The President’s goal cannot be achieved 

without a healthy and productive higher 

education for-profit sector. 

However, the programs offered by the 

for-profit sector must lead to measurable 

outcomes, or those programs will 

devalue postsecondary credentials 

through oversupply. The Government 

Accountability Office (GAO) had noted 

this problem in its work dating to the 

1990’s. Specifically, GAO found that 

occupation-specific training programs 

that lacked a general education 

component made graduates of for-profit 

institutions less versatile and limited 

their opportunities for employment 

outside their field. GAO also found that 

there were labor oversupplies when the 

numbers of expected job openings were 

compared to the corresponding number 

of postsecondary graduates who 

completed training programs. 

Oversupply in the labor market results 

in unemployment and a decline in real 

wages. Generally, the impact is felt most 

significantly by recent graduates and 

adversely affects their ability to support 

themselves and their families, as well as 

their ability to repay their student loans. 

The Department of Education 

Organization Act gives the Secretary 

broad responsibility to establish the 

regulatory requirements necessary for 

appropriately managing the Department 

and its programs. Additionally, under 

the Higher Education Act of 1965, as 

amended (HEA), the Department has the 

responsibility to ensure that institutions 

of higher education, including for-profit 

institutions, meet minimum standards if 

they choose to participate in the title IV, 

HEA programs (Federal student aid 

programs). For the programs that would 


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1Source: U.S. Department of Education, National 

Center for Education Statistics, B&B: 93/03 

Baccalaureate and Beyond Longitudinal Study. 

2Source: U.S. Department of Education, National 

Center for Education Statistics, B&B: 93/03 

Baccalaureate and Beyond Longitudinal Study. 

be subject to these proposed regulations, 

one of these minimum standards is that 

the programs must lead to gainful 

employment in a recognized 

occupation. 

Many for-profit institutions derive 

most of their income from the Federal 

student aid programs. In 2009, the five 

largest for-profit institutions received 77 

percent of their revenues from the 

Federal student aid programs. This 

figure that does not include revenue 

received from certain Federal student 

loans (not authorized by the HEA) that 

are exempted under the so-called 90/10 

rule, or other revenue derived from 

government sources including Federal 

Veterans’ education benefits, Federal job 

training programs, and State student 

financial aid programs. A recent study 

completed for the Florida legislature 

concluded that for-profit institutions 

were more expensive for taxpayers on a 

per-student basis due to their high 

prices and large subsidies. 

The proposed standards for 

institutions participating in the title IV, 

HEA 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. The proposed 

standards will also protect students who 

often lack the necessary information to 

evaluate their postsecondary education 

options and may be mislead by skillful 

marketing, resulting in significant 

student loan debts without meaningful 

career opportunities. Unlike public or 

private nonprofit institutions, for-profit 

institutions are legally obligated to make 

profitability for shareholders the 

overriding objective. Furthermore, forprofit institutions may be subject to less 

oversight by States and other entities. 

There are reasons for concern that 

some students attending for-profit 

institutions have not been well served. 

Student loan debt is higher among 

graduates of for-profit institutions. For 

example, the median debt of a graduate 

of a two-year for-profit institution is 

$14,000, while most students at 

community colleges have no student 

loan debt. There are 18 title IV, HEA 

loan defaults for every 100 graduates of 

for-profit institutions, compared to only 

5 title IV, HEA loan defaults for every 

100 graduates of public institutions. 

Investigations and news reports have 

also produced anecdotal evidence of 

low-quality programs that leave 

students with large debts and poor 

prospects for employment. Despite these 

concerns, these institutions and suspect 

programs have never been required to 

substantiate their claim that they meet 

the statutory requirement of preparing 

students for ‘‘gainful employment.’’ 

Summary of Proposed Regulations 

Under these proposed regulations, the 

Department would assess whether a 

program provides training that leads to 

gainful employment by applying two 

tests: One test based upon debt-toincome ratios and the other test based 

upon repayment rates. Based on the 

program’s performance under these 

tests, the program may be eligible, have 

restricted eligibility, or be ineligible. A 

program that meets both of these tests, 

or whose debt-to-income ratio is very 

low, would continue to be eligible for 

title IV, HEA program funds without 

restrictions, while a program that does 

not meet any of the tests would become 

ineligible. A program that meets only 

one of the tests would be placed in a 

restricted eligibility status, unless it has 

a high repayment rate. 

Under certain circumstances, the 

proposed regulations would also require 

an institution to disclose the test results 

and alert current and prospective 

students that they may difficulty 

repaying their loans. 

This proposed use of two measures is 

a balanced approach that gives 

institutions flexibility in how to 

demonstrate that they prepare students 

for gainful employment. The debt-toincome ratio provides a measure of 

program completers’ ability to repay 

their loans, and the proposed targets 

were set based upon industry practices 

and expert recommendations. The use 

of discretionary income would 

recognize that borrowers with higher 

incomes can afford to devote a larger 

share of their income to loan 

repayments, while the use of annual 

income would benefit programs whose 

borrowers have lower earnings. 

Under the debt-to-income test, 

programs whose completers typically 

have annual debt service payments that 

are 8 percent or less of average annual 

earnings or 20 percent or less of 

discretionary income would continue to 

qualify, without restrictions, for title IV, 

HEA program funds. Programs whose 

completers typically face annual debt 

service payments that exceed 12 percent 

of average annual earnings and 30 

percent of discretionary income may 

become ineligible. 

Debt service rates have a connection 

to whether borrowers will default on 

their loans. Borrowers with rates above 

the 8 percent threshold, for example, 

have a default rate of 10.2 percent, 

compared to a rate of 5.4 percent for 

those below the threshold.1 Borrowers 

with debt rates above the 12 percent 

threshold, for example, have a default 

rate of 10.9 percent.2

The repayment rate is a measure of 

whether program enrollees are repaying 

their loans, regardless of whether they 

completed the program. This measure 

would provide some assurance to 

programs that may have high debt-toincome ratios for completers but enroll 

prepared and responsible students who 

understand their financial obligations. 

Programs whose former students have a 

loan repayment of at least 45 percent 

will continue to be eligible. Programs 

whose former students have loan 

repayment rates below 45 percent but at 

least 35 percent may be placed on 

restricted status. Programs whose former 

students have loan repayment rates 

below 35 percent may become 

ineligible. 

A program that does not satisfy either 

the debt-to-income ratio or the 45 

percent rate but has a loan repayment 

rate of at least 35 percent would be 

subject to restrictions and additional 

oversight by the Department. 

The proposed regulations also would 

require an institution whose program 

does not have a loan repayment rate of 

at least 45 percent and an annual loan 

payment that is either 20 percent or less 

of discretionary income or 8 percent or 

less of average annual income, to alert 

current and prospective students that 

they may have difficulty repaying their 

loans. 

Recognizing the potential impact of 

the proposed regulations on some 

students seeking a postsecondary 

education, the proposed regulations 

would provide for a one-year transition 

period during which the Department 

would limit the number of programs 

declared ineligible to the lowestperforming programs producing no 

more than five percent of completers 

during the prior award year. Additional 

programs and programs that fail to meet 

the debt thresholds but fall outside the 

five percent cap during the transition 

year would be subject to the same 

requirements as programs on a restricted 

eligibility status. 

Significant Proposed Regulations 

We group major issues according to 

subject, with appropriate sections of the 

proposed regulations referenced in 

parentheses. We discuss other 

substantive issues under the sections of 

the proposed regulations to which they 

pertain. Generally, we do not address 

proposed regulatory provisions that are 

technical or otherwise minor in effect. 


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Part 668 Student Assistance General 

Provisions 

Gainful Employment in a Recognized 

Occupation (§ 668.7) 

Section 102(b) and (c) of the HEA 

defines, in part, a proprietary institution 

and a postsecondary vocational 

institution, respectively, as institutions 

that provide an eligible program of 

training that prepares students for 

gainful employment in a recognized 

occupation. Section 101(b)(1) of the 

HEA defines an institution of higher 

education, in part, as any institution 

that provides not less than a one-year 

program of training that prepares 

students for gainful employment in a 

recognized occupation. 

The Department’s current regulations 

in §§ 600.4(a)(4)(iii), 600.5(a)(5), and 

600.6(a)(4) mirror the statutory 

provisions, and like the statute, do not 

define or further describe the meaning 

of the phrase ‘‘gainful employment.’’ 

General 

The proposed regulations are 

intended to address growing concerns 

about unaffordable levels of loan debt 

for students attending postsecondary 

programs that presumptively provide 

training that leads to gainful 

employment in a recognized 

occupation. Under the proposed 

regulatory framework, to determine 

whether these programs provide 

training that leads to gainful 

employment, as required by the HEA, 

the Department would take into 

consideration repayment rates on 

Federal student loans, the relationship 

between total student loan debt and 

earnings, and in some cases, whether 

employers endorse program content. 

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. The regulations 

would establish measures of the 

relationship between loan debt and 

postcompletion employment income (a 

loan repayment rate and debt-to-income 

measures based on discretionary income 

and average annual earnings) and set 

reasonable thresholds for each measure. 

As long as the program satisfies the debt 

thresholds, an institution could 

continue to offer title IV aid to students 

in the program without additional 

oversight from the Department. 

Otherwise, the program would either 

become ineligible for title IV, HEA 

program funds or the institution’s 

ability to disburse Federal funds to 

students attending that program would 

be restricted. 

The trends in earnings, student loan 

debt, loan defaults, and loan repayment 

that underscore the need for the 

Secretary to act are discussed more fully 

in Appendix A to this document. 

Debt Measures and Thresholds 

Under the loan repayment rate in 

proposed § 668.7(a), the relationship 

would be reasonable if students who 

attended the program (and are not in a 

military or in-school deferment status) 

repay their Federal loans at an aggregate 

rate of at least 45 percent. The rate 

would be based on the total amount of 

loans repaid divided by the original 

outstanding balance of all loans entering 

repayment in the prior four Federal 

fiscal years (FFY). A loan would be 

counted as being repaid if the borrower 

(1) made loan payments during the most 

recent fiscal year that reduced the 

outstanding principal balance, (2) made 

qualifying payments on the loan under 

the Public Service Loan Forgiveness 

Program, as provided in 34 CFR 

685.219(c), or (3) paid the loan in full. 

Other borrowers who are meeting their 

legal obligations but are not actively 

repaying their loans, such as those in 

deferment or forbearance, are not 

considered to be in repayment. 

Based on data available (see 

Appendix A for more information about 

these data), the following chart shows 

the Department’s estimate of the 

distribution of loan repayment rates by 

sector of all institutions, not only those 

subject to these regulations, that would 

satisfy loan repayment thresholds of 45 

and 35 percent. 

INSTITUTIONAL-LEVEL REPAYMENT RATES

Sector Number of 

institutions 

% At least 

45% 

% Between 

35–45% % Below 35% 

Private for-profit 2-year .................................................................................... 565 32.92 23.19 43.89 

Private for-profit 4-year or above ..................................................................... 218 25.23 32.57 42.20 

Private for-profit less-than-2-year .................................................................... 946 40.70 22.09 37.21 

Private nonprofit 2-year ................................................................................... 156 76.28 9.62 14.10

Private nonprofit 4-year or above .................................................................... 1434 78.31 10.53 11.16 

Private nonprofit less-than-2-year ................................................................... 45 64.44 11.11 24.44 

Public 2-year .................................................................................................... 860 43.14 29.53 27.33 

Public 4-year or above .................................................................................... 590 74.24 14.92 10.85

Public less-than-2-year .................................................................................... 148 74.32 19.59 6.08

Grand Total ............................................................................................... 4962 56.75 19.21 24.04 

Because the loan repayment rate 

considers program completers and 

noncompleters, a low rate may indicate 

that many noncompleters obtained 

loans they are now unable to repay. 

Note that this chart gives an indication 

of the rates at which graduates are 

entering into deferments that are not 

related to military service or returning 

to postsecondary education, entering 

into forbearances or are simply 

unwilling or unable to pay more than 

interest accrued on their Federal student 

loans. 

The number of institutions with very 

low loan repayment rates, particularly 

in the for-profit sector, is alarmingly 

high. Based on these data, we propose 

to allow a program with a loan 

repayment rate as low as 35 percent to 

remain eligible, but may restrict that 

eligibility. Under proposed § 668.7(a) 

and (e), an institution whose program is 

in a restricted status would have to 

provide annually documentation from 

employers not affiliated with the 

institution affirming that the curriculum 

of the program aligns with recognized 

occupations at those employers’ 

businesses and that there are projected 

job vacancies or expected demand for 

those occupations at those businesses. 

Moreover, the Department would limit 

the enrollment of title IV aid recipients 

in that program to the average number 

enrolled during the prior three award 

years. While we believe that these 

restrictions are appropriate considering 

the poor performance of these programs, 

we seek comment on whether programs 

with a loan repayment rate of less than 

45 percent but higher than 35 percent 


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should be subject to the loss of title IV, 

HEA program funds. 

Even with a repayment rate of less 

than 35 percent, under the proposed 

regulations a program would still be 

eligible for title IV, HEA program funds, 

without restrictions, as long as the 

program has an acceptable debt-toincome ratio. We seek comment on 

whether a program with a loan 

repayment rate below a specified 

threshold should be ineligible for title 

IV, HEA funds, regardless of the debt-toincome ratio. 

For the debt-to-income measures in 

proposed § 668.7(a)(1)(ii) and (iii), the 

relationship would be reasonable if the 

annual loan payment (based on a 10- 

year repayment plan) of the typical 

student completing the program is 

30 percent or less of discretionary 

income or 12 percent or less of average 

annual earnings. The measure would 

use the most current income available of 

the students who completed the 

program in the most recent three years 

(three-year period or 3YP). However, in 

cases where an institution could show 

that the earnings of students in a 

particular program increase 

substantially after an initial 

employment period, the measure would 

use the most current earnings of 

students who completed the program 

four, five, and six years prior to the most 

recent year (i.e., the prior three-year 

period or P3YP). When prior three-year 

data are used, the relationship would be 

reasonable if the annual loan payment is 

less than 20 percent of discretionary 

income or less than 8 percent of average 

annual earnings. 

The proposed debt-to-income 

measures, one based on discretionary 

income and the other on average annual 

earnings, are alternatives to the loan 

repayment rate. The debt measure for 

discretionary income is modeled on the 

Income-Based Repayment (IBR) plan. 

IBR assumes that borrowers with 

incomes below 150 percent of the 

poverty guideline are unable to make 

any payment, while those with incomes 

above that level can devote 15 percent 

of each added dollar of earnings 

(Congress reduced that to 10 percent for 

new borrowers starting in 2014.) to loan 

payments. While the Federal 

Government has established policies 

allowing borrowers with financial 

hardships to reduce payments to 10 or 

15 percent of their discretionary 

income, those thresholds are not 

appropriate for defining gainful 

employment. The IBR formula is based 

on research conducted by economists 

Sandy Baum and Saul Schwartz, who 

recommended 20 percent of 

discretionary income as the outer 

boundary of manageable student loan 

debt. This approach is recommended by 

others including Mark Kantrowitz, 

publisher of Finaid.org. However, we 

cannot rely solely on this approach 

because any program would fail the debt 

measure if the average earnings of those 

completing the program were below 150 

percent of the poverty guideline, 

regardless of the level of debt incurred. 

To avoid this consequence, we adopted 

the proposal made during negotiated 

rulemaking that borrowers should not 

devote more than 8 percent of annual 

earnings toward repaying their student 

loans. This percentage has been a fairly 

common credit-underwriting standard, 

as many lenders typically recommend 

that student loan installments not 

exceed 8 percent of the borrower’s 

pretax income so that borrowers have 

sufficient funds available to cover taxes, 

car payments, rent or mortgage 

payments, and household expenses. 

Other studies have also accepted the 

8 percent standard, and some State 

agencies have established similar 

guidelines ranging from 5 percent to 

15 percent of gross income. These 

percentages are derived from home 

mortgage underwriting criteria where 

total household debt should not exceed 

38 to 45 percent of pretax income, with 

30 percent being available for housingrelated debt. 

For these proposed regulations, we 

have increased the research-based and 

industry-used debt-to-income measures 

by 50 percent (from 20 to 30 percent of 

discretionary income, and from 8 to 

12 percent of annual earnings) to 

establish thresholds above which it 

becomes unambiguous that a program’s 

debt levels are excessive. 


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In prior generations, most graduates 

repaid their loans within 10 years of 

completing college. The standard 

repayment plan chosen by most 

borrowers remains 10 years. Among 

bachelor’s degree recipients in 1992–93 

who had student loan debt, about threefourths fully repaid their loans in less 

than 10 years. Those reporting higher 

incomes were most likely to have repaid 

their loans (even though they had higher 

average debt), indicating that earnings 

played a role in their ability—or at least 

their willingness—to repay. For many 

adults, paying off student loans is an 

important milestone. Many borrowers 

see a tradeoff between making student 

loan payments and other important 

financial decisions such as saving for 

retirement, buying a home, or saving for 

their own children’s education. 

While the Federal Government is 

providing new options for repaying 

loans over extended periods of time to 

protect a portion of the borrower 

population from the adverse impact of 

nonpayment, these repayment options 

should not be the norm. 

All other things being equal, students 

would be better off without student loan 

debt. The less debt they owe, the more 

of their income they can devote to home 

purchases, retirement savings, or 

serving the community. Student loan 

debt must be weighed against the 

education and training (and increased 

employment income) that higher 

education can provide. To the extent 

that the education and its accompanying 

student loan debt do not provide the 

necessary skills to provide increased 

wages and employment, public policy 

should attempt to minimize or eliminate 

that cost to students and society. 

Excess student debt affects students 

and society in three significant ways: 

Payment burdens on the borrower; the 

cost of the loan subsidies to taxpayers; 

and the negative consequences of 

default (which affect borrowers and 

taxpayers). 

Loan repayments that outweigh the 

benefits of the education and training 

are an inefficient use of the borrower’s 

resources. If a student makes that choice 

fully informed and using his or her own 

funds, it is not a matter for public 

policy. But if the availability of Federal 

student aid increases the likelihood that 

a student will enroll at an institution of 

higher education, the Federal 

Government should consider ways to 

ensure that student borrowers are not 

unduly burdened, even if they would 


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3For graduate and professional programs, 

separate data are not available on for-profit colleges. 

For professional degrees, the known debt levels at 

public and nonprofit institutions could be 

problematic if earnings are not sufficient. 

4National Postsecondary Student Aid Survey, as 

reported in Trends in Student Aid 2009, College 

Board. 

eventually repay the loans. This concern 

motivates the debt-to-income ratio, a 

measure of the potential individual 

burden incurred by taking out loans, to 

ensure that students on an individual 

basis benefit from the receipt of Federal 

funds. 

The second cost is taxpayer subsidies. 

When a borrower is unemployed or is 

forced because of low income to obtain 

a forbearance or deferment, the 

Government waives the interest on 

subsidized Stafford and Perkins loans. 

For example, the cost to the Government 

of three years of deferment is up to 20 

percent of the value of the loan. Also, 

borrowers who have low incomes but 

high debt may reduce their payments 

through income-based or incomecontingent repayment programs. These 

programs can either be at little or no 

cost to the Government or as much as 

the full amount of the loan with interest. 

Deferments and repayment options 

are important protections for borrowers 

because while higher education 

generally brings higher earnings, there is 

no guarantee for the individual. Policies 

that assist those with high debt burdens 

are a critical form of insurance: They 

tell all Americans that the Federal 

Government will take on the potential 

risk of an education not ‘‘paying off’’ for 

a specific individual. However, these 

policies should not mean that 

institutions should increase the level of 

risk to the individual student or the 

taxpayer—just as the existence of 

homeowners insurance does not mean 

builders should make houses more 

flammable. The insurance is important; 

but public policy must protect against 

the moral hazard of it being seen as a 

license for providing a worse product to 

consumers or to taxpayers. 

The third cost is default. The 

Government covers the cost of defaults 

on Federal student loans, $9.2 billion in 

fiscal year 2009. Ultimately this cost is 

mitigated by the Department’s success 

in collection, using such tools as wage 

garnishment, Federal and State tax 

refund seizure, seizure of any other 

Federal payment, and Federal court 

actions. Nonetheless, the taxpayer costs 

can be significant. Based on historical 

collections, the net present value cost of 

the $9.2 billion of loans that defaulted 

in fiscal year 2009 is estimated at 

approximately $1 billion. This 

concern—protecting the taxpayer— 

motivates the repayment rate measure, 

which indicates the taxpayer’s exposure 

to delayed repayment or default. 

An additional cost of default is the 

damage to students and their family and 

community. Although the decision to 

enter into loans is made voluntarily by 

students, a wealth of evidence suggests 

that many individuals lack sufficient 

information—or may be manipulated 

with false information or assurances— 

regarding future employment prospects 

and program costs, and thus are unable 

to properly evaluate their eventual 

ability to repay loans. Former students 

who default on Federal loans cannot 

receive additional title IV aid for 

postsecondary education. Their credit 

rating is destroyed, undermining their 

ability to rent a house, get a mortgage, 

or purchase a car. To the extent they can 

get credit, they pay much higher 

interest. In some States, they may be 

denied certain occupational licenses. 

And, increasingly, employers consider 

credit records in their hiring decisions. 

Furthermore, particularly for former 

students from disadvantaged 

neighborhoods, the stigma of default can 

send an unfortunate message to others— 

that seeking an education can have 

disastrous results. Combined with the 

evidence suggesting that individuals 

may not have the ability to evaluate 

fully the costs and benefits of entering 

into loans, the potential for substantial 

adverse outcomes motivates the 

consumer protection approach the 

Department is taking through these 

proposed regulations. 

At all types of institutions, student 

debt is growing and will cause more 

students to allocate more of their future 

income toward repayment, whether 

through larger or longer payments. 

(See Tables A–1 and A–2 of Appendix 

A for additional details). Student loan 

data show that this problem is 

particularly problematic at for-profit 

institutions. For certificate, associate’s 

degree, and bachelor’s degree programs, 

debt levels are highest at for-profit 

institutions.3 For example, in 2007–08: 4

• 13 percent of baccalaureate 

recipients from public four-year 

institutions carried at least $30,000 of 

Federal and private student loan debt. 

Among graduates of private nonprofit 

colleges, 25 percent had that level of 

student debt. And at for-profit 

institutions, 57 percent of the 

baccalaureate recipients carried student 

loan debts of $30,000 or more. 

• At the associate’s degree level, only 

about five percent of public college 

graduates have debt of $20,000 or more, 

while 42 percent of for-profit graduates 

have debt at those levels. 

• For certificate recipients, less than 

2 percent at public institutions and 11 

percent at for-profit institutions have 

debt of $20,000 or more. 

The proposed regulations would 

lessen the potential for these negative 

consequences by ensuring that programs 

subject to the gainful employment 

standards actually produce students 

with sufficient incomes (relative to their 

debt) to make their debt payments. 

Calculating the Loan Repayment Rate 

Under proposed § 668.7(b), the 

Department would calculate the loan 

repayment rate annually using the ratio: 

OOPB of LPF plus OOPB of RPL

OOPB of all loans for students attending the program

The OOPB (original outstanding 

principal balance) would be the amount 

of the outstanding balance on FFEL and/ 

or Direct loans owed by students who 

attended the program, including 

capitalized interest, as of the date those 

loans entered repayment. The OOPB of 

all loans would include the FFEL and 

Direct loans that entered repayment in 

the four preceding Federal fiscal years 

(FFYs). LPF (loans paid in full) would 

be loans to the program’s students that 

have been paid in full. However, the 

LPF would not include any loans paid 

through a consolidation loan until the 

consolidation loan is paid in full. The 

OOPB of LPF in the numerator of the 

ratio would be the total amount of 

OOPB for these loans. 

RPL (reduced principal loan) would 

be calculated using loans where 

borrower payments during the most 

recently completed FFY reduced the 

outstanding principal balance of that 

loan in that year. RPL would also 

include loans for borrowers whose 


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payments and employment during that 

FFY qualify for the Public Service Loan 

Forgiveness program under 34 CFR 

685.219(c). The OOPB of RPL in the 

numerator of the ratio would be the total 

amount of the OOPB for these loans. 

Finally, the ratio would not include 

the OOPB of borrowers on an in-school 

deferment or a military-related 

deferment status or the OOPB of 

borrowers entering repayment in the 

final six months of the most recent FFY. 

Calculating the Debt-to-Income 

Measures 

Under proposed § 668.7(c), the 

Department would calculate annually 

the debt-to-income measures for each 

program to determine whether the 

annual loan payment is less than the 

discretionary (30 and 20 percent) and 

earnings (12 and 8 percent) thresholds 

using the following formulas: 

• Annual loan payment < 

Discretionary threshold * (Average 

Annual Earnings ¥ (1.5 * Poverty 

Guideline)). 

• Annual loan payment < Earnings 

threshold * Average Annual Earnings. 

Both debt measures would examine 

the annual loan payment of program 

completers in relationship to the 

average annual earnings of those 

completers to calculate whether a 

program met the gainful employment 

standard. 

The annual loan payment would be 

the median loan debt of students who 

completed a program during the threeyear period under standard repayment 

terms (i.e., 10-year repayment schedule 

and the current annual interest rate on 

Federal unsubsidized loans). Loan debt 

would include title IV, HEA program 

loans, except Parent PLUS loans, and 

any private educational loans or debt 

obligations arising from institutional 

financing plans. However, it would not 

include any student loan that a student 

incurred at prior institutions or at 

subsequent institutions unless the other 

and current institutions are under 

common ownership or control, or are 

otherwise related entities. 

The Department would calculate the 

average annual earnings by using most 

currently available actual, average 

annual earnings, obtained from the 

Social Security Administration (SSA) or 

another Federal agency, of the students 

who completed the program during the 

three-year period. However, in certain 

cases, the measure could include the 

current earnings data for students who 

completed the program for a longer 

employment period (students who 

completed the program in the fourth, 

fifth, and sixth award years preceding 

the most recent three-year period) if the 

institution could show that students 

completing the program typically 

experience a significant increase in 

earnings after the first three years. The 

institution would have to provide 

information to the Department such as 

survey results of employers or former 

students, or through other empirical 

evidence, documenting the increased 

earnings. 

As discussed in the Paperwork 

Reduction Act portion of this notice, 

institutions will have an opportunity to 

review and provide comments on the 

collection of new data associated with 

this provision. Interested parties will 

have an opportunity to provide input 

into this requirement through that 

process or in response to this notice of 

proposed rulemaking. 

Under proposed § 668.7(a), a program 

would meet the gainful employment 

standard if the annual loan payment of 

its students is 30 percent or less of 

discretionary income or 12 percent or 

less of average annual earnings of its 

students. Discretionary income would 

be defined as the difference between 

average annual income and 150 percent 

of the most current Poverty Guideline 

for a single person in the continental 

United States (available at http:// 

aspe.hhs.gov/poverty). We specifically 

seek comment on whether the 30 

percent threshold for the first three 

years of employment is appropriately 

rigorous or whether the Department 

should consider using the 20 percent of 

discretionary income or 8 percent of 

average annual earnings to define 

programs as ineligible. The less 

restrictive standard is used here 

because, as a general matter, the 

Department would be assessing the 

programs during a borrower’s first three 

years after leaving the postsecondary 

education institution. In any case, 

however, where the prior three-year 

period is used, the annual loan payment 

would have to be less than 20 percent 

of discretionary income or less than 8 

percent of average annual earnings. 

Consequences of Meeting or Not 

Meeting the Thresholds; Timelines; 

Transition 

Effective July 1, 2012, under proposed 

§ 668.7(d), an institution would be 

required to alert prospective and 

currently enrolled students they may 

have difficulty in repaying their loans 

under certain circumstances. The 

institution would have to provide a 

prominent warning in its promotional, 

enrollment, registration, and other 

materials, including those on its Web 

site, and to prospective students when 

conducting person-to-person recruiting 

activities. The institution must also 

provide the most recent debt-to-income 

ratios and the loan repayment rate for 

that program. An institution must 

provide the warning if the program’s 

repayment rate is less that 45 percent 

and, using 3YP and, if applicable, P3YP, 

the debt-to-income ratio is greater than 

8 percent of average annual earnings or 

20 percent of discretionary income. 

Under proposed § 668.7(a) and (e), the 

Department would place a program on 

a restricted status if the program’s 

repayment rate is less than 45 percent 

and the program’s annual loan payment 

is more than 20 percent of discretionary 

income and more than 8 percent of 

average annual income. For a restricted 

program, the institution would be 

required to work with employers to 

assure that the training program is 

meeting their needs, and limit new 

students enrollments in that program to 

the average enrollment level for the 

prior three years. These restrictions are 

intended to encourage an institution to 

improve the program to better meet the 

needs of students and the relevant 

employers identified by the institution. 

Moreover, under proposed § 668.7(a) 

and (f), if the program does not satisfy 

at least one of the debt thresholds in 

paragraph (a)(1) of this section, effective 

July 1, 2012, it would not meet the 

gainful employment standard. The 

Department would notify the institution 

of the program’s ineligibility, and new 

students attending the program would 

not qualify for title IV, HEA program 

funds. However, an institution would be 

allowed to disburse title IV, HEA 

program funds to current students who 

began attending the program before it 

became ineligible for the remainder of 

the award year and for the award year 

following the date of the Department’s 

notice. 

For the award year beginning on July 

1, 2012, a program could fail to meet 

one of the measures but still remain 

eligible. For this transition year, the 

Department would cap the number of 

programs declared ineligible to the 

lowest-performing programs producing 

no more than five percent of completers 

during the prior award year, eliminating 

the risk of large and immediate 

displacement of students. Specifically, 

under proposed § 668.7(f)(2), the 

Department would determine which 

programs would fall within the five 

percent cap by: 

(1) Sorting all programs subject to this 

section by category based solely on the 

credential awarded as determined by 

the Department (e.g., certificate, 

associate degree, baccalaureate degree, 

and graduate and professional degree) 

and then within each category, by loan 


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repayment rate, from lowest rate to 

highest rate. 

(2) For each category of programs, 

beginning with the ineligible program 

with the lowest loan repayment rate, 

identifying the ineligible programs that 

account for a combined number of 

students that completed the programs in 

the most recently completed award year 

that do not exceed five percent of the 

total number of students who completed 

programs in that category. 

For each ineligible program that falls 

within the five percent grouping for 

each category, the Department would 

notify the institution that the program 

no longer qualifies as an eligible 

program. For every other ineligible 

program, the Department would notify 

the institution that it must limit the 

enrollment of title IV, HEA program 

recipients in that program to the average 

number of title IV, HEA program 

recipients enrolled during the prior 

three award years and provide the same 

employer affirmations and debt 

disclosures that apply to programs with 

low repayment rates and high debt-toincome ratios. 

Additional Programs 

Under proposed § 668.7(g), before an 

institution could offer a new program 

that is eligible for title IV aid, it would 

apply to have the program approved by 

the Department. As part of its 

application, the institution would need 

to provide (1) the projected enrollment 

for the program for the next five years 

for each location of the institution that 

will offer the additional program, 

(2) documentation from employers not 

affiliated with the institution that the 

program’s curriculum aligns with 

recognized occupations at those 

employers’ businesses, and that there 

are projected job vacancies or expected 

demand for those occupations at those 

businesses, and (3) if the additional 

program constitutes a substantive 

change, documentation of the approval 

of the substantive change from its 

accrediting agency. 

In determining whether to approve 

the new program, under proposed 

§ 668.7(g)(2), the Department could 

restrict the approval for an initial period 

based on the institution’s enrollment 

projections and demonstrated ability to 

offer programs that lead to gainful 

employment. 

If the new program constitutes a 

substantive change based solely on 

program content, it would be subject to 

the gainful employment measures as 

soon as data on the loan repayment rate 

and debt measures are available. 

Otherwise, the loan repayment rate and 

debt measures for the new program 

would be based, in part, on loan data 

from the institution’s other programs 

currently or previously offered that are 

in the same job family. The Bureau of 

Labor Statistics (BLS) describes a job 

family as a group of occupations based 

on work performed, skills, education, 

training, and credentials and identifies 

the SOC code (Standard Occupational 

Classification code) for each occupation 

in a job family at http://www.bls.gov/ 

oes/current/oes_stru.htm. 

The following charts provide in 

summary form a description of the 

consequences of meeting or not meeting 

the thresholds as well as the 

Department’s proposed timelines. 

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BILLING CODE 4000–01–C 

Provisional Certification (§ 668.13) 

The Department’s current regulations 

in § 668.13(c) identify the conditions or 

reasons for which the Department may 

provisionally certify an institution. We 

are proposing to amend § 668.13(c)(1) to 

provide that the Department may 

provisionally certify an institution if 

one or more of its programs becomes 

restricted or ineligible under the gainful 

employment provisions in proposed 

§ 668.7. The Department believes that 

provisional certification may be 

warranted in cases where an institution 

fails to take the actions necessary to 

keep its programs in compliance with 

the gainful employment provisions in 

§ 668.7. This failure would be one factor 

considered by the Department when 

reviewing an institution’s application 

for recertification of its program 

participation agreement. 

Hearing Official (§ 668.90(a)) 

Current § 668.90(a)(3) sets forth the 

limitations on the matters that may be 

considered, or limitations on decisions 

that may be rendered by hearing 

officials in proceedings arising under 

subpart G of part 668. Under proposed 

§ 668.90(a)(3)(vii), in a termination 

action against a program for not meeting 

the standards for gainful employment in 

§ 668.7(a), the hearing official would 

accept as accurate the average annual 

earnings calculated by another Federal 

agency, so long as the other Federal 

agency provided that calculation for the 

list of program completers identified by 

the institution and accepted by the 

Department. The hearing official may 

consider evidence from an institution 

about earnings from its graduates to 

establish a different average annual 

earnings amount to be used with the 

debt measure, so long as that 

information is for the same individuals 

and determined to be reliable by the 

hearing official. 

During the negotiated rulemaking 

sessions, some non-Federal negotiators 

highlighted the difficulty that 

institutions could encounter in 

obtaining earnings information from 

students who completed their programs. 

During these meetings, a separate 

proposal was discussed to use wage 

information from the Bureau of Labor 

Statistics (BLS) to represent earnings for 

program graduates. Some of the 

negotiators voiced concerns that the 

reported salaries might not be 

representative for a number of reasons 

such as regional variations and job 

classifications and that self-employed 

individuals might not be included in the 

BLS wage records, (although other 

information suggested that this 

information was included). 

Nevertheless, the Department is 

proposing to obtain average annual 


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earnings by program from another 

Federal agency, using actual wage 

information maintained by that Federal 

agency for a program’s students. This 

information is and will be the best 

information available but, to preserve 

the confidentiality of individuals that 

may or may not have received a Federal 

benefit, neither the Department nor the 

institution will be able to review the 

wage information for specific program 

graduates. The Department and the 

institution will, however, be able to 

ensure that the data includes only those 

program completers that were included 

in the information provided by the 

institution under the notice of proposed 

rulemaking published by the 

Department on June 18, 2010. 

Since the specific individuals’ actual 

earnings information will not be 

available to the institution or to the 

Department, the proposed regulations 

limit the discretion of the hearing 

official to determining whether the 

average annual earnings at issue in a 

hearing were provided by the other 

Federal agency to the Department for 

the list of program completers identified 

by the institution and accepted by the 

Department. Since the average annual 

earnings will be calculated using an 

automated process that matches the 

program graduates with the wage 

information the other Federal agency is 

required to maintain, the Department 

believes it is sufficient to limit the 

review by a hearing official to whether 

the average annual earnings were 

provided for the list of program 

graduates that were identified by the 

institution and accepted by the 

Department. The hearing official may 

consider whether the institution can 

demonstrate that a program is eligible 

using a different amount for the average 

annual earnings of the program 

graduates with the debt measures for 

that program, so long as the institution 

demonstrates the average annual 

earnings information is reliable and for 

the same individuals who completed 

the program in question. 

Executive Order 12866 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether the 

regulatory action is ‘‘significant’’ and 

therefore subject to the requirements of 

the Executive Order and subject to 

review by the OMB. Section 3(f) of 

Executive Order 12866 defines a 

‘‘significant regulatory action’’ as an 

action likely to result in a rule that may 

(1) have an annual effect on the 

economy of $100 million or more, or 

adversely affect a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities in a material way (also 

referred to as an ‘‘economically 

significant’’ rule); (2) create serious 

inconsistency or otherwise interfere 

with an action taken or planned by 

another agency; (3) materially alter the 

budgetary impacts of entitlement grants, 

user fees, or loan programs or the rights 

and obligations of recipients thereof; or 

(4) raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive order. 

Pursuant to the terms of the Executive 

order, we have determined this 

proposed regulatory action will have an 

annual effect on the economy of more 

than $100 million. Therefore, this action 

is ‘‘economically significant’’ and subject 

to OMB review under section 3(f)(1) of 

Executive Order 12866. 

Notwithstanding this determination, we 

have assessed the potential costs and 

benefits—both quantitative and 

qualitative—of this regulatory action 

and have determined that the benefits 

justify the costs. 

The Summary of Effects tables that 

follow describe the estimated impact on 

programs that would be subject to these 

proposed regulations along with the 

number of students that would be 

affected. 

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BILLING CODE 4000–01–C 

The preceding table shows the 

estimated impact when the proposed 

regulations are fully implemented by 

July 1, 2012. A detailed analysis is 

found in Appendix A to this NPRM. 

Paperwork Reduction Act of 1995 

Proposed § 668.7 contains information 

collection requirements. Under the 

Paperwork Reduction Act of 1995 (44 


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U.S.C. 3507(d)), the Department has 

submitted a copy of this section to OMB 

for its review. 

Section 668.7—Gainful Employment in 

a Recognized Occupation 

The proposed regulations would 

impose new requirements on certain 

programs that by law must, for purposes 

of the title IV, HEA programs, prepare 

students for gainful employment in a 

recognized occupation. For public and 

private nonprofit institutions, a program 

that does not lead to a degree would be 

subject to the eligibility requirement 

that the program lead to gainful 

employment in a recognized 

occupation, while a program leading to 

a degree, including a two-academic-year 

program fully transferable to a 

baccalaureate degree, would not be 

subject to this eligibility requirement. 

For proprietary institutions, all eligible 

degree and nondegree programs would 

be required to lead to gainful 

employment in a recognized 

occupation, except for a liberal arts 

baccalaureate program under section 

102(b)(1)(A)(ii) of the HEA. 

As proposed in § 668.7(a)(3)(viii), in 

accordance with procedures established 

by the Department for the purposes of 

calculating the loan repayment rate 

under § 668.7(b), an institution must 

report the CIP codes for all students 

who attended a program at the 

institution whose FFEL or Direct Loan 

entered repayment in the prior four 

FFYs. As indicated earlier, there has 

been tremendous growth in 

occupational programs between 2000 

and 2008, averaging 200,000 new 

students per year. Based upon data from 

our institutional eligibility and program 

participation unit within Federal 

Student Aid, the Department estimates 

the following number of affected 

institutions that offer programs that 

currently prepare students for gainful 

employment in recognized occupations. 

The Department estimates there are 

2,086 proprietary institutions with 

occupational programs, there are 238 

private, non-profit institutions with 

occupational programs, and there are 

2,139 public institutions with 

occupational programs. 

The Department estimates that in the 

first year of reporting CIP codes for all 

students who attended a program whose 

FFEL and Direct Loans entered 

repayment in the preceding four Federal 

fiscal years the burden would be as 

follows. 

With respect to the 2,086 proprietary 

institutions, the Department estimates 

that 376,000 student (47 percent times 

800,000) attended programs at those 

institutions during the preceding four 

FFYs. Of those 376,000, we estimate 

that 90 percent or 338,400 had title IV, 

HEA loans that entered repayment. At 

an average of .08 hours (5 minutes) per 

student to determine and report the CIP 

code, the Department estimates an 

increase in burden for proprietary 

institutions of 27,072 hours in OMB 

1845–NEW4. 

With respect to the 238 private nonprofit institutions, the Department 

estimates that 40,000 students (5 

percent times 800,000) attended 

programs at those institutions during 

the preceding four FFYs. Of those 

40,000, we estimate that 60 percent or 

24,000 had title IV, HEA loans that 

entered repayment. At an average of .08 

hours (5 minutes) per student to 

determine and report the CIP code, the 

Department estimates an increase in 

burden for private non-profit 

institutions of 1,920 hours in OMB 

1845–NEW4. 

With respect to the 2,139 public 

institutions, the Department estimates 

that 384,000 students (48 percent times 

800,000) attended those institutions 

during the preceding four FFYs. Of 

those 384,000, we estimate that 38 

percent or 145,920 had title IV, HEA 

loans that entered repayment. At an 

average of .08 hours (5 minutes) per 

student to determine and report the CIP 

code, the Department estimates an 

increase in burden for public 

institutions of 11,674 hours in OMB 

1845–NEW4. 

Collectively, the Department 

estimates that the burden associated 

with determinations and reporting 

related to CIP codes for all students who 

attended an occupational program will 

increase to the affected institutions by 

40,666 hours in OMB 1845–NEW4. 

As proposed in § 668.7(c)(3)(i) and 

(ii), the Secretary determines annually 

for each program whether the annual 

loan payment is less than the 

discretionary income and the earnings 

thresholds in § 668.7(a). For annual 

earnings, the Secretary uses the most 

currently available actual, average 

annual earnings obtained from a Federal 

agency, of the students who completed 

the program during the 3YP and, if the 

data are available, during the P3YP. 

P3YP data are used if, in accordance 

with procedures established by the 

Secretary, the institution shows that 

students completing the program 

typically experience a significant 

increase in earnings after an initial 

employment period and the institution 

explains the basis for that earnings 

pattern. For each of the P3YP student 

completers, the institution is required to 

provide the Secretary with the following 

information; the program CIP code, the 

student’s completion date, the amount 

of private educational loans that the 

student received, and the amount of 

debt incurred from institutional 

financing plans. 

We estimate that 60 percent of the 

proprietary institutions would meet the 

loan repayment rate of 45 percent; 

therefore 40 percent of the 2,086 

proprietary institutions with programs 

that prepare students for gainful 

employment or 834 institutions would 

have a loan repayment rate less than 45 

percent. Under the proposed 

regulations, the debt measure as 

calculated by the Department would be 

used to determine if a program would be 

eligible and therefore unrestricted, or to 

what extent restrictions would apply. 

We estimate that 65.3 percent of the 834 

institutions would pass the initial 3YP 

debt measure and therefore, 34.7 

percent (.347 times 834 institutions 

equal 289 institutions) would not pass 

the initial 3YP debt measure. Of the 

remaining 289 institutions that would 

not pass the initial 3YP debt measure, 

75 percent would pass the prior 3YP 

threshold of the annual loan repayment 

not exceeding 20 percent of 

discretionary income, or 8 percent of 

annual earnings. We estimate that for 

the explanation of the increase in 

earnings after the initial employment 

period and the submission of the P3YP 

information (to include for each student 

that completed the program: the CIP 

code of the program, the completion 

date, the amount of private educational 

loans, and the amount of debt incurred 

from institutional financing plans), to 

average 10 hours per proprietary 

institution for a total of 2,890 hours of 

burden in OMB 1845–NEW4. 

We estimate that 89 percent of the 

private nonprofit institutions would 

meet the loan repayment rate of 45 

percent; therefore 11 percent of the 238 

private nonprofit institutions with 

programs that prepare students for 

gainful employment or 26 institutions 

would have a loan repayment rate less 

than 45 percent. Under the proposed 

regulations, the debt measure as 

calculated by the Department would be 

used to determine if a program would be 

eligible and unrestricted, or to what 

extent restrictions would apply. We 

estimate that 95 percent of the 26 

private nonprofit institutions would 

pass the initial 3YP debt measure and 

therefore, 5 percent (.05 times 26 

institutions equal 1 institution) would 

not pass the initial 3YP debt measure. 

Of the remaining 1 institution that 

would not pass the initial 3YP debt 

measure, we estimate that this 

institution would explain the increase 

in earnings after the initial employment 


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Federal Register / Vol. 75, No. 142 / Monday, July 26, 2010 / Proposed Rules 43635 

period and submit the alternative debt 

threshold data. We estimate that this 

institution would pass the P3YP 

threshold of the annual loan payment 

not exceeding 20 percent of 

discretionary income, or 8 percent of 

average annual earnings. We estimate 

that the submission of the explanation 

of increased earnings and the P3YP 

information (to include for each student 

that completed the program: The CIP 

code of the program, the completion 

date, the amount of private educational 

loans, and the amount of debt incurred 

from institutional financing plans), to 

average 10 hours per private nonprofit 

institution for a total of 10 hours of 

burden in OMB 1845–NEW4. 

We estimate that 82 percent of the 

public institutions would meet the loan 

repayment rate of 45 percent; therefore 

18 percent of the 2,139 public 

institutions with programs that prepare 

students for gainful employment or 385 

institutions would have a loan 

repayment rate less than 45 percent and 

therefore the debt measure as calculated 

by the Department would be used to 

determine if a program would be 

eligible and unrestricted, or to what 

extent restrictions would apply. We 

estimate that 98 percent of the 385 

public institutions would pass the 

initial 3YP debt measure and therefore, 

2 percent (.02 times 385 institutions 

equal 8 institutions) would not pass the 

initial 3YP debt measure. Of the 

remaining 8 institutions that would not 

pass the initial 3YP debt measure, we 

estimate that virtually all would explain 

the increase in earnings beyond the 

initial employment period and submit 

the alternative debt threshold data. We 

estimate that 90 percent would pass the 

P3YP threshold of the annual loan 

payment not exceeding 20 percent of 

discretionary income, or 8 percent of 

average annual earnings. We estimate 

that the submission of the explanation 

of the increased earnings and the P3YP 

information (to include for each student 

that completed the program: The CIP 

code of the program, the completion 

date, the amount of private educational 

loans, and the amount of debt incurred 

from institutional financing plans), to 

average 10 hours per public institution 

for a total of 80 hours of burden in OMB 

1845–NEW4. 

Collectively, under proposed 

§ 668.7(c)(3), we estimate the burden for 

institutions to explain the increase in 

earnings after the initial 3YP and the 

submission of data on students that 

completed the program during the P3YP 

would result in a burden of 2,980 hours. 

Under proposed § 668.7(d), on or after 

July 1, 2012, unless the program has a 

loan repayment rate of at least 45 

percent or an annual loan payment that 

is at least 20 percent of discretionary 

income or 8 percent of average annual 

income, the Department would notify 

the institution that it must include a 

prominent warning in its promotional, 

enrollment, registration, and other 

materials describing the program, 

including those on its Web site, 

designed and intended to alert 

prospective and currently enrolled 

students they may have difficulty 

repaying loans obtained for attending 

that program. 

We estimate that 60 percent of the 

proprietary institutions would have a 

loan repayment rate of 45 percent or 

above and that 40 percent would not 

pass this rate (.4 times 2,086 equal 834 

proprietary institutions that have 

programs that prepare students for 

gainful employment that would not pass 

this rate). We estimate that for the initial 

3YP, that 65.3 percent of the remaining 

834 proprietary institutions would meet 

or surpass the debt measures of at least 

20 percent of discretionary income or at 

least 8 percent of average annual 

income. We estimate that the remaining 

34.7 percent (.347 times 834 equal 289 

proprietary institutions) would not pass 

the debt measures and therefore under 

the proposed regulations would be 

required to provide a debt warning 

disclosure. We estimate that it will take 

the affected 289 proprietary institutions, 

on average, 1 hour to meet these 

reporting requirements for their 

occupational training programs for a 

total estimated increase in burden of 

289 hours in OMB 1845–NEW4. 

We estimate that 89 percent of the 

private nonprofit institutions would 

have a loan repayment rate of 45 percent 

or above and that 11 percent would not 

pass this rate (.11 times 238 equal 26 

private nonprofit institutions that have 

programs that prepare students for 

gainful employment that would not pass 

this rate). We estimate that for the initial 

3YP, 95 percent of the remaining 26 

private nonprofit institutions would 

meet or surpass the debt measures of at 

least 20 percent of discretionary income 

or at least 8 percent of average annual 

income. We estimate that the remaining 

5 percent (.05 times 26 equal 1 private 

nonprofit institution) would not pass 

the debt measures and therefore under 

the proposed regulations would be 

required to provide a debt warning 

disclosure. We estimate that it will take 

the affected private non-profit 

institution, on average, 1 hour to meet 

these reporting requirements for its 

occupational training programs for a 

total estimated increase in burden of 

1 hour in OMB 1845–NEW4. 

We estimate that 82 percent of the 

public institutions would have a loan 

repayment rate of 45 percent or above 

and that 18 percent would not pass this 

rate (.18 times 2,139 equal 385 public 

institutions that have programs that 

prepare students for gainful 

employment that would not pass this 

rate). We estimate that for the initial 

3YP, 98 percent of the remaining 385 

public institutions would meet or 

surpass the debt measures of at least 20 

percent of discretionary income or at 

least 8 percent of average annual 

earnings. We estimate that the 

remaining 2 percent (.02 times 385 

equal 8 public institutions) would not 

pass the debt measures and therefore 

under the proposed regulations would 

be required to provide a debt warning 

disclosure. We estimate that it will take 

the affected 8 public institutions, on 

average, 1 hour to meet these reporting 

requirements for their occupational 

training programs for a total estimated 

increase in burden of 8 hours in OMB 

1845–NEW4. 

Collectively, under proposed 

§ 668.7(d), we estimate that burden for 

institutions to meet these proposed 

disclosure requirements in accordance 

with procedures established by the 

Department would increase by 298 

hours in OMB Control Number 1845– 

NEW4. 

Under proposed § 668.7(e), a 

restricted program would be required to 

report to the Department additional 

information annually. The additional 

information would include 

documentation from employers not 

affiliated with the institution, affirming 

that the curriculum of the program 

aligns with recognized occupations at 

those employers’ businesses. The 

number and locations of the businesses, 

as well as the number of projected job 

vacancies at those businesses must be 

commensurate with the anticipated size 

of the programs. 

We estimate that 22.7 percent of the 

proprietary institutions will be subject 

to the proposed requirements of the 

restricted status (.227 times 2,086 

proprietary institutions that have 

programs that prepare students for 

gainful employment equal 474 affected 

institutions). We estimate that on 

average, each institution would take 11 

hours to obtain the independent 

employer affirmations as proposed for 

submission to the Department. These 

institutions would already be required 

to provide a debt warning disclosure, so 

there is no additional burden associated 

with that requirement in this section. 

Therefore, we estimate an increase in 

burden of 5,214 hours (474 affected 


sroberts on DSKD5P82C1PROD with PROPOSALS
43636 Federal Register / Vol. 75, No. 142 / Monday, July 26, 2010 / Proposed Rules 

institutions times 11 hours equal 5,214 

hours). 

We estimate that 15 percent of the 

private nonprofit institutions will be 

subject to the proposed requirements of 

the restricted status (.15 times 238 

private nonprofit institutions that have 

programs that prepare students for 

gainful employment equal 36 affected 

institutions). We estimate that on 

average, each institution would take 11 

hours to obtain the independent 

employer affirmations as proposed for 

submission to the Department. These 

institutions would already be required 

to provide a debt warning disclosure, so 

there is no additional burden associated 

with that requirement in this section. 

Therefore, we estimate an increase in 

burden of 396 hours (36 affected 

institutions times 11 hours equal 396 

hours). 

We estimate that 11.8 percent of the 

public institutions will be subject to the 

proposed requirements of the restricted 

status (.118 times 2,139 public 

institutions that have programs that 

prepare students for gainful 

employment equal 252 affected 

institutions). We estimate that on 

average, each institution would take 13 

hours to develop its five year enrollment 

projections and obtain the independent 

employer affirmations as proposed for 

submission to the Department. These 

institutions would already be required 

to provide a debt warning disclosure, so 

there is no additional burden associated 

with that requirement in this section. 

Therefore, we estimate an increase in 

burden of 2,772 hours (252 affected 

institutions times 11 hours equal 2,772 

hours). 

Collectively, under proposed 

§ 668.7(e), we estimate that burden 

would increase by 8,382 hours in OMB 

1845–NEW4. 

Under proposed § 668.7(f), the 

Department would notify an institution 

whenever one or more of its programs 

become ineligible. During the initial 

year of implementation as proposed, for 

the award year beginning July 1, 2012, 

the number of ineligible programs 

would be limited to five percent. The 

Department estimates that there would 

be 3,000 programs in the ineligible 

category initially. Five percent of the 

3,000 ineligible program or 450 

programs would not be able to award 

title IV, HEA program assistance to new 

students after the notification date. The 

other 2,550 ineligible programs would 

be subject to additional reporting 

requirements including providing 

employer affirmations under 

§ 668.7(g)(1)(iii) and providing the debt 

warning disclosures under § 668.7(d). 

With respect to the 2,550 ineligible 

programs, the Department estimates that 

65 percent or 1,658 of the ineligible 

programs would be at proprietary 

institutions. At an average of 11 hours 

to obtain and report employer 

affirmation per program, we estimate 

that burden would increase by 18,238 

hours in OMB 1845–NEW4. 

With respect to the 2,550 ineligible 

programs, the Department estimates that 

65 percent or 1,658 of the ineligible 

programs would be at proprietary 

institutions. At an average of 11 hours 

to obtain and report employer 

affirmation per program, we estimate 

that burden would increase by 18,238 

hours. At an average of 1 hour to place 

debt warning disclosure information in 

its promotional, enrollment, and other 

materials, including its Web site, we 

estimate that burden will increase by 

1,658 hours in OMB 1845–NEW4. 

Collectively, the Department estimates 

that burden would increase for 

proprietary institutions by 19,896 hours 

in OMB 1845–NEW4. 

With respect to the 2,550 ineligible 

programs, the Department estimates that 

5 percent or 128 of the ineligible 

programs would be at private nonprofit 

institutions. At an average of 11 hours 

to obtain and report employer 

affirmation per program, we estimate 

that burden would increase by 1,408 

hours. At an average of 1 hour to place 

debt warning disclosure information in 

its promotional, enrollment, and other 

materials, including its Web site, we 

estimate that burden will increase by 

128 hours in OMB 1845–NEW4. 

Collectively, the Department estimates 

that burden would increase for private 

nonprofit institutions by 1,536 hours in 

OMB 1845–NEW4. 

With respect to the 2,550 ineligible 

programs, the Department estimates that 

30 percent or 764 of the ineligible 

programs would be at public 

institutions. At an average of 11 hours 

to obtain and report employer 

affirmation per program, we estimate 

that burden would increase by 8,404 

hours. At an average of 1 hour to place 

debt warning disclosure information in 

its promotional, enrollment, and other 

materials, including its Web site, we 

estimate that burden will increase by 

764 hours in OMB 1845–NEW4. 

Collectively, the Department estimates 

that burden would increase for public 

institutions by 9,168 hours in OMB 

1845–NEW4. 

In total, under proposed § 668.7(f), the 

Department estimates that burden 

would increase by 30,600 hours in OMB 

1845–NEW4. 

Under proposed § 668.7(g), before an 

institution can offer an additional 

program, the institution would have to 

apply to the Department by providing 

documentation of the approval of the 

substantive change by its accrediting 

agency, providing projected five year 

enrollment estimates, as well as, 

obtaining documentation from 

employers not affiliated with the 

institution, that the program curriculum 

aligns with recognized occupations at 

those employers’ businesses, the 

number and locations of the businesses, 

and that the projected number of job 

vacancies are commensurate with the 

anticipated size of the program. We 

estimate that during the initial three 

year period there will be 650 

submissions of additional programs for 

which institutions would submit to the 

Department this information. We 

estimate that, of the 4,463 institutions 

with programs that prepare student for 

gainful employment in a recognized 

occupation, 47 percent are in the 

proprietary sector, 5 percent are in the 

private nonprofit sector, and 48 percent 

are in the public sector. 

We estimate that 47 percent of the 650 

additional programs or 306 programs 

would be at proprietary institutions and 

that on average it will take 13 hours to 

develop the five-year projections and to 

collect the proposed employer 

documentation for a total increase of 

3,978 hours of burden. 

We estimate that 5 percent of the 650 

additional programs or 32 programs 

would be at private nonprofit 

institutions and that on average it will 

take 13 hours to develop the five-year 

projections and to collect the proposed 

employer documentation for a total 

increase of 416 hours of burden. 

We estimate that 48 percent of the 650 

additional programs or 312 programs 

would be at public institutions and that 

on average it will take 13 hours to 

develop the five-year projections and to 

collect the proposed employer 

documentation for a total increase of 

4,056 hours of burden. 

Collectively, under § 668.7(g), we 

estimate that the increase in burden to 

institutions would be 8,450 hours in 

OMB Control 1845–NEW4. 


sroberts on DSKD5P82C1PROD with PROPOSALS
Federal Register / Vol. 75, No. 142 / Monday, July 26, 2010 / Proposed Rules 43637 

COLLECTION OF INFORMATION

Regulatory 

section Information collection Collection 

668.7(a)(3)(viii) .... As proposed in § 668.7(a)(3)(viii), in accordance with procedures established by 

the Department for the purposes of calculating the loan repayment rate under 

paragraph (b) of this section, an institution must report the CIP codes for all 

students who attended a program at the institution whose FFEL or Direct Loan 

entered repayment in the prior four FFYs.

OMB 1845–NEW4. This collection would 

be a new collection. The burden increases by 40,666 hours. 

668.7(c)(3) .......... The Department uses the current earnings of the student who completed the program during the prior 3-year period if, in accordance with procedures established by the Department, the institution shows that students completing the 

program typically experience a significant increase in earnings after an initial 

employment period. The institution also provides the information to the Department needed to calculate the annual debt measures under this section, including the CIP codes, the completion date, the amount received in private loans 

or institutional financing for attendance in the program and the amount of debt 

incurred from institutional financing plans for each graduate for the prior threeyear period.

OMB 1845–NEW4. This collection would 

be a new collection. The burden increases by 2,980 hours. 

668.7(d) ............... On or after July 1, 2012, if a program exceeds the debt threshold, the Department notifies the institution that it must include a prominent warning in its promotional, enrollment, registration, and other materials describing the program, 

including those on its Web site, designed and intended to alert prospective and 

currently enrolled students that they may have difficulty repaying loans obtained for attending that program.

OMB 1845–NEW4. This collection would 

be a new collection. The burden increases by 298 hours. 

668.7(e) ............... Restricted programs as defined in proposed 668.7(e) are required annually to report employer affirmations specified in paragraph (g)(1)(iii) of this section.OMB 1845–NEW4. This collection would 

be a new collection. The burden increases by 8,382 hours. 

668.7(f) ................ On or after July 1, 2012 a program becomes ineligible if it does not meet at least 

one of the debt thresholds in § 668.7(a)(1). During the initial year, 95 percent 

of the ineligible programs may continue to participate in the title IV, HEA programs if the institution submits employer affirmations consistent with the requirements in proposed § 668.7(g)(1)(iii) and provides the debt warning disclosures in proposed § 668.7(d).

OMB 1845–NEW4. This collection would 

be a new collection. The burden increases by 30,600 hours. 

668.7(g) ............... Before an institution offers an additional program that is subject to the requirements of this section, the institution must apply to the Department and also 

provide documentation of the approval of the substantive change by its accrediting agency, projected enrollment for the next five years for each location of 

the institution that will offer the additional program, and documentation from 

employers not affiliated with the institution affirming the curriculum of the additional program aligns with recognized occupations at those employers’ businesses.

OMB 1845–NEW4. This collection would 

be a new collection. The burden increases by 8,450 hours. 

If you want to comment on the 

proposed information collection 

requirements, please send your 

comments to the Office of Information 

and Regulatory Affairs, OMB, Attention: 

Desk Officer for U.S. Department of 

Education. Send these comments by email to OIRA_DOCKET@omb.eop.gov or 

by fax to (202) 395–5806. You may also 

send a copy of these comments to the 

Department contact named in the 

ADDRESSES section of this preamble. 

The Department and OMB will 

consider your comments on these 

proposed collections of information in— 

• Deciding whether the proposed 

collections are necessary for the proper 

performance of its functions, including 

whether the information will have 

practical use; 

• Evaluating the accuracy of its 

estimate of the burden of the proposed 

collections, including the validity of its 

methodology and assumptions; 

• Enhancing the quality, usefulness, 

and clarity of the information it collects; 

and 

• Minimizing the burden on those 

who must respond. This consideration 

includes exploring the use of 

appropriate automated, electronic, 

mechanical, or other technological 

collection techniques or other forms of 

information technology, e.g., permitting 

electronic submission of responses. 

OMB is required to make a decision 

concerning the collections of 

information contained in these 

proposed regulations between 30 and 60 

days after publication of this document 

in the Federal Register. Therefore, to 

ensure that OMB gives your comments 

full consideration, OMB must receive 

the comments within 30 days of 

publication. This additional time to 

provide comments to OMB does not 

affect the deadline for your comments 

on the proposed regulations. 

The Department notes that a federal 

agency cannot conduct or sponsor a 

collection of information unless it is 

approved by OMB under the PRA, and 

displays a currently valid OMB control 

number, and the public is not required 

to respond to a collection of information 

unless it displays a currently valid OMB 

control number. Also, notwithstanding 

any other provisions of law, no person 

shall be subject to penalty for failing to 

comply with a collection of information 

if the collection of information does not 

display a currently valid OMB control 

number. The Department will publish a 

notice at the final rulemaking stage 

announcing OMB’s action regarding the 

collections of information contained in 

this proposed rule. 

Intergovernmental Review 

These programs are not subject to 

Executive Order 12372 and the 

regulations in 34 CFR part 79. 

Assessment of Educational Impact 

In accordance with section 411 of the 

General Education Provisions Act, 20 

U.S.C. 1221e–4, the Secretary 

particularly requests comments on 

whether these proposed regulations 

would require transmission of 

information that any other agency or 


sroberts on DSKD5P82C1PROD with PROPOSALS
43638 Federal Register / Vol. 75, No. 142 / Monday, July 26, 2010 / Proposed Rules 

authority of the United States gathers or 

makes available. 

Electronic Access to This Document 

You can view this document, as well 

as all other documents of this 

Department published in the Federal 

Register, in text or Adobe Portable 

Document Format (PDF) on the Internet 

at the following site: http://www.ed.gov/ 

news/fedregister. To use PDF, you must 

have Adobe Acrobat Reader, which is 

available free at this site. 

Note: The official version of this document 

is the document published in the Federal 

Register. Free Internet access to the official 

edition of the Federal Register and the Code 

of Federal Regulations is available on GPO 

Access at: http://www.gpoaccess.gov/nara/ 

index/html. 

(Catalog of Federal Domestic Assistance: 

84.007 FSEOG; 84.032 Federal Family 

Education Loan Program; 84.033 Federal 

Work-Study Program; 84.037 Federal Perkins 

Loan Program; 84.063 Federal Pell Grant 

Program; 84.069 LEAP; 84.268 William D. 

Ford Federal Direct Loan Program; 84.376 

ACG/SMART; 84.379 TEACH Grant Program) 

List of Subjects in 34 CFR Part 668 

Administrative practice and 

procedure, Aliens, Colleges and 

universities, Consumer protection, 

Grant programs—education, Loan 

programs-education, Reporting and 

recordkeeping requirements, Selective 

Service System, Student aid, Vocational 

education. 

Dated: July 16, 2010. 

Arne Duncan, 

Secretary of Education. 

For the reasons discussed in the 

preamble, the Secretary proposes to 

amend part 668 of title 34 of the Code 

of Federal Regulations as follows: 

PART 668—STUDENT ASSISTANCE 

GENERAL PROVISIONS 

1. The authority citation for part 668 

continues to read as follows: 

Authority: 20 U.S.C. 1001, 1002, 1003, 

1070g, 1085, 1088, 1091, 1092, 1094, 1099c, 

and 1099c–1, unless otherwise noted. 

2. Section 668.7 is added to subpart 

A to read as follows: 

§ 668.7 Gainful employment in a 

recognized occupation. 

(a) Gainful employment—(1) Debt 

thresholds. A program is considered to 

provide training that leads to gainful 

employment in a recognized occupation 

if, as calculated under paragraph (b) and 

(c) of this section— 

(i) The program’s annual loan 

repayment rate is at least 35 percent; 

(ii) Using the three-year period (3YP), 

the program’s annual loan payment is 

30 percent or less of discretionary 

income or 12 percent or less of average 

annual earnings; or 

(iii) Using the prior three-year period 

(P3YP), the program’s annual loan 

payment is less than 20 percent of 

discretionary income or less than 8 

percent of average annual earnings. 

(2) Restricted status. Unless a program 

is ineligible under paragraph (f) of this 

section, the Secretary places the 

program on a restricted status under the 

following conditions— 

(i) The program has an annual loan 

repayment rate of less than 45 percent; 

and 

(ii) The program has an annual loan 

payment that is more than 20 percent of 

discretionary income and more than 8 

percent of average annual income using 

3YP, and if applicable P3YP. 

(3) General. For purposes of this 

section— 

(i) A program refers to any 

educational program offered by the 

institution under § 668.8(c)(3) or (d); 

(ii) A Federal fiscal year (FFY) is the 

12-month period starting October 1 and 

ending September 30; 

(iii) A three-year period (3YP) is the 

period covering the three most recently 

completed award years prior to the 

earnings year; 

(iv) A prior three-year period (P3YP) 

is the period covering the fourth, fifth, 

and sixth most recently completed 

award years prior to the earnings year 

(i.e., the three years preceding the 3YP); 

(v) Earnings year is the most recent 

calendar year for which earnings data 

are available; 

(vi) Discretionary income is the 

difference between average annual 

earnings and 150 percent of the most 

current Poverty Guideline for a single 

person in the continental U.S. The 

Poverty Guidelines are published 

annually by the U.S. Department of 

Health and Human Services (HHS) and 

are available at http://aspe.hhs.gov/ 

poverty; 

(vii) The Classification of 

Instructional Programs (CIP) is a 

taxonomy of instructional program 

classifications and descriptions 

developed by the U.S. Department of 

Education’s National Center for 

Education Statistics; and 

(viii) In accordance with procedures 

established by the Secretary for 

purposes of calculating the loan 

repayment rate under paragraph (b) of 

this section, an institution must report 

the CIP code for all students who 

attended a program at the institution 

whose FFEL or Direct Loans entered 

repayment in the prior four FFYs. 

(b) Loan repayment rate. The 

Secretary calculates the loan repayment 

rate for a program annually using the 

following ratio: 

OOPB of LPF plus OOPB of RPL

OOPB of all loans for students attending the program

(1) Original Outstanding Principal 

Balance (OOPB). (i) The OOPB is the 

amount of the outstanding balance on 

FFEL or Direct loans owed by students 

who attended the program, including 

capitalized interest, on the date those 

loans entered repayment. 

(ii) The OOPB of all loans includes 

the FFEL and Direct loans that entered 

repayment for the prior four FFYs. 

(2) Loans Paid in Full (LPF). (i) LPF 

are loans to students who attended the 

program that have been paid in full. 

However, a loan that is paid through a 

consolidation loan is not counted as 

paid in full for this purpose until the 

consolidation loan is paid in full. 

(ii) The OOPB of LPF in the 

numerator of the ratio is the total 

amount of OOPB for these loans. 

(3) Reduced Principal Loan (RPL). (i) 

RPL represents a loan where payments 

made by a borrower during the most 

recently completed FFY reduced the 

outstanding principal balance of that 

loan from the beginning of that FFY. 

RPL also includes loans for borrowers 

whose payments during that FFY 

qualify for the Public Service Loan 

Forgiveness program under 34 CFR 

685.219(c), even if there is no reduction 

during the FFY in the outstanding 

principal balance of those loans. 

(ii) The OOPB of RPL in the 

numerator of the ratio is the total 

amount of the OOPB for these loans. 

(4) Exclusions. The following are 

excluded from both the numerator and 

the denominator of the ratio: 

(i) The OOPB of borrowers on an inschool deferment or a military-related 

deferment status. 


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(ii) The OOPB of borrowers entering 

repayment after March 31 of the most 

recent FFY. 

(c) Debt measures—(1) General. The 

Secretary determines annually for each 

program whether the annual loan 

payment is less than the discretionary 

income and earnings thresholds in 

paragraph (a) of this section using the 

following formulas: 

(i) Annual loan payment < 

Discretionary threshold * (Average 

Annual Earnings¥(1.5 * Poverty 

Guideline)). For example, under 

paragraph (a)(1)(ii) of this section, the 

Discretionary threshold is 20 percent or 

.20. 

(ii) Annual loan payment < Earnings 

threshold * Average Annual Earnings. 

For example, under paragraph (a)(1)(iii) 

of this section the Earnings threshold is 

12 percent or .12. 

(2) Annual loan payment. The 

Secretary determines the median loan 

debt of students who completed the 

program at the institution during the 

3YP and uses this amount to calculate 

an annual loan payment based on a 10- 

year repayment schedule and the 

current annual interest rate on Federal 

Direct Unsubsidized Loans. If data are 

available, the Secretary also calculates 

the median loan debt of students who 

completed the program during the 

P3YP. In general, loan debt includes 

title IV, HEA program loans, other than 

Parent PLUS loans, and any private 

educational loans or debt obligations 

arising from institutional financing 

plans. Loan debt does not include any 

debt obligations arising from student 

attendance at prior or subsequent 

institutions unless the other and current 

institutions are under common 

ownership or control, or are otherwise 

related entities. 

(3) Average annual earnings. The 

Secretary uses the most currently 

available actual, average annual 

earnings obtained from a Federal 

agency, of the students who completed 

the program during the 3YP and, if the 

data are available, during the P3YP. 

P3YP data are used if, in accordance 

with procedures established by the 

Secretary— 

(i) The institution shows that students 

completing the program typically 

experience a significant increase in 

earnings after an initial employment 

period and explains the basis for that 

earnings pattern; and 

(ii) The institution provides the 

Secretary the information needed to 

calculate the annual debt measures 

under this section, including the CIP 

code, and for each student who 

completed the program, the completion 

date, the amount received from private 

educational loans, and the amount of 

debt incurred from institutional 

financing plans. 

(d) Debt warning disclosure. On or 

after July 1, 2012, unless the program 

has a loan repayment rate of at least 45 

percent and an annual loan payment 

that is at least 20 percent of 

discretionary income or 8 percent of 

average annual income, the Secretary 

notifies the institution that it must— 

(1) Include a prominent warning in its 

promotional, enrollment, registration, 

and in all other materials, including 

those on its Web site, and in all 

admissions meetings with prospective 

students, that is designed and intended 

to alert prospective and currently 

enrolled students that they may have 

difficulty repaying loans obtained for 

attending that program; and 

(2) Disclose to current and 

prospective students, the program’s 

most recent loan repayment rate under 

paragraph (b) of this section, and most 

recent debt measures under paragraph 

(c) of this section. 

(e) Restricted programs. The Secretary 

notifies an institution whenever one of 

its program’s is placed on a restricted 

status under paragraph (a)(2) of this 

section, that— 

(1) The institution must provide 

annually to the Secretary the employer 

affirmations specified in paragraph 

(g)(1)(iii) of this section; 

(2) The institution must make the debt 

warning disclosures specified in 

paragraph (d) of this section; and 

(3) The Secretary limits the 

enrollment of title IV, HEA program 

recipients in that program to the average 

number enrolled during the prior three 

award years. 

(f) Ineligible program—(1) General. 

Except for the transition year under 

paragraph (f)(2) of this section, on or 

after July 1, 2012 a program becomes 

ineligible if it does not satisfy at least 

one of the debt thresholds in paragraph 

(a)(1) of this section. The Secretary 

notifies the institution that the program 

is ineligible on this basis, and the 

institution may not disburse any title IV, 

HEA program funds to students who 

begin attending that program after the 

date specified in the Secretary’s notice. 

However, the institution may disburse 

title IV, HEA program funds to students 

who began attending the program before 

it became ineligible for the remainder of 

the award year and for the award year 

following the date of the Secretary’s 

notice. 

(2) Transition year. (i) For the award 

year beginning July 1, 2012, the 

Secretary caps the number of ineligible 

programs for which a notice is sent 

under paragraph (f)(1) of this section 

by— 

(A) Sorting all programs subject to 

this section by category based solely on 

the credential awarded as determined 

by the Secretary (e.g., certificate, 

associate degree, baccalaureate degree, 

and graduate and professional degree) 

and then within each category, by loan 

repayment rate, from lowest rate to 

highest rate; and 

(B) For each category of programs, 

beginning with the ineligible program 

with the lowest loan repayment rate, 

identifying the ineligible programs that 

account for a combined number of 

students that completed the programs in 

the most recently completed award year 

that do not exceed five percent of the 

total number of students who completed 

programs in that category. 

(ii) For each ineligible program that 

falls within the five percent grouping by 

category during the transition period, 

the Secretary notifies the institution 

under paragraph (f)(1) of this section 

that the program no longer qualifies as 

an eligible program. For every other 

ineligible program, the Secretary 

notifies the institution that— 

(A) It must limit the enrollment of 

title IV, HEA program recipients in that 

program to the average number of title 

IV, HEA program recipients enrolled 

during the prior three award years; 

(B) It must provide the employer 

affirmations under paragraph (g)(1)(iii) 

of this section; and 

(C) It must provide the debt warning 

disclosures specified in paragraph (d) of 

this section. 

(g) Additional programs. (1) Before an 

institution offers an additional program 

that is subject to the requirements of 

this section, the institution must apply 

to the Secretary under 34 CFR 

600.10(c)(1) to have that program 

approved as an eligible program. As part 

of its application, the institution must 

provide— 

(i) If the additional program 

constitutes a substantive change as 

provided under 34 CFR 602.22(a)(1), 

documentation of the approval of the 

substantive change by its accrediting 

agency; 

(ii) Projected student enrollment for 

the next five years for each location of 

the institution that will offer the 

additional program; and 

(iii) Documentation from employers 

not affiliated with the institution 

affirming that the curriculum of the 

additional program aligns with 

recognized occupations at those 

employers’ businesses, and that there 

are projected job vacancies or expected 

demand for those occupations at those 

businesses. The number and locations of 


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the businesses for which affirmation is 

required must be commensurate with 

the anticipated size of the program. 

(2) In determining whether to approve 

the additional program, the Secretary 

may restrict the approval for an initial 

period based on the projected growth 

estimates provided by the institution 

and the demonstrated ability of the 

institution to offer programs subject to 

this section. 

(3) If the additional program 

constitutes a substantive change based 

solely on program content as provided 

in 34 CFR 602.22(a)(2)(iii), the Secretary 

calculates the loan repayment rate and 

debt measures for that program as soon 

as data are available. Otherwise, the 

Secretary— 

(i) Calculates the loan repayment rate 

under paragraph (b) of this section by 

using loan data from the additional 

program and, for the first three years, 

loan data from all other programs 

currently or previously offered by the 

institution that are in the same job 

family as the additional program. Any 

loans from the programs in the same job 

family that enter repayment after the 

third year that the loan repayment rate 

is calculated for the additional program, 

are not included in that program’s loan 

repayment rate. As described by the 

Bureau of Labor Statistics (BLS), a job 

family is a group of occupations based 

on work performed, skills, education, 

training, and credentials. Occupations 

are grouped by Standard Occupational 

Classification (SOC) codes. Information 

about job families and SOC codes is 

available at http://www.bls.gov/oes/ 

current/oes_stru.htm, or http:// 

online.onetcenter.org/find/family; and 

(ii) Calculates the debt measures 

under paragraph (c) of this section by 

using the loan debt incurred by students 

in the additional program and in all 

other programs currently or previously 

offered by the institution that are in the 

same job family as the additional 

program, until loan debt data are 

available for a 3YP solely for the 

additional program. 

(Approved by the Office of Management and 

Budget under control number 1845–NEW4) 

(Authority: 20 U.S.C 1001(b), 1002(b) and (c)) 

3. Section 668.13 is amended by: 

A. In paragraph (c)(1)(i)(D), removing 

the word ‘‘or’’ that appears after the 

punctuation ‘‘;’’. 

B. In paragraph (c)(1)(i)(E), removing 

the punctuation ‘‘.’’ and adding, in its 

place, the word ‘‘; or’’. 

C. Adding a new paragraph 

(c)(1)(i)(F). 

The addition reads as follows: 

§ 668.13 Certification procedures. 

* * * * * 

(c) * * * 

(1)(i) * * * 

(F) One or more programs offered by 

the institution— 

(1) Are subject to the eligibility 

limitations under the gainful 

employment provisions in § 668.7(e); or 

(2) Become ineligible under the 

gainful employment provisions in 

§ 668.7(f). 

* * * * * 

4. Section § 668.90 is amended by: 

A. In paragraph (a)(3)(v), removing the 

word ‘‘and’’ that appears after the 

punctuation’’;’’. 

B. In paragraph (a)(3)(vi)(F), removing 

the punctuation ‘‘.’’ and adding, in its 

place, the word ‘‘; and’’. 

C. Adding a new paragraph (a)(3)(vii). 

The addition reads as follows: 

§ 668.90 Initial and final decisions. 

(a) * * * 

(3) * * * 

(vii) In a termination action against a 

program based on the grounds that the 

program does not meet the standards for 

gainful employment in § 668.7(a), the 

hearing official accepts as accurate the 

average annual earnings calculated by 

another Federal agency, so long as the 

other Federal agency provided that 

calculation for the list of program 

completers identified by the institution 

and accepted by the Department. The 

hearing official may consider evidence 

from an institution about earnings from 

its graduates to establish a different 

amount for the average annual earnings 

of the program graduates, so long as that 

information is for the same individuals 

and determined to be reliable. 

* * * * * 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Appendix A—Regulatory Impact 

Analysis 

BILLING CODE 400–01–P 


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[FR Doc. 2010–17845 Filed 7–23–10; 8:45 am] 

BILLING CODE 4000–01–C 


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