Education Department finalizes gainful-employment rule

The Biden administration has finalized its rule that would redefine what it means to prepare graduates for gainful employment, the U.S. Education Department announced Wednesday evening.

Under the rule, which was proposed in May as part of a broader package of regulations, programs at for-profit institutions as well as nondegree programs in any sector would have to show that graduates can afford their yearly debt payments and that they are making more than an adult in their state who didn’t go to college.

Experts have said that the rule, which would take effect July 1, 2024, would be tougher than previous iterations released during the Obama administration and would provide guardrails to protect students. Programs that fail either test in two consecutive years could risk losing their eligibility for Title IV funding. Title IV of the Higher Education Act of 1965 authorizes federal financial aid programs.

“By implementing measures that ensure both accountability and transparency, the department will take a stand against predatory practices and safeguard the futures of students and the hard-earned money of taxpayers,” wrote New America, a left-leaning think tank, in its comment on the proposed rule. Other consumer protection advocates praised the rule, which they said would strengthen the higher education system.

The other rules in the regulatory set released in May are still under review at the Office of Management and Budget and could be delayed if, as expected, the government shuts down this weekend.

The Biden administration’s gainful-employment regulation resurrects an Obama-era effort to hold for-profit colleges and nondegree programs accountable for their students’ outcomes. The Obama rule was finalized in 2014, but only one year of data was ever released. Former education secretary Betsy DeVos stopped enforcing the rule and scrapped it altogether in 2019. The 2014 rule and an earlier version faced legal challenges as well, which the Biden rule could also face.

This time around, the Education Department received nearly 4,000 comments on its draft rule. Hundreds of comments came from those connected to cosmetology schools. The stricter gainful-employment tests are expected to decimate the industry. The American Association of Cosmetology Schools, which sued to block a previous gainful-employment rule, has called this latest proposal illegal.

The draft rule also called for calculating the debt and earnings of students in all academic programs with more than 30 students, regardless of whether the program was subject to the gainful-employment regulations. Higher education associations pushed back on that idea in their comments, calling the provision “inappropriate and illogical.”

Higher education groups wanted to see a number of changes to the rule. It was unclear Wednesday how many of those changes were made.

Career Education Colleges and Universities, which represents the for-profit higher education sector, said in a statement Wednesday that the department overlooked critical issues to “hastily implement and weaponize a final Gainful Employment rule against for-profit institutions.”

“The department continues to put its thumb on the scale to circumvent established procedures and advance a partisan rule that fails to protect the vast majority of students,” CECU president and CEO Jason Altmire said in the statement released before the department’s announcement. “CECU has continually advocated for a rule that ensures the protection of all students and maintains equal accountability for public, private nonprofit, and for-profit institutions—an objective this rule does not achieve.”

This is a developing story. Please check back for updates.