[Federal Register Volume 79, Number 211 (Friday, October 31, 2014)]
[Rules and Regulations]
[Pages 64889-65103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25594]



[[Page 64889]]

Vol. 79

Friday,

No. 211

October 31, 2014

Part II





Department of Education





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34 CFR Parts 600 and 668





Program Integrity: Gainful Employment; Final Rule

Federal Register / Vol. 79 , No. 211 / Friday, October 31, 2014 / 
Rules and Regulations

[[Page 64890]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 600 and 668

RIN 1840-AD15
[Docket ID ED-2014-OPE-0039]


Program Integrity: Gainful Employment

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends regulations on institutional eligibility 
under the Higher Education Act of 1965, as amended (HEA), and the 
Student Assistance General Provisions to establish measures for 
determining whether certain postsecondary educational programs prepare 
students for gainful employment in a recognized occupation, and the 
conditions under which these educational programs remain eligible under 
the Federal Student Aid programs authorized under title IV of the HEA 
(title IV, HEA programs).

DATES: These regulations are effective July 1, 2015.

FOR FURTHER INFORMATION CONTACT: John Kolotos, U.S. Department of 
Education, 1990 K Street NW., Room 8018, Washington, DC 20006-8502. 
Telephone: (202) 502-7762 or by email at: 
gainfulemploymentregulations@ed.gov.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary

    Purpose of This Regulatory Action: The regulations are intended to 
address growing concerns about educational programs that, as a 
condition of eligibility for title IV, HEA program funds, are required 
by statute to provide training that prepares students for gainful 
employment in a recognized occupation (GE programs), but instead are 
leaving students with unaffordable levels of loan debt in relation to 
their earnings, or leading to default. GE programs include nearly all 
educational programs at for-profit institutions of higher education, as 
well as non-degree programs at public and private non-profit 
institutions such as community colleges.
    Specifically, the Department is concerned that a number of GE 
programs: (1) Do not train students in the skills they need to obtain 
and maintain jobs in the occupation for which the program purports to 
provide training, (2) provide training for an occupation for which low 
wages do not justify program costs, and (3) are experiencing a high 
number of withdrawals or ``churn'' because relatively large numbers of 
students enroll but few, or none, complete the program, which can often 
lead to default. We are also concerned about the growing evidence, from 
Federal and State investigations and qui tam lawsuits, that many GE 
programs are engaging in aggressive and deceptive marketing and 
recruiting practices. As a result of these practices, prospective 
students and their families are potentially being pressured and misled 
into critical decisions regarding their educational investments that 
are against their interests.
    For these reasons, through this regulatory action, the Department 
establishes: (1) An accountability framework for GE programs that 
defines what it means to prepare students for gainful employment in a 
recognized occupation by establishing measures by which the Department 
will evaluate whether a GE program remains eligible for title IV, HEA 
program funds, and (2) a transparency framework that will increase the 
quality and availability of information about the outcomes of students 
enrolled in GE programs. Better outcomes information will benefit: 
Students, prospective students, and their families, as they make 
critical decisions about their educational investments; the public, 
taxpayers, and the Government, by providing information that will 
enable better protection of the Federal investment in these programs; 
and institutions, by providing them with meaningful information that 
they can use to help improve student outcomes in their programs.
    The accountability framework defines what it means to prepare 
students for gainful employment by establishing measures that assess 
whether programs provide quality education and training to their 
students that lead to earnings that will allow students to pay back 
their student loan debts. For programs that perform poorly under the 
measures, institutions will need to make improvements during the 
transition period we establish in the regulations.
    The transparency framework will establish reporting and disclosure 
requirements that increase the transparency of student outcomes of GE 
programs so that students, prospective students, and their families 
have accurate and comparable information to help them make informed 
decisions about where to invest their time and money in pursuit of a 
postsecondary degree or credential. Further, this information will 
provide the public, taxpayers, and the Government with relevant 
information to better safeguard the Federal investment in these 
programs. Finally, the transparency framework will provide institutions 
with meaningful information that they can use to improve student 
outcomes in these programs.
    Authority for This Regulatory Action: To accomplish these two 
primary goals of accountability and transparency, the Secretary amends 
parts 600 and 668 of title 34 of the Code of Federal Regulations (CFR). 
The Department's authority for this regulatory action is derived 
primarily from three sources, which are discussed in more detail in 
``Section 668.401 Scope and Purpose'' and in the notice of proposed 
rulemaking (NPRM) published on March 25, 2014 (79 FR 16426). First, 
sections 101 and 102 of the HEA define an eligible institution, as 
pertinent here, as one that provides an ``eligible program of training 
to prepare students for gainful employment in a recognized 
occupation.'' 20 U.S.C. 1001(b)(1), 1002(b)(1)(A)(i), (c)(1)(A). 
Section 481(b) of the HEA defines ``eligible program'' to include a 
program that ``provides a program of training to prepare students for 
gainful employment in a recognized profession.'' 20 U.S.C. 1088(b). 
Briefly, this authority establishes the requirement that certain 
educational programs must provide training that prepare students for 
gainful employment in a recognized occupation in order for those 
programs to be eligible for title IV, HEA program funds--the 
requirement that the Department defines through these regulations.
    Second, section 410 of the General Education Provisions Act 
provides the Secretary with authority to make, promulgate, issue, 
rescind, and amend rules and regulations governing the manner of 
operations of, and governing the applicable programs administered by, 
the Department. 20 U.S.C. 1221e-3. Furthermore, under section 414 of 
the Department of Education Organization Act, the Secretary is 
authorized to prescribe such rules and regulations as the Secretary 
determines necessary or appropriate to administer and manage the 
functions of the Secretary or the Department. 20 U.S.C. 3474. These 
authorities, together with the provisions in the HEA, thus include 
promulgating regulations that, in this case: Set measures to determine 
the eligibility of GE programs for title IV, HEA program funds; require 
institutions to report information about the program to the Secretary; 
require the institution to

[[Page 64891]]

disclose information about the program to students, prospective 
students, and their families, the public, taxpayers, and the 
Government, and institutions; and establish certification requirements 
regarding an institution's GE programs.
    As also explained in more detail in ``Section 668.401 Scope and 
Purpose'' and the NPRM, the Department's authority for the transparency 
framework is further supported by section 431 of the Department of 
Education Organization Act, which provides authority to the Secretary, 
in relevant part, to inform the public regarding federally supported 
education programs; and collect data and information on applicable 
programs for the purpose of obtaining objective measurements of the 
effectiveness of such programs in achieving the intended purposes of 
such programs. 20 U.S.C. 1231a.
    The Department's authority for the regulations is also informed by 
the legislative history of the provisions of the HEA, as discussed in 
the NPRM, as well as the rulings of the U.S. District Court for the 
District of Columbia in Association of Private Sector Colleges and 
Universities v. Duncan, 870 F.Supp.2d 133 (D.D.C. 2012), and 930 
F.Supp.2d 210 (D.D.C. 2013) (referred to in this document as ``APSCU v. 
Duncan). Notably, the court specifically considered the Department's 
authority to define what it means to prepare students for gainful 
employment and to require institutions to report and disclose relevant 
information about their GE programs.
    Summary of the Major Provisions of This Regulatory Action: As 
discussed under ``Purpose of This Regulatory Action,'' the regulations 
establish an accountability framework and a transparency framework.
    The accountability framework, among other things, creates a 
certification process by which an institution establishes a GE 
program's eligibility for title IV, HEA program funds, as well as a 
process by which the Department determines whether a program remains 
eligible. First, an institution establishes the eligibility of a GE 
program by certifying, among other things, that the program is included 
in the institution's accreditation and satisfies any applicable State 
or Federal program-level accrediting requirements and State licensing 
and certification requirements for the occupations for which the 
program purports to prepare students to enter. This requirement will 
serve as a baseline protection against the harm that students could 
experience by enrolling in programs that do not meet all State or 
Federal accrediting standards and licensing or certification 
requirements necessary to secure the jobs associated with the training.
    Under the accountability framework, we also establish the debt-to-
earnings (D/E) rates measure \1\ that will be used to determine whether 
a GE program remains eligible for title IV, HEA program funds. The D/E 
rates measure evaluates the amount of debt (tuition and fees and books, 
equipment, and supplies) students who completed a GE program incurred 
to attend that program in comparison to those same students' 
discretionary and annual earnings after completing the program. The 
regulations establish the standards by which the program will be 
assessed to determine, for each year rates are calculated, whether it 
passes or fails the D/E rates measure or is ``in the zone.''
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    \1\ Please see ``Section 668.404 Calculating D/E Rates'' for 
details about the calculation of the D/E rates.
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    Under the regulations, to pass the D/E rates measure, the GE 
program must have a discretionary income rate \2\ less than or equal to 
20 percent or an annual earnings rate \3\ less than or equal to 8 
percent. The regulations also establish a zone for GE programs that 
have a discretionary income rate greater than 20 percent and less than 
or equal to 30 percent or an annual earnings rate greater than 8 
percent and less than or equal to 12 percent. GE programs with a 
discretionary income rate over 30 percent and an annual earnings rate 
over 12 percent will fail the D/E rates measure. Under the regulations, 
a GE program becomes ineligible for title IV, HEA program funds, if it 
fails the D/E rates measure for two out of three consecutive years, or 
has a combination of D/E rates that are in the zone or failing for four 
consecutive years. We establish the D/E rates measure and the 
thresholds, as explained in more detail in ``Sec.  668.403 Gainful 
Employment Framework,'' to assess whether a GE program has indeed 
prepared students to earn enough to repay their loans, or was 
sufficiently low cost, such that students are not unduly burdened with 
debt, and to safeguard the Federal investment in the program.
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    \2\ Please see Sec.  668.404(a)(1) for the definition of the 
discretionary income rate.
    \3\ Please see Sec.  668.404(a)(2) for the definition of the 
annual earnings rate.
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    The regulations also establish procedures for the calculation of 
the D/E rates and for challenging the information used to calculate the 
D/E rates and appealing the determination. The regulations also 
establish a transition period for the first seven years after the 
regulations take effect to allow institutions to pass the D/E rates 
measure by reducing the loan debt of currently enrolled students.
    For a GE program that could become ineligible based on its D/E 
rates for the next award year, the regulations require the institution 
to warn students and prospective students of the potential loss of 
eligibility for title IV, HEA program funds and the implications of 
such loss of eligibility. Specifically, institutions would be required 
to provide warnings to enrolled students that describe, among other 
things, the options available to continue their education at the 
institution if the program loses its eligibility and whether the 
students will be able to receive a refund of tuition and fees. The 
regulations also provide that, for a GE program that loses eligibility 
or for any failing or zone program that is discontinued by the 
institution, the loss of eligibility is for three calendar years.
    These provisions will: Ensure that institutions have a meaningful 
opportunity and reasonable time to improve their programs for a period 
of time after the regulations take effect, and ensure that those 
improvements are reflected in the D/E rates; protect students and 
prospective students and ensure that they are informed about programs 
that are failing or could potentially lose eligibility; and provide 
institutions and other interested parties with clarity as to how the 
calculations are made, how institutions can ensure the accuracy of 
information used in the calculations, and the consequences of failing 
the D/E rates measure and losing eligibility.
    In addition, the regulations establish a transparency framework. 
First, the regulations establish reporting requirements, under which 
institutions will report information related to their GE programs to 
the Secretary. The reporting requirements will facilitate the 
Department's evaluation of the GE programs under the accountability 
framework, as well as support the goals of the transparency framework. 
Second, the regulations require institutions to disclose relevant 
information and data about the GE programs through a disclosure 
template developed by the Secretary. The disclosure requirements will 
help ensure students, prospective students, and their families, the 
public, taxpayers, and the Government, and institutions have access to 
meaningful and comparable information about student outcomes and the 
overall performance of GE programs.
    Costs and Benefits: There are two primary benefits of the 
regulations. Because the regulations establish an accountability 
framework that assesses program performance we expect

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students, prospective students, taxpayers, and the Federal Government 
to receive a better return on the title IV, HEA program funds. The 
regulations also establish a transparency framework which will improve 
market information that will assist students, prospective students, and 
their families in making critical decisions about their educational 
investment and in understanding potential outcomes of that investment. 
The public, taxpayers, the Government, and institutions will also gain 
relevant and useful information about GE programs, allowing them to 
evaluate their investment in these programs. Institutions will largely 
bear the costs of the regulations: Paperwork costs of complying with 
the regulations, costs that could be incurred by institutions if they 
attempt to improve their GE programs, and costs due to changing student 
enrollment. See ``Discussion of Costs, Benefits, and Transfers'' in the 
regulatory impact analysis in Appendix A to this document for a more 
complete discussion of the costs and benefits of the regulations.
    On March 25, 2014, the Secretary published the NPRM for these 
regulations in the Federal Register (79 FR 16426). In the preamble of 
the NPRM, we discussed on pages 16428-16433, the background of the 
regulations, the relevant data available, and the major changes 
proposed in that document. Terms used but not defined in this document, 
for example, 2011 Prior Rule and 2011 Final Rules, have the meanings 
set forth in the NPRM. The final regulations contain a number of 
changes from the NPRM. We fully explain the changes in the Analysis of 
Comments and Changes section of the preamble that follows.
    Public Comment: In response to our invitation in the NPRM, we 
received approximately 95,000 comments on the proposed regulations. We 
discuss substantive issues under the sections of the proposed 
regulations to which they pertain. Generally, we do not address 
technical or other minor changes.
    Analysis of Comments and Changes: An analysis of the comments and 
of any changes in the regulations since publication of the NPRM 
follows.

Section 668.401 Scope and Purpose

    Comments: A number of commenters stated that, in promulgating the 
regulations, the Department exceeds its delegated authority to 
administer programs under the HEA. Some commenters asserted that the 
legislative history of the gainful employment provisions in the HEA 
does not support the Department's regulatory action to define gainful 
employment and that the Department gave undue weight to testimony 
presented to Congress at the time the gainful employment provisions 
were enacted. Some commenters stated that Congress did not intend for 
the Department to measure whether a program leads to gainful employment 
based on debt or earnings.
    Several commenters argued that, even if the Department has the 
legal authority, the issues addressed by the regulations should be 
addressed instead as a part of HEA reauthorization or by other 
legislative action. One commenter contended that members of Congress 
have asked the Department to refrain from regulating on gainful 
employment programs pending reauthorization of the HEA and that the 
proposed regulations constitute a usurping of legislative authority.
    Other commenters asserted that identifying educational programs in 
the career training sector that do not prepare students for gainful 
employment and terminating their eligibility for title IV, HEA program 
funds is mandated by the HEA.
    Discussion: The Department's statutory authority for this 
regulatory action is derived primarily from three sources. First, 
sections 101 and 102 of the HEA define ``eligible institution'' to 
include an institution that provides an ``eligible program of training 
to prepare students for gainful employment in a recognized 
occupation.'' 20 U.S.C. 1001(b)(1), 1002(b)(1)(A)(i), (c)(1)(A). 
Section 481(b) of the HEA defines ``eligible program'' to include a 
program that ``provides a program of training to prepare students for 
gainful employment in a recognized profession.'' 20 U.S.C. 1088(b). 
These statutory provisions establish the requirement that certain 
educational programs must provide training that prepares students for 
gainful employment in a recognized occupation in order for those 
programs to be eligible for title IV, HEA program funds--the 
requirement that the Department seeks to define through the 
regulations.
    Second, section 410 of the General Education Provisions Act 
provides the Secretary with authority to make, promulgate, issue, 
rescind, and amend rules and regulations governing the manner of 
operations of, and governing the applicable programs administered by, 
the Department. 20 U.S.C. 1221e-3. Furthermore, under section 414 of 
the Department of Education Organization Act, the Secretary is 
authorized to prescribe such rules and regulations as the Secretary 
determines necessary or appropriate to administer and manage the 
functions of the Secretary or the Department. 20 U.S.C. 3474. These 
provisions, together with the provisions in the HEA regarding GE 
programs, authorize the Department to promulgate regulations that: Set 
measures to determine the eligibility of GE programs for title IV, HEA 
program funds; require institutions to report information about GE 
programs to the Secretary; require institutions to disclose information 
about GE programs to students, prospective students, and their 
families, the public, taxpayers, and the Government, and institutions; 
and establish certification requirements regarding an institution's GE 
programs.
    Third, the Department's authority for establishing the transparency 
framework is further supported by section 431 of the Department of 
Education Organization Act, which provides authority to the Secretary, 
in relevant part, to inform the public about federally supported 
education programs and collect data and information on applicable 
programs for the purpose of obtaining objective measurements of the 
effectiveness of such programs in achieving the intended purposes of 
such programs. 20 U.S.C. 1231a.
    The U.S. District Court for the District of Columbia confirmed the 
Department's authority to regulate gainful employment programs in 
Association of Private Sector Colleges and Universities (APSCU) v. 
Duncan, 870 F.Supp.2d 133 (D.D.C. 2012), and 930 F.Supp.2d 210 (D.D.C. 
2013). These rulings arose out of a lawsuit brought by APSCU 
challenging the Department's 2010 and 2011 gainful employment 
regulations. In that case, the court reached several conclusions about 
the Department's rulemaking authority to define eligibility 
requirements for gainful employment programs that have informed and 
framed the Department's exercise of that authority through this 
rulemaking. Notably, the court agreed with the Department that the 
Secretary has broad authority to make, promulgate, issue, rescind, and 
amend the rules and regulations governing applicable programs 
administered by the Department, such as the title IV, HEA programs, and 
that the Secretary is ``authorized to prescribe such rules and 
regulations as the Secretary determines necessary or appropriate to 
administer and manage the functions of the Secretary or the 
Department.'' APSCU v. Duncan, 870 F.Supp.2d at 141; see 20 U.S.C. 
3474. Furthermore, in answering the question of whether the 
Department's regulatory effort to define the gainful employment 
requirement falls within its statutory authority, the court found that 
the Department's actions were within its statutory

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authority to define the gainful employment requirement. Specifically, 
the court concluded that the phrase ``gainful employment in a 
recognized occupation'' is ambiguous; in enacting a requirement that 
used that phrase, Congress delegated interpretive authority to the 
Department; and the Department's regulations were a reasonable 
interpretation of an ambiguous statutory command. APSCU v. Duncan, 870 
F.Supp.2d at 146-49. The court also upheld the disclosure requirements 
set forth by the Department in the 2011 Final Rule, which are still in 
effect, rejecting APSCU's challenge and finding that these requirements 
``fall comfortably within [the Secretary's] regulatory power,'' and are 
``not arbitrary or capricious.'' Id. at 156.
    Contrary to the claims of some commenters, the Department's 
authority to promulgate regulations defining the gainful employment 
requirement and using a debt and earnings measure for that purpose is 
also supported by the legislative history of the statutory provisions 
regarding gainful employment programs. The legislative history of the 
statute preceding the HEA that first permitted students to obtain 
federally financed loans to enroll in programs that prepared them for 
gainful employment in recognized occupations demonstrates the 
conviction that the training offered by these programs should equip 
students to earn enough to repay their loans. APSCU v. Duncan, 870 
F.Supp.2d at 139. Allowing these students to borrow was expected to 
neither unduly burden the students nor pose ``a poor financial risk'' 
to taxpayers. Specifically, the Senate Report accompanying the initial 
legislation (the National Vocational Student Loan Insurance Act 
(NVSLIA), Pub. L. 89-287) quotes extensively from testimony provided by 
University of Iowa professor Dr. Kenneth B. Hoyt, who testified on 
behalf of the American Personnel and Guidance Association. On this 
point, the Senate Report sets out Dr. Hoyt's questions and conclusions:

    Would these students be in a position to repay loans following 
their training? . . .
    If loans were made to these kinds of students, is it likely that 
they could repay them following training? Would loan funds pay 
dividends in terms of benefits accruing from the training students 
received? It would seem that any discussion concerning this bill 
must address itself to these questions. . . .
    We are currently completing a second-year followup of these 
students and expect these reported earnings to be even higher this 
year. It seems evident that, in terms of this sample of students, 
sufficient numbers were working for sufficient wages so as to make 
the concept of student loans to be [repaid] following graduation a 
reasonable approach to take. . . . I have found no reason to believe 
that such funds are not needed, that their availability would be 
unjustified in terms of benefits accruing to both these students and 
to society in general, nor that they would represent a poor 
financial risk.

Sen. Rep. No. 758 (1965) at 3745, 3748-49 (emphasis added).
    Notably, both debt burden to the borrower and financial risk to 
taxpayers and the Government were clearly considered in authorizing 
federally backed student lending. Under the loan insurance program 
enacted in the NVSLIA, the specific potential loss to taxpayers of 
concern was the need to pay default claims to banks and other lenders 
if the borrowers defaulted on the loans. After its passage, the NVSLIA 
was merged into the HEA, which in title IV, part B, has both a direct 
Federal loan insurance component and a Federal reinsurance component 
that require the Federal Government to reimburse State and private non-
profit loan guaranty agencies upon their payment of default claims. 20 
U.S.C. 1071(a)(1). Under either HEA component, taxpayers and the 
Government assume the direct financial risk of default. 20 U.S.C. 
1078(c) (Federal reinsurance for default claim payments), 20 U.S.C. 
1080 (Federal insurance for default claims). We therefore disagree that 
the legislative history does not support the Department's action here 
nor do we see any basis, and commenters have provided none, for us to 
question that history or the information Congress relied upon in 
enacting the statutory provisions.
    We appreciate that Congress may have a strong interest in 
addressing the issues addressed by these regulations in the 
reauthorization of the HEA or other legislation and we look forward to 
working with Congress on its legislative proposals. However, we do not 
agree that the Department should not take, or should defer, regulatory 
action on this basis until Congress reauthorizes the HEA or takes other 
action. In light of the numerous concerns about the poor outcomes of 
students attending many GE programs, and the risk that poses to the 
Federal interest, the Department must proceed now in accordance with 
its statutory authority, as delegated by Congress, to protect students 
and taxpayers.
    Changes: None.
    Comments: Some commenters suggested that the phrase ``to prepare 
students for gainful employment'' is unambiguous and therefore not 
subject to further interpretation. Commenters stated that the 
Department's interpretation of the phrase is incorrect because it is 
contrary to the ordinary meaning of the phrase ``gainful employment,'' 
to congressional intent, and to the rules of statutory construction. 
These commenters asserted that the dictionary definition of the phrase 
does not comport with the Department's proposed definition or the 
definition of the term ``gainful employment'' in other provisions of 
the HEA. Commenters also stated that Congress has not made any changes 
to the HEA triggering a requirement by the Secretary to define the term 
``gainful employment'' and claimed that the term cannot now be defined 
since Congress left it undisturbed during its periodic reauthorizations 
of the HEA.
    Some commenters expressed the view that the framework of detailed 
program requirements under title IV of the HEA, including institutional 
cohort default rates, institutional disclosure requirements, 
restrictions on student loan borrowing, and other financial aid 
requirements, prevents the Department from adopting debt measures to 
determine whether a gainful employment program is eligible to receive 
title IV, HEA program funds.
    One commenter claimed that the Department has previously defined 
the phrase ``gainful employment in a recognized occupation'' in the 
context of conducting administrative hearings and argued that the 
Department did not adequately explain in the NPRM why it was departing 
from its prior use of the term.
    Discussion: As the court found in APSCU v. Duncan, Congress has not 
spoken through legislative action to the precise question at issue 
here: Whether the statutory requirement that programs providing 
vocational training ``prepare students for gainful employment in a 
recognized occupation'' may be measured by reference to students' 
ability to repay their loans. Congress did not provide a definition for 
the phrase ``gainful employment'' or ``gainful employment in a 
recognized occupation'' in either the statute or its legislative 
history. Thus, the phrase is ambiguous and Congress left further 
definition of the phrase to the Department.
    There also is no common meaning of the phrase, contrary to the 
assertion of the commenters. The commenters' argument that ``gainful 
employment'' has one meaning in all circumstances--``a job that 
pays''--is belied by other dictionaries that define ``gainful'' as 
``profitable.'' See, e.g., Webster's New Collegiate Dictionary 469 
(1975). ``Profitable'' means the excess of returns over expenditures, 
or having something left over after one's expenses are paid.

[[Page 64894]]

Id. at 919. This definition supports the idea embodied in the 
regulations that ``gainful employment in a recognized occupation'' is 
not just any job that pays a nominal amount but a job that pays enough 
to cover one's major expenses, including student loans.
    Nor is there a common definition of the phrase in the HEA. Although 
Congress used the words ``gainful employment'' in other provisions of 
the HEA, the operative phrase for the purpose of these regulations is 
``gainful employment in a recognized occupation.'' The modifying words 
``in a recognized occupation'' qualify the type of job for which 
students must be prepared. ``A recognized occupation'' suggests an 
established occupation, not just any job that pays. In addition, the 
phrase ``gainful employment'' means different things based on its 
context in the statute. For example, the requirement that a recipient 
of a graduate fellowship not be ``engaged in gainful employment, other 
than part-time employment related to teaching, research, or a similar 
activity'' (20 U.S.C. 1036(e)(1)(B)(ii)) has a different meaning than 
the requirement that vocationally oriented programs ``prepare students 
for gainful employment in a recognized occupation,'' just as both 
requirements necessarily have a different meaning than a statutory 
requirement that a program for students with disabilities focus on 
skills that lead to ``gainful employment'' (20 U.S.C. 1140g(d)(3)(D)).
    As the court stated in APSCU v. Duncan, ``[t]he power of an 
administrative agency to administer a congressionally created . . . 
program necessarily requires the formulation of policy and the making 
of rules to fill any gap left, implicitly or explicitly, by Congress. 
The means of determining whether a program `prepare[s] students for 
gainful employment in a recognized occupation' is a considerable gap, 
which the Department has promulgated rules to fill.'' APSCU v. Duncan, 
870 F. Supp. 2d 133, 146 (D.D.C. 2012) (internal quotations and 
citations omitted).
    The commenters are incorrect in their assertion that the HEA's 
provisions on loan default rates, student borrowing, and other 
financial aid matters prevent the Department from regulating on what it 
means for a program to provide training that prepares students for 
gainful employment in a recognized occupation. The Department's 
regulations are not an attempt to second guess Congress or depart from 
a congressional plan but rather will fill a gap that Congress left in 
the statute--defining what it means to prepare a student for gainful 
employment in a recognized occupation--in a manner consistent with 
congressional intent. The regulations supplement and complement the 
statutory scheme. And, although there are differences between the 
regulations and other provisions, such as those regarding institutional 
cohort default rates (CDR), the regulations do not fundamentally alter 
the statutory scheme.
    Rather than conflicting, as asserted by commenters, the CDR and GE 
regulations complement each other. Congress enacted the CDR provision 
as ``one'' mechanism--not the sole, exclusive mechanism--for dealing 
with abuses in Federal student aid programs. See H.R. Rep. No. 110-500 
at 261 (2007) (``Over the years, a number of provisions have been 
enacted under the Higher Education Act to protect the integrity of the 
federal student aid programs. One effective mechanism was to restrict 
federal loan eligibility for students at schools with very high cohort 
loan default rates'' (emphasis added).) Congress did not, in enacting 
the CDR provision or at any other time, limit the Department's 
authority to promulgate regulations to define what it means to 
``prepare students for gainful employment in a recognized occupation.'' 
Compare 20 U.S.C. 1015b(i), concerning student access to affordable 
course materials (``No regulatory authority. The Secretary shall not 
promulgate regulations with respect to this section.''). Nor did it 
alter this existing statutory language when it passed the CDR 
provision. Indeed, the court in APCSU v. Duncan specifically addressed 
the issue of whether the CDR provisions would preclude the Department 
from effectuating the gainful employment requirement by relying on 
other debt measures at the programmatic level and concluded that the 
``statutory cohort default rule . . . does not prevent the Department 
from adopting the debt measures.'' APSCU v. Duncan, 870 F. Supp. 2d at 
147 (citing to Career Coll. Ass'n v. Riley, 74 F.3d 1265, 1272-75 (D.C. 
Cir. 1996), where the DC Circuit held that the Department's authority 
to establish `` `reasonable standards of financial responsibility and 
appropriate institutional capability' empowers it to promulgate a rule 
that measures an institution's administrative capability by reference 
to its cohort default rate--even though the administrative test differs 
significantly from the statutory cohort default rate test.'')
    The GE regulations are also consistent with other provisions of the 
HEA aimed at curbing abuses in the title IV, HEA programs. Prompted by 
a concern that its enormous commitment of Federal resources would be 
used to provide financial aid to students who were unable to find jobs 
that would allow them to repay their loans, Congress enacted several 
statutory provisions to ensure against abuse. Congress specified that 
participating schools cannot ``provide any commission, bonus, or other 
incentive payment based directly or indirectly on success in securing 
enrollments or financial aid to any persons or entities engaged in any 
student recruiting or admission activities or in making decisions 
regarding the award of student financial assistance.'' 20 U.S.C. 
1094(a)(20). ``The concern is that recruiters paid by the head are 
tempted to sign up poorly qualified students who will derive little 
benefit from the subsidy and may be unable or unwilling to repay 
federally guaranteed loans.'' United States ex rel. Main v. Oakland 
City Univ., 426 F.3d 914, 916 (7th Cir. 2005). To prevent schools from 
improperly inducing people to enroll, Congress prohibited participating 
schools from engaging in a ``substantial misrepresentation of the 
nature of its educational program, its financial charges, or the 
employability of its graduates.'' 20 U.S.C. 1094(c)(3)(A). Congress 
also required a minimum level of State oversight of eligible schools.
    In sum, the GE regulations simply build upon the Department's 
regulation of institutions participating in the title IV, HEA programs 
and the myriad ways in which the Department, as authorized by Congress, 
protects students and taxpayers from abuse of the Federal student aid 
program.
    We further disagree that the Department has previously defined what 
``gainful employment in a recognized occupation'' means for the purpose 
of establishing accountability and transparency with respect to GE 
programs and their outcomes. In support of this argument, the 
commenters rely on a 1994 decision of an administrative law judge 
regarding whether a program in Jewish culture prepared students 
enrolled in the program for gainful employment in a recognized 
occupation. As the district court noted, the administrative law judge 
did not fully decide what it means to prepare a student for gainful 
employment in a recognized occupation but merely stated that any 
preparation must be for a specific area of employment. APSCU v. Duncan, 
870 F. Supp. 2d 133, 150 (D.D.C. 2012). Further, the Department did not 
depart from the administrative law judge's interpretation in the 2011 
Final Rules, as the court in APSCU v. Duncan agreed. See id. Nor is the 
Department

[[Page 64895]]

departing from that interpretation with these regulations.
    Changes: None.
    Comments: Some commenters claimed that the proposed regulations 
violate the HEA because they would require an institution to ensure a 
student is gainfully employed in a recognized occupation. The 
commenters stated that the HEA requires only that vocational schools 
``prepare'' students for gainful employment in a recognized occupation 
and not that they ensure they obtain such employment. Commenters also 
stated that the HEA does not hold institutions responsible for a 
student's post-graduation employment choices but the proposed 
regulations would. The commenters stated that under the proposed 
regulations, an institution would be penalized if a student chose not 
to seek gainful employment after graduation or chose to seek employment 
in another field that did not result in sufficient earnings to repay 
their debt.
    Discussion: The commenters ignore the legislative history 
demonstrating that, in enacting the gainful employment statutory 
provisions, Congress intended that students who borrowed Federal funds 
to obtain such training would be able to repay the debt incurred 
because they would have been prepared for gainful employment in a 
recognized occupation. Contrary to commenters' claims, the D/E rates 
measure the Department adopts here neither requires a school to ensure 
that an individual student obtains employment nor holds schools 
responsible for a student's career decisions. Rather, the measure 
evaluates whether a particular cohort of students completing a program 
has received training that prepares those students for gainful 
employment such that they are able to repay their student loans, not 
whether each student who completed the program obtains a job that 
enables that student to pay back his or her loans.
    Changes: None.
    Comments: One commenter asked how the Department defines 
``recognized occupation.'' According to the commenter, this question is 
of particular concern for schools offering cosmetology programs. The 
commenter said that there are many individuals who use their 
cosmetology degrees to obtain employment in a field that is indirectly 
related, such as beauty school administration. The commenter stated 
that some companies frequently hire beauty school graduates to work in 
their financial and student advisor offices; these students do not 
possess degrees in finance, career counseling, or administration, but 
their background and education in cosmetology has been found to be 
sufficient to properly fulfill the job requirements. The commenter 
asked whether these indirectly related jobs would be considered a 
recognized occupation.
    Discussion: The proposed and final regulations in Sec.  600.2 
define recognized occupation as an occupation that is either (a) 
identified by a Standard Occupational Classification (SOC) code 
established by OMB or an Occupational Information Network O*Net-SOC 
established by the Department of Labor or (b) determined by the 
Secretary in consultation with the Secretary of Labor to be a 
recognized occupation. Institutions are expected to identify a CIP code 
for their programs that represents the occupations for which the 
institution has designed its program. The Bureau of Labor Statistics 
(BLS) has developed a crosswalk that identifies the occupations (SOCs) 
associated with the education and training provided by a program 
(www.onetonline.org/crosswalk), and these would be ``recognized 
occupations'' for the purposes of these regulations. However, 
regardless of whether an occupation is associated with a particular 
program so long as the occupation is identified by a SOC code, it is a 
recognized occupation.
    Changes: None.
    Comments: Some commenters claimed that the proposed regulations 
would require institutions to lower their tuition in order to meet the 
D/E rates measure. Referencing a House of Representatives committee 
report from 2005, the commenter stated that this was contrary to 
Congress' decision not to regulate institutions' tuition. One commenter 
stated that the proposed regulations attempt to address the costs of 
deferments and other repayment options, but that Congress has already 
created mechanisms to address the issue of increasing student debt load 
and rising tuition costs. The commenter claimed that the proposed 
regulations would require institutions to reduce tuition and therefore 
are contrary to congressional action in this area.
    Discussion: The regulations do not require institutions to lower 
their tuition. Reducing tuition and fees may be one way for an 
institution to meet the D/E rates measure but it is not the only way. 
Institutions can also meet the D/E rates measure by having high-quality 
program curricula and engaging in robust efforts to place students.
    The regulations also are not contrary to Congress' findings in H.R. 
Rep. 109-231. That report states ``[i]t is the Committee's position 
that . . . the Federal Government does not have the ability to set 
tuition and fee rates for colleges and universities.'' H.R. Rep. 109-
231, at 159 (emphasis added). Given that these regulations do not ``set 
tuition and fee rates for colleges and universities,'' there is no 
conflict with the congressional findings in this report.
    Changes: None.
    Comments: Several commenters contended that the Department failed 
to satisfy its obligations under the Administrative Procedure Act in 
conducting negotiated rulemaking. Specifically, the commenters asserted 
that representatives of for-profit institutions and business and 
industry, as well as representatives from law, medical, and other 
professional schools, were not adequately represented on the 
negotiating committee. They further argued that the Department did not 
listen to the views of negotiators during the negotiated rulemaking 
sessions. Some commenters stated that the Department did not conduct 
the negotiations in good faith because the negotiation sessions were 
held for seven days when other negotiated rulemaking sessions have 
taken longer.
    Discussion: The negotiated rulemaking process ensures that a broad 
range of interests is considered in the development of regulations. 
Specifically, negotiated rulemaking seeks to enhance the rulemaking 
process through the involvement of all parties who will be 
significantly affected by the topics for which the regulations will be 
developed. Accordingly, section 492(b)(1) of the HEA, 20 U.S.C. 
1098a(b)(1), requires the Department to choose negotiators from groups 
representing many different constituencies. The Department selects 
individuals with demonstrated expertise or experience in the relevant 
subjects under negotiation, reflecting the diversity of higher 
education interests and stakeholder groups, large and small, national, 
State, and local. In addition, the Department selects negotiators with 
the goal of providing adequate representation for the affected parties 
while keeping the size of the committee manageable. The statute does 
not require the Department to select specific entities or individuals 
to be on the committee. As there was a committee member representing 
each of for-profit institutions and business and industry interests, we 
do not agree that these groups were not adequately represented on the 
committee. We also do not agree that specific areas of training, such 
as law and medicine, required specific representation, as institutions 
with such programs were represented at the sector level.

[[Page 64896]]

    While it is to be expected that some committee members will have 
interests that differ from other members and that consensus is not 
always reached, as in the case of these regulations, the negotiated 
rulemaking process is intended to provide stakeholders an opportunity 
to present alternative ideas, to identify areas where compromises can 
be reached, and to help inform the agency's views. In the negotiated 
rulemaking sessions for these regulations, there was robust discussion 
of the draft regulations, negotiators including those representing the 
commenters submitted a number of proposals for the committee to 
consider, and, as we described in detail in the NPRM, the views and 
suggestions of negotiators informed the proposed and these final 
regulations.
    With respect to the length of the negotiations, the HEA does not 
require negotiated rulemaking sessions to be held for a minimum number 
of days. Seven days was a sufficient amount of time to conduct these 
negotiations.
    Changes: None.
    Comments: A number of commenters stated that the proposed 
regulations were arbitrary and capricious and therefore violate the 
Administrative Procedure Act. Commenters raised this concern both 
generally and with respect to specific elements of the proposed 
regulations. For example, several commenters argued that the thresholds 
for the D/E rates measure lack a reasoned basis. As another example, 
some commenters claimed that the Department was arbitrary and 
capricious in proposing regulations that were different from those 
promulgated in the 2011 Final Rules.
    Discussion: We address commenters' arguments with respect to 
specific provisions of the regulations in the sections of this preamble 
specific to those provisions. However, as a general matter, in taking 
this regulatory action, we have considered relevant data and factors, 
considered and responded to comments, and articulated a reasoned basis 
for our actions. Marsh v. Oregon Natural Res. Council, 490 U.S. 360, 
378 (1989); Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. 
Co., 463 U.S. 29, 43 (1983); see also Pub. Citizen, Inc. v. Fed. 
Aviation Admin., 988 F.2d 186, 197 (D.C. Cir. 1993); PPL Wallingford 
Energy LLC v. FERC, 419 F.3d 1194, 1198 (D.C. Cir. 2005). Further, for 
those provisions of the regulations that differ from those established 
in the 2011 Final Rules, we have provided a reasoned basis for our 
departure from prior policy. Motor Vehicle, 463 U.S. at 57; see also 
Williams Gas Processing-Gulf Coast Co., L.P. v. FERC, 475 F.3d 319, 326 
(D.C. Cir. 2006); Rust v. Sullivan, 500 U.S. 173, 187 (1991); F.C.C. v. 
Fox Television Stations, Inc., 556 U.S. 502, 514-516 (2009); Investment 
Co. Inst. v. Commodity Futures Trading Comm'n, 720 F.3d 370, 376 (D.C. 
Cir. 2013).
    Changes: None.
    Comments: Various commenters argued that the regulations are 
impermissibly retroactive. These commenters contended that the 
accountability metrics reflect historical performance and not current 
program performance and, at least initially, would apply standards to 
measure a program's performance at a time when the standards were not 
in effect. Commenters suggested that this approach deprives 
institutions of any ability to make improvements that would be 
reflected in those programs' initial D/E rates. Some commenters noted 
that this issue is more significant for programs that are of longer 
duration, as there will be a longer period after implementation of the 
regulations during which the D/E rates are based on student outcomes 
that predate the regulations. Some commenters also noted that the 
manner in which program performance is measured could result in 
programs being required to provide warnings to students that would 
depress enrollment at times when the program had already been improved.
    Commenters proposed that the Department lengthen the transition 
period to avoid any sanctions against low-performing programs based 
upon periods when the new regulations were not in effect. Other 
commenters urged that some mechanism be used to take more recent 
program performance into consideration.
    Discussion: Eligibility determinations based on past program 
performance, even performance that predates the effective date of the 
regulations, does not present a legal impediment to these regulations. 
A law is ``not retroactive merely because the facts upon which its 
subsequent action depends are drawn from a time antecedent to the 
enactment.'' Reynolds v. United States, 292 U.S. 443, 449 (1934). This 
principle applies even when, as is the case with these regulations, the 
statutes or regulations at issue were not in effect during the period 
being measured. Career College Ass'n v. Riley, No. 94-1214, 1994 WL 
396294 (D.D.C. July 19, 1994). This principle has been confirmed in the 
context of the Department's use of institutional cohort default rates. 
Ass'n of Accredited Cosmetology Schools v. Alexander, 979 F.2d 859, 
860-62 (D.C. Cir. 1992); Pro Schools Inc. v. Riley, 824 F.Supp. 1314 
(E.D. Wis. 1993). The courts in these matters found that measuring the 
past default rates of institutions was appropriate because the results 
would not be used to undo past eligibility, but rather, to determine 
future eligibility. See, e.g., Ass'n of Accredited Cosmetology Schools, 
979 F.2d at 865. As with the institutional cohort default rate 
requirements, as long as it is a program's future eligibility that is 
being determined using the D/E rates measure, the assessment can be 
based on prior periods of time. Indeed, the court in APSCU v. Duncan 
rejected this retroactivity argument with respect to the 2011 Prior 
Rule. 870 F. Supp. 2d at 151-52.
    We discuss the comments relating to the transition period under 
``Section 668.404 Calculating D/E Rates.''
    Changes: None.
    Comments: We received many comments in support of the proposed 
regulations, including both general expressions of support and support 
with respect to specific aspects of the proposed regulations. 
Commenters stated that the proposed regulations would help ensure that 
more students have the opportunity to enter programs that prepare them 
for gainful employment and that students would be better positioned to 
repay their educational loans. Several commenters also believed that 
the regulations will help curtail the abusive recruiting tactics that 
were revealed by the Senate Permanent Subcommittee on Investigations 
and the Senate Committee on Health, Education, Labor and Pensions 
(HELP) in 2012. One commenter expressed support on the basis that, by 
preventing students from enrolling in low-performing programs, the 
regulations would curb predatory recruiting practices that target 
veterans in particular.
    Discussion: We appreciate the support of these commenters.
    Changes: None.
    Comments: We received a number of comments suggesting that the 
regulations were not sufficiently strong to ensure programs prepare 
students for gainful employment and to protect students. One commenter 
argued that the regulations set a low bar for compliance and would do 
little to stem the flow of Federal dollars to poorly performing 
institutions. This commenter argued that Federal investment in a 
program carries an implied endorsement that the program has been 
``approved'' and that the Department has determined it worthwhile. 
Similarly, several commenters advocated for stronger regulations that 
close loopholes by

[[Page 64897]]

which programs could ``game'' the accountability metrics.
    Discussion: We disagree that the regulations set too low a bar for 
compliance. We believe that the accountability framework strikes a 
reasonable balance between holding institutions accountable for poor 
student outcomes and providing institutions the opportunity to improve 
programs that, if improved, may offer substantial benefits to students 
and the public.
    The Department acknowledges the concern among several commenters 
about potential loopholes in the proposed accountability metrics and 
notes that many of these concerns related to program cohort default 
rates, which in the final regulations will not be used as an 
accountability metric but, rather, will be used only as a potential 
disclosure item. We address the commenters' other specific concerns in 
the sections of the preamble to which they pertain. As a general 
matter, however, although we cannot anticipate every situation in which 
an institution could potentially evade the intent of the regulations, 
we believe the regulations will effectively hold institutions 
accountable for a program's student outcomes and make those outcomes 
transparent to students, prospective students, the public, taxpayers, 
and the Government.
    Changes: None.
    Comments: Several commenters argued that the regulations create 
overly burdensome reporting and compliance requirements that will be an 
enormous drain on programs and result in higher tuition costs. One 
commenter asserted that the regulations add 1.65 million additional 
hours of workload for institutions. Commenters contended that the 
regulations would harm community colleges by creating heavy regulatory 
and financial burdens and stifle innovation and employment solutions 
for both students and businesses. One commenter argued that, to avoid 
the administrative burden created by the regulations, foreign 
institutions with a small number of American students would likely 
cease to participate in the title IV, HEA programs.
    Discussion: We appreciate the commenters' concerns. Throughout the 
regulations, we have balanced our interest in minimizing burden on 
institutions with our interest in achieving our dual objectives of 
accountability and transparency. The reporting and disclosure 
requirements are integral to achieving those goals. We discuss concerns 
about burden throughout this preamble, including in ``Section 668.411 
Reporting Requirements for GE Programs,'' ``Section 668.412 Disclosure 
Requirements for GE Programs,'' and Paperwork Reduction Act of 1995.
    Changes: None.
    Comments: Commenters expressed several concerns about specific 
elements of the definition of ``gainful employment (GE) program.'' 
Commenters recommended that graduate programs be excluded from the 
definition and, specifically, from evaluation under the accountability 
metrics. One commenter suggested that the HEA framework relating to 
gainful employment programs was established at a time when most 
qualifying programs were short term and job focused. The commenter 
asserted that it is unfair to apply this framework to graduate-level 
programs where the same program, for example, a Masters of Business 
Administration program, may be offered by a for-profit institution--and 
qualify as a GE program--and by a public institution--but not qualify 
as a GE program. Another commenter argued that a stated purpose of the 
regulations is to focus on the employability of students enrolled in 
entry-level postsecondary programs, and that evaluating graduate 
programs, where there are not the same employment challenges and 
return-on-investment considerations, would be inconsistent with this 
purpose. One commenter asserted that based on its analysis, graduate 
programs would be minimally affected by the proposed metrics and 
therefore should be exempt from them. Commenters also argued that 
graduate students are mature students and often experienced workers 
familiar with the debt and earnings potential of various educational 
and career paths who do not require the protections offered by the 
regulations. Commenters argued that the D/E rates measure and program 
Cohort Default Rate (pCDR) \4\ measure are not reliable metrics for 
many graduate programs because, according to the commenters, there 
tends to be a longer lag in time between when students enter these 
programs and when they experience increased earnings gains.
---------------------------------------------------------------------------

    \4\ Please see the ``Analysis of the Regulations: Methodology 
for pCDR Calculations'' in the Regulatory Impact Analysis.
---------------------------------------------------------------------------

    One commenter recommended that the Department exempt all law 
programs accredited by the American Bar Association because, according 
to the commenter, students who complete accredited law programs rarely 
have difficulty in avoiding default on loans. We received similar 
comments with respect to graduate medical programs. One commenter 
recommended that the Department conduct a study on the impact of the D/
E rates measure on medical programs and release that with the final 
regulations.
    Some commenters argued generally that it is unfair for the 
Department to set requirements for some programs and not others. One 
commenter, focusing on degree programs, questioned treating for-profit 
institutions and public institutions differently based on whether the 
degree programs are subject to the gainful employment requirements.
    Some commenters suggested that ``GE programs'' should be defined 
more narrowly. These commenters suggested that, instead of grouping 
programs by classification of instructional program (CIP) code and 
credential level, GE programs should be evaluated by campus location, 
or at the individual program level, because program performance may 
vary by campus location or program format due to differences in, for 
example, student demographics, local market conditions, and 
instructional methods.
    One commenter noted that community colleges may offer programs 
where certificates and associate degrees are conferred concurrently 
upon completion, and recommended excluding these types of programs from 
the definition of ``GE program'' as they are primarily degree programs 
offered by a public institution, which would not otherwise constitute 
GE programs.
    Discussion: To the extent a program constitutes an ``eligible 
program'' that ``provides a program of training to prepare students for 
gainful employment in a recognized profession'' under the HEA, the 
program by statute constitutes a ``GE program,'' and we do not have the 
authority to exclude it from the regulations. We note, for example, 
that Congress amended the HEA in 2008 to exempt from the gainful 
employment provisions programs leading to a baccalaureate degree in 
liberal arts that had been offered by a regionally accredited 
proprietary institution since January 1, 2009. We view this relatively 
recent and very specific amendment as an indication that the Department 
lacks discretion to exempt other types of programs. This applies to 
graduate programs, including ABA-accredited law schools or medical 
schools, regardless of the results of such programs under the D/E rates 
measure. The Department is not providing a separate study analyzing the 
impact of the D/E rates measure on medical programs with these 
regulations. As the regulations are implemented, we will

[[Page 64898]]

monitor the impact of the D/E rates measure on all GE programs, 
including graduate medical programs.
    We also do not agree that the purposes of the regulations are 
served by excluding graduate programs. Specifically, the issues of 
accountability for student outcomes, including excessive student debt, 
and transparency are as relevant to graduate programs and students as 
they are to undergraduate programs and students. Whether or not it is 
the case that many graduate programs prepare students for occupations 
where earnings gains are delayed, we do not believe that this justifies 
an exemption from the regulations. As discussed in the NPRM, earnings 
must be adequate to manage debt both in the early years after entering 
repayment and in later years. Future earnings gains are of course a 
desirable outcome, but borrowers could default on their loans soon 
after entering repayment, or experience extreme hardship that leads to 
negative consequences, well before these earnings gains are realized. 
Further, as discussed in the NPRM, borrowers may still be facing 
extreme hardship in repaying their loans even though they have not 
defaulted, and so, a low default rate by itself is not necessarily an 
indication that a program is leading to manageable student debt.
    In response to commenters' concerns that similar programs offered 
by for-profit institutions and public institutions would be treated 
differently under the regulations, we note that this reflects the 
treatment of these programs under the HEA and a policy decision made by 
Congress. We firmly believe that implementing this policy decision 
through these regulations is necessary and appropriate and that 
students, prospective students, their families, the public, taxpayers, 
and the Government will benefit from these efforts.
    Regarding the commenters' request that we evaluate GE programs at 
the campus level, we do not agree that it would be beneficial to break 
down the definition of ``GE program'' beyond CIP code and credential 
level. A GE program's eligibility for title IV, HEA program funds is 
determined at the institutional level, not by location; thus a 
program's eligibility applies to each of the locations at which the 
institutions offers the program. We note also that Sec.  668.412 
permits institutions offering a GE program in more than one location or 
format to create separate disclosure templates for each location or 
format. Thus, the institution has the discretion to provide information 
about its programs by location or format if it chooses to do so.
    With respect to the commenter's request that we exclude from the 
definition of ``GE program'' programs at public institutions that 
concurrently confer an associate degree and a certificate, we do not 
believe a specific exclusion is required. A degree program at a public 
institution is not a ``GE program,'' even though enrolled students may 
also earn a certificate as part of the degree program. Of course, if 
the student is separately enrolled in a certificate program that 
student is included in that GE program for purposes of the D/E rates 
measure and disclosures.
    Changes: None.
    Comments: One commenter suggested that the Department should exempt 
small businesses that offer GE programs or, if the regulations do not 
provide an exemption based on size, that the Department should consider 
an additional or alternate requirement that institutions must meet 
(such as spending 2.5 times on instruction and student services than on 
recruitment). Another commenter stated that the Department should 
exempt institutions that have an enrollment of less than 2,000 students 
because of the burden that would be imposed on small institutions.
    Discussion: We disagree that programs at institutions that might be 
considered small businesses or institutions with an enrollment of less 
than 2,000 students should be exempted from the regulations. In 
addition to the limitations in our statutory authority, an 
institution's size has no effect on whether the institution is 
preparing students for gainful employment in a recognized occupation. 
We also see no basis for establishing an alternative metric based on 
the amount of revenues an institution spends on instruction compared to 
recruiting because it would not indicate when a program is resulting in 
high debt burden. We believe that any burden on institutions resulting 
from these regulations is outweighed by the benefits to students and 
taxpayers. We discuss the burden on small institutions in the Final 
Regulatory Flexibility Analysis.
    Changes: None.
    Comments: One commenter suggested that in the final regulations, 
the Department should commit to evaluating whether the regulations 
result in the cost savings for the government estimated in the NPRM and 
the impact of the regulations on Federal student aid funding. The 
commenter also suggested that the Department commit to reviewing the 
estimated costs of implementing the regulations, including costs for 
meeting the information collection requirements. The commenter said the 
Department should commit to measuring whether the certification 
criteria for new programs are effective at ensuring whether those 
programs will remain eligible and pass the accountability metrics. 
Additionally, the commenter suggested that the Department affirm that 
it will measure whether the disclosure and reporting requirements 
improve market information as evidenced by increased enrollment in 
passing GE programs and decreased enrollment in failing and zone 
programs.
    Discussion: We appreciate the commenters' suggestions and, as with 
all of our regulations, we intend to review the regulations as we 
implement them to ensure they are meeting their intended purposes and 
to evaluate the impact on students, institutions, and taxpayers.
    Changes: None.
    Comments: A number of commenters raised concerns about the 
definition of ``student,'' specifically the limitation of the term 
``students'' to those individuals who receive title IV, HEA program 
funds for enrolling in the applicable GE program. These commenters 
believed that ``student'' should be defined, for all or some purposes 
of the regulations, more broadly.
    Some commenters proposed that ``student'' be defined to include all 
individuals enrolled in a GE program, whether or not they received 
title IV, HEA program funds. These commenters argued that the purpose 
of the regulations should be to measure, and disclose, the outcomes of 
all individuals in a program. They argued that limiting the definition 
of ``student'' to students who receive title IV, HEA program funds is 
arbitrary and would present inaccurate and unrepresentative program 
outcomes, particularly for community colleges. According to these 
commenters, many of the individuals attending GE programs at community 
colleges do not receive title IV, HEA program funds and any 
accountability measures and disclosures that exclude their debt and 
earnings would not accurately reflect the performance of the GE 
program. They claimed that individuals who receive title IV, HEA 
program funds are disproportionally from underserved and low-income 
populations and tend to have higher debt and lower earnings outcomes.
    Other commenters stated that the definition should include all 
students with a record in the National Student Loan Database System 
(NSLDS) because these individuals either filed a Free Application for 
Federal Student Aid

[[Page 64899]]

(FAFSA) or have previously received title IV, HEA program funds for 
attendance in another eligible program. According to the commenters, 
including these individuals would more accurately reflect the title IV, 
HEA program population at an institution and provide more relevant 
information for both eligibility determinations and consumer 
information. In making these suggestions, commenters were mindful of 
the court's interpretation in APSCU v. Duncan of relevant law regarding 
the Department's authority to maintain records in its NSLDS. Under 
these alternative proposed definitions, the commenters suggested that 
the Department could collect and maintain data regarding these 
individuals in a manner consistent with APSCU v. Duncan as they would 
already have records in NSLDS for these individuals.
    Some commenters requested that the term ``student'' include 
individuals who did not receive title IV, HEA program funds for only 
specific purposes of the regulations. Some commenters argued that the 
definition of ``student'' for the purpose of the D/E rates measure 
should include all individuals who completed the program, whether or 
not they received title IV, HEA program funds, on the grounds that 
earnings and debt levels at programs are to some extent derived from 
differences in student characteristics and borrowing behavior between 
students receiving title IV, HEA program funds and individuals who do 
not receive title IV, HEA program funds. One commenter suggested that 
individuals who do not receive title IV, HEA program funds should be 
included in the calculation of D/E rates because otherwise, according 
to the commenter, institutions would encourage students who do not 
otherwise plan to take out loans to do so in order to improve a 
program's performance on the D/E rates measure.
    Other commenters argued that the definition should be broadened 
only for certain disclosure requirements. For example, some of the 
commenters suggested that the completion and withdrawal rates and 
median loan debt disclosures should include the outcomes of all 
individuals enrolled in a GE program, both those who receive title IV, 
HEA program funds and those who do not in order to provide students, 
prospective students, and other stakeholders with a complete picture of 
a GE program's performance.
    Discussion: We continue to believe that it is necessary and 
appropriate to define the term ``student'' for the purposes of these 
regulations as individuals who received title IV, HEA program funds for 
enrolling in the applicable GE program for two reasons.
    First, as discussed in more detail in the NPRM, this approach is 
aligned with the court's interpretation in APSCU v. Duncan of relevant 
law regarding the Department's authority to maintain records in its 
NSLDS. See APSCU v. Duncan, 930 F. Supp. 2d at 220. Second, by limiting 
the D/E rates measure to assess outcomes of only students who receive 
title IV, HEA program funds, the Department can effectively evaluate 
how the GE program is performing with respect to the students who 
received the Federal benefit that we are charged with administering. 
Because the primary purpose of the D/E rates measure is determining 
whether a program should continue to be eligible for title IV, HEA 
program funds, we can make a sufficient assessment of whether a program 
prepares students for gainful employment based only on the outcomes of 
students who receive those funds.
    Although we appreciate the commenters' interest in expanding the 
definition of ``student'' to consider the outcomes of all individuals 
enrolled in a GE program, our goal in these regulations is to evaluate 
a GE program's performance for the purpose of continuing eligibility 
for title IV, HEA program funds. Our proposed definition of 
``students'' is directly aligned with that goal. In addition, this 
approach is consistent with our goal of providing students and 
prospective students who are eligible for title IV, HEA program funds 
with relevant information that will help them in considering where to 
invest their resources and limited eligibility for title IV, HEA 
program funds. We understand that some GE programs may not have a large 
number of individuals receiving title IV, HEA program funds, but given 
the overall purpose of the regulations--determining a GE program's 
eligibility for title IV, HEA program funds--we do not believe it is 
necessary to measure the outcomes of individuals who do not receive 
that aid. For the same reasons, we do not believe it is necessary to 
include individuals who do not receive title IV, HEA program funds in 
the calculation of D/E rates or in the disclosures the Department 
calculates for a program.
    Finally, the Department does not agree that limiting its analysis 
to only students receiving title IV, HEA program funds would create an 
incentive for institutions to encourage more students to borrow. We do 
not think it would be common for a student to take out a loan that the 
student did not otherwise plan to take on.
    Changes: None.
    Comments: One commenter stated that the Department had not 
adequately explained its departure from the approach taken in the 2011 
Final Rules, which considered the outcomes of all individuals enrolled 
in a GE program rather than just individuals receiving title IV, HEA 
program funds.
    Discussion: We have adequately justified the Department's decision 
to base the D/E rates measure only on the outcomes of individuals 
receiving title IV, HEA program funds. Our analysis of this issue is 
described in the previous paragraphs, was set forth in considerable 
detail in the NPRM, and, additionally, as noted in the NPRM, is 
supported by the court's decision in APSCU v. Duncan. The 
justifications presented meet the reasoned basis standard we must 
satisfy under the Administrative Procedure Act and relevant case law.
    Changes: None.
    Comments: We received a number of comments about the definition of 
``student'' in the context of the mitigating circumstances showing in 
Sec.  668.406 of the proposed regulations. As proposed in the NPRM, an 
institution would be permitted to demonstrate that less than 50 percent 
of all individuals who completed the program during the cohort period, 
both those individuals who received title IV, HEA program funds and 
those who did not, incurred any loan debt for enrollment in the 
program. A GE program that could make this showing would be deemed to 
pass the D/E rates measure.
    In this context, some commenters argued against allowing 
institutions to include individuals who do not receive title IV, HEA 
program funds for enrollment in the GE program. These commenters noted 
that including individuals who do not receive these loans is at odds 
with the legal framework that the Department established in order to 
align the regulations with the district court's decision in APSCU v. 
Duncan. They suggested that permitting institutions to include 
individuals who do not receive loans under the title IV, HEA programs 
in a mitigating circumstances showing would be inconsistent with the 
court's decision and as a result would violate the HEA.
    Several commenters also asserted that permitting mitigating 
circumstances showings or providing for a full exemption would 
discriminate in favor of institutions, such as community colleges, 
where less than 50 percent of individuals enrolled in the program 
receive title IV, HEA program funds.

[[Page 64900]]

According to these commenters, many of these public institutions have 
higher costs than institutions in the for-profit sector but have lower 
borrowing rates because the higher costs are subsidized by States. The 
commenters stated that if these institutions' programs are considered 
exempt from the D/E rates measure, programs that perform very poorly on 
other measures like completion would continue merely because they are 
low cost even though they do not reflect a sound use of taxpayer funds.
    Some commenters stated that permitting a mitigating circumstances 
showing would result in unfair and unequal treatment of similar 
institutions in different States. The commenter said that, for example, 
in some States, cosmetology programs are eligible for State tuition 
assistance grants, while in other States these programs are not 
eligible for such grants. Schools charging the same tuition and whose 
graduates are making the same amount in one State would pass the D/E 
rates measure while those in another would not. Finally, some 
commenters asserted that only a fraction of programs at public 
institutions would fail the D/E rates measure, and that this small 
number does not support an exemption or permitting a mitigating 
circumstances showing.
    A number of commenters supported the proposed mitigating 
circumstances showing, and specifically the inclusion of individuals 
who do not receive title IV, HEA program funds. As noted previously, 
commenters argued that these individuals should be considered because 
the number of students receiving title IV, HEA program funds and 
incurring debt to enroll in many community college programs is 
typically very small and these students do not represent the majority 
of individuals who complete the program. According to these commenters, 
a program in which at least 50 percent of individuals enrolled in the 
program have no debt is unlikely to produce graduates whose educational 
debts would be excessive because tuition and costs are likely to be low 
and require little borrowing. Commenters further noted that including 
these individuals in the calculation would be consistent with the 2011 
Prior Rule, where a program with a median loan debt of zero passed the 
debt-to-earnings measures based on the borrowing activity of 
individuals who receive title IV, HEA program funds and those who do 
not. These commenters stated that even though the Department is largely 
limiting the accountability measures to an analysis of the earnings and 
debt of students receiving title IV, HEA program funds due to the 
concerns expressed by the district court in APSCU v. Duncan, a program 
with a median loan debt of zero, whether or not the calculation is 
limited to students receiving title IV, HEA program funds, should still 
pass the D/E rates measure.
    Finally, these commenters noted that the D/E rates measure is 
designed to help ensure that students are receiving training that will 
lead to earnings that will allow them to pay back their student loan 
debts after they complete their program. According to these commenters, 
many GE programs, including many programs offered by community 
colleges, have low tuition and many of their students can pay the costs 
of the program solely through a Pell Grant, rather than incurring debt.
    Some of the commenters who supported allowing an institution to 
make a showing of mitigating circumstances under Sec.  668.406 of the 
proposed regulations also argued that, instead of requiring such a 
showing, the Department should completely exempt from the D/E rates 
measure any GE program for which less than 50 percent of the 
individuals who completed the program incurred loan debt for enrollment 
in the program. The commenters proposed several methodologies the 
Department could use to determine which programs qualify for the 
exemption. These commenters made similar arguments to those discussed 
previously--that these programs should not be subject to the 
administratively burdensome process for calculating the D/E rates, when 
ultimately these programs will have a median loan debt of zero and 
therefore will be determined to be passing the D[sol]E rates measure. 
One of these commenters suggested that, if a program is failing or in 
the zone with respect to the D/E rates measure, the institution should 
have the ability to recalculate its median loan debt based on all 
graduates, to evaluate the overall quality of a program. The commenter 
proposed that, if the program passes on the basis of that 
recalculation, the notice of determination issued by the Department 
would be annotated to reflect that the institution made a showing of 
``mitigating circumstances'' and the program would be deemed passing. 
Some of the commenters also argued that an exemption based on a 
borrowing rate of less than 50 percent should apply across the board to 
all GE program requirements, including the reporting and disclosure 
requirements.
    Commenters asserted that, absent an exemption, many low-cost 
programs with a low borrowing rate would be inclined to leave the 
Direct Loan program or close their programs, even those programs that 
were effective. The commenters further stated that these closures would 
disproportionately affect minority and economically disadvantaged 
students, many of whom enroll in these programs, and that without these 
programs, these students would not have available economically viable 
options for furthering their education.
    Discussion: We appreciate the commenters' responses to our request 
for comment on the definition of ``student'' and the mitigating 
circumstances provision in proposed Sec.  668.406. None of the 
commenters, however, presented an adequate justification for us to 
depart from our proposed definition of ``students'' and the purpose of 
the regulations, which is to evaluate the outcomes of individuals 
receiving title IV, HEA program funds and a program's continued 
eligibility to receive title IV, HEA program funds based solely on 
those outcomes. We do not agree that a borrowing rate below 50 percent 
necessarily indicates that a program is low cost or low risk. A program 
with a borrowing rate of under 50 percent, particularly a large 
program, could still have a substantial number of students with title 
IV loans and, additionally, those students could have a substantial 
amount of debt or insufficient earnings to pay their debt. We also note 
that, if a GE program is indeed ``low cost'' or does not have a 
significant percentage of borrowers, which commenters claimed is the 
case with many community college programs, it is very likely that the 
program will pass the D/E rates measure because most students will not 
have any debt. NPSAS data show that, of all students completing 
certificate programs at two-year public institutions who received title 
IV, HEA program funds, 77 percent received only Pell Grants and only 23 
percent were borrowers.\5\ Program results in the 2012 GE informational 
D/E rates data set reflects the findings of the NPSAS analysis. Of the 
824 programs at two-to-three-year public institutions in the 2012 GE 
informational D/E rates data set, 823 pass under the D/E rates measure. 
Further, of the 824 total programs at two-to-three-year public 
institutions, 504 (61 percent) have zero median debt, which means that, 
for these programs, less than half of the students completing the 
program are borrowers and that the majority of their students 
completing the program received title IV, HEA program funds in

[[Page 64901]]

the form of Pell Grants only. Accordingly, we do not believe there is 
adequate justification to depart from our definition of ``student,'' by 
permitting a showing of mitigating circumstances based on individuals 
who do not receive title IV, HEA program funds for enrollment in a 
program, or to make a greater departure from our accountability 
framework, by permitting a related up-front exemption.
---------------------------------------------------------------------------

    \5\ NPSAS:2012.
---------------------------------------------------------------------------

    Changes: We have revised the regulations to remove the provisions 
in Sec.  668.406 that would have permitted institutions to submit a 
mitigating circumstances showing for a GE program that is not passing 
the D/E rates measure.
    Comments: A number of commenters recommended revisions to the 
definition of ``prospective student.'' One commenter recommended that 
the Department use the definition of ``prospective student'' in Sec.  
668.41(a), which provides that a ``prospective student'' is an 
individual who has contacted an eligible institution for the purpose of 
requesting information concerning admission to that institution. The 
commenter argued that using this definition would maintain consistency 
across the title IV, HEA program regulations.
    Some of the commenters stated that the proposed definition is too 
broad. Specifically, they noted that an institution would not be able 
to identify, for example, to whom it was required to deliver 
disclosures and student warnings if anyone who had passive contact with 
an institution's advertising constituted a ``prospective student'' 
under the regulations. They suggested that if ``prospective student'' 
is defined that broadly, they would not be able to meet their 
obligations with respect to these students under the regulations or 
that compliance would be very burdensome, potentially requiring the 
development of new admissions and marketing materials annually. These 
commenters recommended that we revise the definition of ``prospective 
student'' to include only individuals who actively seek information 
from an institution about enrollment in a program. Another commenter 
expressed concern about the definition because, according to the 
commenter, a prospective student would include anyone who has access to 
the Internet.
    Other commenters stated that the definition is too narrow and 
recommended that the term include anyone in contact with an institution 
about ``enrollment,'' rather than ``enrolling.'' According to these 
commenters, with this change, the definition would include family 
members, counselors, and others making enrollment inquiries on behalf 
of someone else.
    Discussion: We believe that it is appropriate to establish a 
definition of ``prospective student'' that is tailored to the purpose 
of these specific regulations. In that regard, the definition will 
account for the various ways that institutions and prospective students 
commonly interact and target interactions that are specific to 
enrollment in a GE program, rather than more general contact about 
admission to an institution. Specifically, unlike the existing 
definition of ``prospective student'' in Sec.  668.41(a), the 
definition in the GE regulations applies without regard to whether an 
individual or the institution initiates contact.
    We agree, however, that an individual's passive interaction with an 
institution's advertising should not result in that individual being 
considered a ``prospective student'' for the purposes of the 
regulations. Accordingly, we are removing the reference to indirect 
contact through advertising from the definition of ``prospective 
student.'' Recognizing that institutions sometimes engage third parties 
to recruit students, we have also revised the definition to capture 
this type of direct contact with prospective students.
    The commenters' proposed alternative definition, which would 
include individuals other than those in contact with the institution 
about enrolling in a program, is too broad for each of the purposes for 
which the definition is used. However, as we discuss in ``Section 
668.410 Consequences of the D/E Rates Measure,'' we agree that, where 
an initial inquiry about enrolling in a program is made by a third 
party on behalf of a prospective student, the third party, as a proxy 
for the prospective student, should be given the student warning, as 
that is when a decision is likely to be made about whether to further 
explore enrolling in that program. We do not believe that the same 
reasoning applies, for example, with respect to the requirement in 
Sec.  668.410 that a written warning be given to a prospective student 
at least three, but not more than 30, days before entering into an 
enrollment agreement.
    Thus, the changes to the definition and to the related requirements 
that we have described balance the need to provide prospective students 
with critical information at a time when they can most benefit from it 
with ensuring that the administrative burden for institutions is not 
unnecessarily increased.
    Changes: We have revised the definition of ``prospective student'' 
to exclude indirect contact through advertising and to include contact 
made by a third party on an institution's behalf.
    Comments: One commenter asked that we clarify whether credential 
level is determined by academic year or calendar year.
    Discussion: After further review of the proposed regulations, we 
have made several changes to the definition of ``credential level'' 
that make the commenter's concern moot. First, we are revising the 
definition to accurately reflect the treatment of a post-baccalaureate 
certificate as an undergraduate credential level under the title IV, 
HEA programs. This certificate was inappropriately listed as a graduate 
credential level in the proposed regulations.
    We also are simplifying the definition by treating all of an 
institution's undergraduate programs with the same CIP code and 
credential level as one ``GE program,'' without regard to program 
length, rather than breaking down the undergraduate credential levels 
according to the length of the program as we proposed in the NPRM. To 
do so would be inconsistent with other title IV, HEA program reporting 
procedures and would unnecessarily add complexity for institutions. We 
note that, under Sec.  668.412(f), an institution that offers a GE 
program in more than one program length must publish a separate 
disclosure template for each length of the program. Although D/E rates 
will not be separately calculated, several of the other required 
disclosures, including the number of clock or credit hours or 
equivalent, program cost, placement rate, and percentage of students 
who borrow, must be broken down by length of the program. Thus, 
students and prospective students will have information available to 
make distinctions between programs of different lengths.
    Changes: We have revised the definition of ``credential level'' to 
include post-baccalaureate certificates as an undergraduate, rather 
than graduate, credential level and to specify that undergraduate 
credential levels are: Undergraduate certificate or diploma, associate 
degree, bachelor's degree, and post-baccalaureate certificate.

Section 668.402 Definitions

    Comments: We received a number of comments regarding defined terms 
in the proposed regulations.
    Discussion: Consistent with our organizational approach in the 
NPRM, we describe the comments received

[[Page 64902]]

relating to a specific defined term in the section in which the defined 
term is first substantively used.
    Changes: We have made changes to the following defined terms. The 
changes are described in the section or sections indicated after the 
defined term.

Credential level (Sec.  668.401)
Classification of instructional program (CIP) code and, within that 
definition, the term ``substantially similar'' (Sec. Sec.  668.410 and 
668.414)
Cohort period (Sec.  668.404)
GE measures (Sec.  668.403)
Program cohort default rate (Sec.  668.403)
Prospective student (Sec.  668.401)

Section 668.403 Gainful Employment Program Framework Impact on For-
Profit Institutions

    Comments: Some commenters asserted that the poor outcomes 
identified by the D/E rates measure--high debt and low earnings--are 
problems across higher education and that, as a result, it would be 
unfair to hold only GE programs accountable under the D/E rates 
measure. Commenters cited data that, they argued, showed that this is 
the case for a large fraction of four-year programs operated by public 
and non-profit institutions. One commenter contended that between 28 
percent and 54 percent of programs operated by the University of Texas 
would fail the Department's accountability metrics.\6\
---------------------------------------------------------------------------

    \6\ Schneider, M. (2014). American Enterprise Institute. Are 
Graduates from Public Universities Gainfully Employed? Analyzing 
Student Loan Debt and Gainful Employment.
---------------------------------------------------------------------------

    Several commenters alleged that the regulations are a Federal 
overreach into higher education. A number of these commenters believed 
that the regulations unfairly target for-profit institutions. They 
stated that while a degree program at a for-profit institution must 
meet the D/E rates measure to remain eligible for title IV, HEA program 
funds, a comparable degree program at a public or private non-profit 
institution, which may have low completion rates or other poor 
outcomes, would not be subject to the regulations.
    Some commenters asserted that for-profit institutions play an 
important role in providing career training for students to enter into 
jobs that do not require a four-year bachelor's degree. In that regard, 
one commenter contended that, because the regulations apply only to GE 
programs offered primarily by for-profit institutions, the regulations 
reflect a bias in favor of traditional four-year degree programs not 
subject to the regulations. This bias, the commenter argued, cannot be 
justified in light of BLS data showing that nearly half of bachelor's 
degree graduates are working in jobs that do not require a four-year 
degree. These degree-holders, according to the commenter, are actually 
employed in what can be described as ``middle-skill'' positions, for 
which the commenter believed for-profit institutions provide more 
effective preparation. These commenters all asserted that traditional 
institutions are ill-suited to provide students with training for 
middle-skill jobs compared to for-profit institutions. Other commenters 
argued that enrollment growth at non-profit and public institutions has 
not kept up with demand from students and for-profit institutions have 
responded to this need by offering opportunities for students. One 
commenter presented data showing that a majority of degrees in the 
fastest growing occupations are awarded by for-profit institutions.
    Several commenters asserted that the regulations would have a 
substantial and disproportionate impact on programs in the for-profit 
sector and the students they serve. Commenters cited an analysis by 
Mark Kantrowitz claiming that, of GE programs that would not pass the 
D/E rates measure, a large and disproportionate portion are operated by 
for-profit institutions compared to programs operated by non-profit and 
public institutions, while other commenters relied on Department data 
to draw the same conclusion.\7\
---------------------------------------------------------------------------

    \7\ Kantrowitz, M. (2014). Edvisors Network Inc., Student Aid 
Policy Analysis. U.S. Department of Education Proposes Stricter 
Gainful Employment Rule.
---------------------------------------------------------------------------

    Commenters said the Department is targeting for-profit programs 
because of an incorrect assumption that student outcomes are worse at 
for-profit institutions. They said the Department has ignored studies 
showing that, when compared to institutions that serve similar 
populations of students, for-profit institutions achieve comparable 
outcomes for their students. Another commenter cited a study that 
showed that first-time enrollees at for-profit schools experience 
greater unemployment after leaving school, but among those working, 
their annual earnings are statistically similar to their counterparts 
at non-profit institutions.
    Several commenters asserted that the student body profiles at for-
profit institutions could significantly affect program performance 
under the D/E rates measure. Charles River Associates analyzed 
NPSAS:2012 data and found that for-profit institutions serve older 
students (average age of 30.0 years compared to 24.6 years at private 
non-profit and 26.0 years at public institutions), veterans (7 percent 
of students compared to 3 percent at private non-profit and public 
institutions), students that are not exclusively full-time (30 percent 
of students compared to 29 percent at private non-profit and 57 percent 
at public institutions), independent students (80 percent at private 
for-profit institutions to 34 percent at private non-profit 
institutions and 49 percent at public institutions), single parents (33 
percent at private for-profit institutions to 9 percent at private non-
profit institutions and 13 percent at public institutions), students 
with dependents (51 percent at private for-profit institutions to 18 
percent at private non-profit institutions to 25 percent at public 
institutions), students working more than 20 hours per week (48 percent 
at private for-profit institutions to 29 percent at private non-profit 
institutions to 44 percent at public institutions), students who 
consider their primary role to be an employee rather than a student (52 
percent at private for-profit institutions to 23 percent at private 
non-profit institutions to 31 percent at public institutions), and 
students less likely to have a parent with at least a bachelor's degree 
(22 percent at private for-profit institutions to 52 percent at private 
non-profit institutions to 37 percent at public institutions).\8\ They 
also found that minority students make up a higher percentage of the 
student body at for-profit institutions, with African-Americans making 
up 26 percent of students compared to 15 percent at public institutions 
and 14 percent at private non-profit institutions and Hispanic students 
comprising 19 percent of students at for-profit institutions, similar 
to the 17 percent at public institutions but higher than the 10 percent 
at private non-profit institutions. Additionally, commenters stated 
that 65 percent of students at for-profit institutions receive Pell 
Grants, while at private non-profit and public institutions, the 
percentage of Pell Grant recipients averages 36 percent and 38 percent, 
respectively. In addition, one commenter suggested that the Department 
should have considered that for-profit institutions are more likely to 
be open-enrollment institutions.
---------------------------------------------------------------------------

    \8\ National Postsecondary Student Aid Study (NPSAS) 2012. 
Unpublished analysis of restricted-use data.
---------------------------------------------------------------------------

    Commenters asserted that for-profit institutions do not in fact 
cost more for students and taxpayers than public

[[Page 64903]]

institutions, particularly community colleges, when State and local 
appropriations and other subsidies received by public institutions are 
taken into account. One commenter said that for-profit two-year 
institutions cost less per student than public two-year institutions 
and that completion rates are somewhat higher at for-profit 
institutions. Commenters pointed to a number of studies estimating 
taxpayer costs across types of institutions. One found that associate 
degree programs at public institutions cost $4,000 more per enrollee 
and $35,000 more per graduate than associate degree programs at for-
profit institutions, while another found that the direct cost to 
taxpayers on a per-student basis is $25,546 lower at for-profit 
institutions than at public two-year institutions, and a third found 
that taxpayer costs of four-year public institutions averaged $9,709 
per student compared to $99 per student at for-profit institutions. 
Another study estimated that public institutions receive $19.38 per 
student in direct tax support and private non-profit institutions 
receive $8.69 per student for every $1 received by for-profit 
institutions per student. Commenters also referenced research 
estimating the total costs to State and local governments if students 
affected by the regulations shift to public institutions, with results 
ranging from $3.6 to $4.7 billion to shift students from nine for-
profit institutions in four States to public two-year or four-year 
institutions. Similarly, one commenter referenced a study estimating 
the total cost of shifting students to public institutions among all 
States would be $1.7 billion in State appropriations to support one 
cohort of graduates from failing or zone programs at public 2-year or 
least selective four-year institutions.
    Other commenters referred to budget data related to the title IV, 
HEA programs to state that student loans do not constitute costs to 
taxpayers because the recovery rate for these loans is over 100 
percent, and asserted that any cost reductions in the title IV, HEA 
programs would be offset by reduced tax revenues at all levels of 
government and increased demand for capacity in the public sector. 
Others noted a GAO Report indicating Federal student loans originated 
between 2007 and 2012 will bring in $66 billion in revenue and that 
Congressional Budget Office projections from 2013 indicate that loans 
originated in the next ten-year period would generate $185 billion. 
Whether approaching the issue on a per-student, per-graduate, or 
overall taxpayer cost basis, the commenters stated that the rationale 
that the regulations will protect taxpayer interests does not withstand 
scrutiny.
    One commenter said that the NPRM overstated the cost of for-profit 
institutions relative to public two-year institutions, because many 
programs at for-profit institutions offer advanced degrees and their 
students accrue more debt. Other commenters said the Department ignores 
the comparable tuition costs of non-profit private institutions, which, 
like for-profit institutions, generally do not benefit from direct 
appropriations from State governments.
    One commenter asserted that the 150 percent of normal time 
graduation rate for public and private non-profit 
open[hyphen]enrollment colleges is 28.3 percent and 39.7 percent 
respectively while for[hyphen]profit colleges graduated 35.2 percent of 
students within 150 percent of normal time. Additionally, the commenter 
contended, more than half (55.7 percent) of for-profit colleges were 
open enrollment institutions in 2011-12, compared to less than 18 
percent of public and 12 percent of private 
not[hyphen]for[hyphen]profit schools. Based on these findings, the 
commenter argued that while the for[hyphen]profit graduation rate is 
lower than the average of all public and private nonprofit 
institutions, it is higher than the average of all 
open[hyphen]enrollment public and private nonprofit institutions, which 
the commenter stated is likely to be a more appropriate comparison 
group.
    Several commenters claimed that the Department's reference in the 
NPRM to qui tam lawsuits and State Attorneys General investigations 
into for-profit institutions evidence bias. In particular, commenters 
suggested such investigations were politically driven, based on bad-
faith attacks, and failed to produce evidence of wrongdoing.
    Some commenters said the Department's reference in the NPRM to a 
GAO report on the for-profit sector also demonstrates bias against for-
profit institutions. Commenters asserted that the GAO investigation in 
particular contained errors and relied on false testimony, which 
required the GAO to correct and reissue its report.\9\ Commenters said 
it was also inappropriate for the Department to rely on what the 
commenters called a ``deeply flawed'' partisan report by the Senate 
HELP committee majority staff, because the report partially relied on 
evidence presented in the GAO report, was actually issued by the 
committee majority staff for the committee, and was not adopted by vote 
of the whole committee.\10\
---------------------------------------------------------------------------

    \9\ Postsecondary Education: Student Outcomes Vary at For-
Profit, Nonprofit, and Public Schools (GAO-12-143), GAO, December 7, 
2011.
    \10\ ``For Profit Higher Education: The Failure to Safeguard the 
Federal Investment and Ensure Student Success,'' Senate HELP 
Committee, July 30, 2012.
---------------------------------------------------------------------------

    On the other hand, several commenters suggested that the Department 
should focus regulatory efforts on for-profit institutions because they 
have been engaged in predatory recruitment practices that hurt students 
and divert taxpayer funds away from higher-quality education programs. 
One commenter said that for-profit institutions increased recruiting of 
veterans by over 200 percent in just one year. Many commenters 
described the disproportionate distribution of government benefits to 
the for-profit sector, contending that for-profit institutions enroll 
only 10 percent of students, but account for 25 percent of Pell Grants 
and Stafford loan volume and account for half of defaults; that for-
profit schools collected more than one-third of all G.I. Bill funds, 
but trained only 25 percent of veterans, while public colleges and 
universities received only 40 percent of G.I. Bill benefits but trained 
59 percent of veterans; and that for-profit colleges cost taxpayers 
twice the tuition as non-profits. Several commenters described the high 
proportion of students who drop out of or withdraw from programs at 
for-profit institutions--about half of students who enroll.
    On the other hand, several commenters cited an analysis of IPEDS 
data by Charles River Associates that found that the difference in FY 
2010 institutional cohort default rates (iCDR) among for-profit (22 
percent), private non-profit (8 percent), and public (13 percent) 
institutions was significantly reduced when institutions were grouped 
into two categories of Pell Grant recipient concentration. The High 
Pell group had at least 50 percent of students receiving Pell Grants 
and the Low Pell group had less than 50 percent of students with Pell 
Grants. The Charles River Associates analysis found that among two-year 
institutions, in the High Pell Group, the iCDR at for-profit 
institutions is 20.6 percent compared to 24.2 percent at public 
institutions and, in the Low Pell Group, the iCDR is 16.6 percent at 
for-profit institutions and 20.4 percent at public institutions.
    Several commenters asserted that the Department has clear 
justification for limiting application of the regulations to 
institutions in the for-profit sector and other institutions offering 
programs that purport to prepare students for gainful

[[Page 64904]]

employment. One commenter cited a study that found that students at 
for-profit institutions were twice as likely to default on their 
student loans as students at other types of schools and another study 
that found that graduation rates at for-profit colleges were less than 
one-third the rates at non-profit colleges. By comparison, the 
commenter cited economic research that found that students in non-
profit and public certificate programs had lower debt burdens, higher 
earnings, lower unemployment, and lower student loan default rates and 
were more satisfied with their programs, even after controlling for 
student demographic factors.
    One commenter said the Department has a specific legislative 
mandate to regulate gainful employment programs, which include the 
programs offered by for-profit institutions, and, as a result, the 
Department is correct to apply the regulations to those programs. Some 
commenters added that for-profit institutions are subject to less 
regulation and accountability than non-profit institutions because for-
profit institutions are not governed by an independent board composed 
of members without an ownership interest. Consequently, they argued, 
the Department should particularly regulate programs operated by for-
profit institutions.
    Discussion: The regulations do not target for-profit programs for 
loss of eligibility under the title IV, HEA programs. To the contrary, 
the Department appreciates the important role for-profit institutions 
play in educating students.
    The for-profit sector has experienced tremendous growth in recent 
years,\11\ fueled by the availability of Federal student aid funding 
and an increased demand for higher education, particularly among non-
traditional students.\12\ The share of Federal student financial aid 
going to students at for-profit institutions has grown from 
approximately 13 percent of all title IV, HEA program funds in award 
year 2000-2001 to 19 percent in award year 2013-2014.\13\
---------------------------------------------------------------------------

    \11\ National Center for Education Statistics (NCES) (2014). 
Digest of Education Statistics (Table 222). Available at: http://nces.ed.gov/programs/digest/d12/tables/dt12_222.asp. This table 
provides evidence of the growth in fall enrollment. For evidence of 
the growth in the number of institutions, please see the Digest of 
Education Statistics (Table 306) available at http://nces.ed.gov/programs/digest/d12/tables/dt12_306.asp.
    \12\ Deming, D., Goldin, C., and Katz, L. (2012). The For-Profit 
Postsecondary School Sector: Nimble Critters or Agile Predators? 
Journal of Economic Perspectives, 26(1), 139-164.
    \13\ U.S. Department of Education, Federal Student Aid, Title IV 
Program Volume Reports, available at https://studentaid.ed.gov/about/data-center/student/title-iv. The Department calculated the 
percentage of Federal Grants and FFEL and Direct student loans 
(excluding Parent PLUS) originated at for-profit institutions 
(including foreign) for award year 2000-2001 and award year 2013-
2014.
---------------------------------------------------------------------------

    The for-profit sector plays an important role in serving 
traditionally underrepresented populations of students. For-profit 
institutions are typically open-enrollment institutions that are more 
likely to enroll students who are older, women, Black, Hispanic, or 
with low incomes.\14\ Single parents, students with a certificate of 
high school equivalency, and students with lower family incomes are 
also more commonly found at for-profit institutions than community 
colleges.\15\
---------------------------------------------------------------------------

    \14\ Deming, D., Goldin, C., and Katz, L. (2012). The For-Profit 
Postsecondary School Sector: Nimble Critters or Agile Predators? 
Journal of Economic Perspectives, 26(1), 139-164.
    \15\ Id.
---------------------------------------------------------------------------

    For-profit institutions develop curriculum and teaching practices 
that can be replicated at multiple locations and at convenient times, 
and offer highly structured programs to help ensure timely 
completion.\16\ For-profit institutions ``are attuned to the 
marketplace and are quick to open new schools, hire faculty, and add 
programs in growing fields and localities,''\17\ including occupations 
requiring ``middle-skill'' training.
---------------------------------------------------------------------------

    \16\ Id.
    \17\ Id.
---------------------------------------------------------------------------

    At least some research suggests that for-profit institutions 
respond to demand that public institutions are unable to handle. Recent 
evidence from California suggests that for-profit institutions absorb 
students where public institutions are unable to respond to demand due 
to budget constraints.\18\ \19\ Additional research has found that 
``[c]hange[s] in for-profit college enrollments are more positively 
correlated with changes in State college-age populations than are 
changes in public-sector college enrollments.'' \20\
---------------------------------------------------------------------------

    \18\ Keller, J. (2011, January 13). Facing new cuts, 
California's colleges are shrinking their enrollments. Chronicle of 
Higher Education. Retrieved from http://chronicle.com/article/Facing-New-Cuts-Californias/125945/.
    \19\ Cellini, S. R. (2009). Crowded Colleges and College Crowd-
Out: The Impact of Public Subsidies on the Two-Year College Market. 
American Economic Journal: Economic Policy, 1(2): 1-30.
    \20\ Deming, D.J., Goldin, C., and Katz, L.F. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile 
Predators? Journal of Economic Perspectives, 26(1), 139-164.
---------------------------------------------------------------------------

    Other evidence, however, suggests that for-profit institutions are 
facing increasing competition from community colleges and traditional 
universities, as these institutions have started to expand their 
programs in online education. According to the annual report recently 
filed by a large, publically traded for-profit institution, ``a 
substantial proportion of traditional colleges and universities and 
community colleges now offer some form of . . . online education 
programs, including programs geared towards the needs of working 
learners. As a result, we continue to face increasing competition, 
including from colleges with well-established brand names. As the 
online . . . learning segment of the postsecondary education market 
matures, we believe that the intensity of the competition we face will 
continue to increase.'' \21\
---------------------------------------------------------------------------

    \21\ Apollo Group, Inc. (2013). Form 10-K for the fiscal year 
ended August 31, 2013. Available at www.sec.gov/Archives/edgar/data/929887/000092988713000150/apol-aug312013x10k.htm.
---------------------------------------------------------------------------

    These regulations apply not only to programs operated by for-profit 
institutions, but to all programs, across all sectors, that are subject 
to the requirement that in order to qualify for Federal student 
assistance, they must provide training that prepares students for 
gainful employment in a recognized occupation. Under the HEA, for these 
purposes, an eligible program includes non-degree programs, including 
diploma and certificate programs, at public and private non-profit 
institutions such as community colleges and nearly all educational 
programs at for-profit institutions of higher education regardless of 
program length or credential level. Our regulatory authority in this 
rulemaking with respect to institutional accountability is limited to 
defining the statutory requirement that these programs are eligible to 
participate in the title IV, HEA programs because they provide training 
that prepares students for gainful employment in a recognized 
occupation. The Department does not have the authority in this 
rulemaking to regulate other higher education institutions or programs, 
even if such institutions or programs would not pass the accountability 
metrics.
    The regulations establish an accountability framework and 
transparency framework for GE programs, whether the programs are 
operated by for-profit institutions or by public or private non-profit 
institutions. However, we are particularly concerned about high costs, 
poor outcomes, and deceptive practices at some institutions in the for-
profit sector.

[[Page 64905]]

    With respect to comments that the NPRM overstates the cost of for-
profit institutions relative to public two-year institutions because 
many for-profit programs offer advanced degrees, the data do not 
support this contention. A comparison of costs at institutions offering 
credentials of comparable levels shows that for-profit institutions 
typically charge higher tuition than do public postsecondary 
institutions. Among first-time full-time degree or certificate seeking 
undergraduates at title IV, HEA institutions operating on an academic 
calendar system and excluding students in graduate programs, average 
tuition and required fees at less-than-two-year for-profit institutions 
are more than double the average cost at less-than-two-year public 
institutions and average tuition and required fees at two-year for-
profit institutions are about four times the average cost at two-year 
public institutions.22 23 Because less than two-year and 
two-year for-profit institutions largely offer certificates and 
associate degrees, rather than more expensive four-year degrees or 
advanced degrees,\24\ it is unlikely to be the case that higher tuition 
at for-profit institutions is the result of advanced degree offerings 
as argued by some commenters.
---------------------------------------------------------------------------

    \23\ Id.
    \24\ NCES, Digest of Education Statistics 2013 (Table 318.40) 
available at http://nces.ed.gov/programs/digest/d13/tables/dt13_318.40.asp. Indicates that in 2011-12, of 855,562 degrees and 
certificates awarded at for-profit institutions, approximately 75% 
(637,565) were certificates or associate degrees. At public 
institutions in 2011-12, approximately 45%, or 1,280,470 of 
2,846,394 degrees and certificates awarded, were certificates or 
associate degrees.
---------------------------------------------------------------------------

    Comparing tuition at for-profit institutions and private non-profit 
institutions reveals similar results. Although the differential between 
for-profit institutions and private non-profit institutions that offer 
similar credentials is smaller than the difference between for-profit 
institutions and public institutions, for-profit institutions still 
charge more than private non-profit institutions when comparing two-
year and less-than-two-year institutions, which includes the majority 
of institutions offering GE programs within the non-profit sector.\25\
---------------------------------------------------------------------------

    \25\ Id.
---------------------------------------------------------------------------

    The Department acknowledges that funding structures and levels of 
government support vary by type of institution, with public 
institutions receiving more direct funding and public and private non-
profit institutions benefiting from their tax-exempt status. However, 
as detailed in ``Discussion of Costs, Benefits, and Transfers'' in the 
Regulatory Impact Analysis, we do not agree that the regulations will 
result in significant costs for State and local governments. In 
particular, we expect that many students who change programs as a 
result of the regulations will choose from the many passing programs at 
for-profit institutions or that State and local governments may pursue 
lower marginal cost options to expand capacity at public institutions.
    With respect to revenues generated by the Federal student loan 
programs, we note that the estimates presented reflect a low discount 
rate environment and that returns vary across different segments of the 
portfolio. Currently, the Direct Loan program reflects a negative 
subsidy. Subsidy rates represent the Federal portion of non-
administrative costs--principally interest subsidies and defaults--
associated with each borrowed dollar over the life of the loan. Under 
Federal Credit Reform Act (FCRA) rules, subsidy costs such as default 
costs and in-school interest benefits are embedded within the program 
subsidy, whereas Federal administration costs are treated as annual 
cash amounts and are not included within the subsidy rate.
    Annual variations in the subsidy rate are largely due to the 
relationship between the OMB-provided discount rate that drives the 
Government's borrowing rate and the interest rate at which borrowers 
repay their loans. Technical assumptions for defaults, repayment 
patterns, and other borrower characteristics would also apply. The loan 
subsidy estimates are particularly sensitive to fluctuations in the 
discount rate. Even small shifts in economic projections may produce 
substantial movement, up or down, in the subsidy rate. While the 
Federal student loan programs, especially Unsubsidized loans and PLUS 
loans, generate savings in the current interest rate environment, the 
estimates are subject to change. In any event, although the regulations 
may result in reduced costs to taxpayers from the title IV, HEA 
programs, the primary benefits of the regulations are the benefits to 
students.
    Because aid received from grants has not kept pace with rising 
tuition in the for-profit sector, in contrast to other sectors, the net 
cost to students who attend GE programs has increased sharply in recent 
years.\26\ Not surprisingly, ``student borrowing in the for-profit 
sector has risen dramatically to meet the rising net prices.'' \27\ 
Students at for-profit institutions are more likely to receive Federal 
student financial aid and have higher average student debt than 
students in public and private non-profit institutions, even taking 
into account the socioeconomic background of the students enrolled 
within each sector.\28\
---------------------------------------------------------------------------

    \26\ Cellini, S. R., and Darolia, R. (2013). College Costs and 
Financial Constraints: Student Borrowing at For-Profit Institutions. 
Unpublished manuscript. Available at www.upjohn.org/stuloanconf/Cellini_Darolia.pdf.
    \27\ Id.
    \28\ Deming, D.J., Goldin, C., and Katz, L.F. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile 
Predators? Journal of Economic Perspectives, 26(1), 139-164.
---------------------------------------------------------------------------

    In 2011-2012, 60 percent of certificate students who were enrolled 
at for-profit two-year institutions took out title IV student loans 
during that year compared to 10 percent at public two-year 
institutions.\29\ Of those who borrowed, the median amount borrowed by 
students enrolled in certificate programs at two-year for-profit 
institutions was $6,629, as opposed to $4,000 at public two-year 
institutions.\30\ In 2011-12, 20 percent of associate degree students 
who were enrolled at for-profit institutions took out student loans, 
while only 66 percent of associate degree students who were enrolled at 
public two-year institutions did so.\31\ Of those who borrowed in 2011-
12, for-profit two-year associate degree enrollees had a median amount 
borrowed during that year of $7,583, compared to $4,467 for students at 
public two-year institutions.\32\
---------------------------------------------------------------------------

    \29\ National Postsecondary Student Aid Study (NPSAS) 2012. 
Unpublished analysis of restricted-use data using the NCES 
PowerStats tool available at http://nces.ed.gov/datalab/postsecondary/index.aspx.
    \30\ Id.
    \31\ Id.
    \32\ Id.
---------------------------------------------------------------------------

    Although student loan default rates have increased in all sectors 
in recent years, they are highest among students attending for-profit 
institutions.\33\ \34\ Approximately 19 percent of borrowers who 
attended for-profit institutions default on their Federal student loans 
within the first three years of repayment as compared to about 13 
percent of borrowers who attended public institutions.\35\ Estimates of 
``cumulative lifetime default rates,'' based on the number of loans, 
rather than borrowers,

[[Page 64906]]

yield average default rates of 24, 23, and 31 percent, respectively, 
for public, private, and for-profit two-year institutions in the 2007-
2011 cohort years. Based on estimates using dollars in those same 
cohort years (rather than loans or borrowers, to estimate defaults) the 
average lifetime default rate is 50 percent for students who attended 
two-year for-profit institutions in comparison to 35 percent for 
students who attended two-year public and non-profit private 
institutions.\36\ Although we included a regression analysis on pCDR 
and student demographic characteristics, including the percentage of 
Pell students attending each program, in the NPRM, we do not respond to 
comments on this subject because the regulations no longer include pCDR 
as an accountability metric to determine eligibility for title IV, HEA 
program funds.
---------------------------------------------------------------------------

    \33\ Darolia, R. (2013). Student Loan Repayment and College 
Accountability. Federal Reserve Bank of Philadelphia.
    \34\ Deming, D.J., Goldin, C., and Katz, L.F. (2012). The For-
Profit Postsecondary School Sector: Nimble Critters or Agile 
Predators? Journal of Economic Perspectives, 26(1), 139-164.
    \35\ Based on the Department's analysis of the three-year cohort 
default rates for fiscal year 2011, U.S. Department of Education, 
available at http://www2.ed.gov/offices/OSFAP/defaultmanagement/schooltyperates.pdf.
    \36\ Federal Student Aid, Default Rates for Cohort Years 2007-
2011, www.ifap.ed.gov/eannouncements/attachments/060614DefaultRatesforCohortYears20072011.pdf.
---------------------------------------------------------------------------

    There is evidence that many programs at for-profit institutions may 
not be preparing students as well as comparable programs at public 
institutions. A 2011 GAO report reviewed results of licensing exams for 
10 occupations that are, by enrollment, among the largest fields of 
study and found that, for 9 out of 10 licensing exams, graduates of 
for-profit institutions had lower rates of passing than graduates of 
public institutions.\37\
---------------------------------------------------------------------------

    \37\ Postsecondary Education: Student Outcomes Vary at For-
Profit, Nonprofit, and Public Schools (GAO-12-143), GAO, December 7, 
2011.
---------------------------------------------------------------------------

    Many for-profit institutions devote greater resources to recruiting 
and marketing than they do to instruction or to student support 
services.\38\ An investigation by the U.S. Senate Committee on Health, 
Education, Labor & Pensions (Senate HELP Committee) of 30 prominent 
for-profit institutions found that almost 23 percent of revenues were 
spent on marketing and recruiting but only 17 percent on 
instruction.\39\ A review of useable data provided by some of the 
institutions that were investigated showed that they employed 35,202 
recruiters compared with 3,512 career services staff and 12,452 support 
services staff.\40\
---------------------------------------------------------------------------

    \38\ For Profit Higher Education: The Failure to Safeguard the 
Federal Investment and Ensure Student Success, Senate HELP 
Committee, July 30, 2012.
    \39\ Id.
    \40\ Id.
---------------------------------------------------------------------------

    We disagree with the commenters who asserted that the Department's 
reference to the findings presented in the GAO and Senate HELP 
Committee staff reports are inappropriate because the GAO report (on 
which the Senate HELP Committee report partially relied) contained 
errors and misleading testimony. We rely upon available data presented 
in the re-released version of the GAO report. Because GAO included 
these data and conclusions on licensure passage rates in their re-
released version, we believe this evidence is reliable and appropriate 
to reference in support of the regulations. Also, we note that the 
evidence we use from the Senate HELP Committee report \41\ is reliable 
because the data the report is based on are readily available and has 
been subject to public review. We do not rely upon qualitative 
testimony presented by the Committee. We referenced in the NPRM some 
descriptions and characterizations from the HELP and GAO reports of 
abusive conduct by for-profit institutions, but those descriptions and 
characterizations were incidental to our discussion and rationale.\42\ 
We make clear in the NPRM our ``primary concern''--that a number of GE 
programs are not providing effective training and are training for low-
paying jobs that do not justify costs of borrowing. 79 FR 16433. We 
stated that the causes of these problems are ``numerous;'' we listed 
five causes, the last of which is the deceptive marketing practices on 
which the two reports focus.\43\ Moreover, the two reports were hardly 
the only evidence we cited of such practices. 79 FR 16435. More 
pertinent to the commenter's objection, these regulations are not 
adopted to impose sanctions on schools that engage in 
misrepresentations; the Department has already adopted rules to address 
enforcement actions for misrepresentations by institutions regarding, 
among other things, their educational programs and the employability of 
their graduates. See 34 CFR part 668, subpart F. Rather, we concluded 
that these regulations are needed based on our analysis of the data and 
literature, and our objectives in these regulations are to establish 
standards to determine whether a GE program is an eligible program and 
to provide important disclosures to students and prospective students. 
We need not rely on reports that indicate predatory and abusive 
behavior in order to conclude that a test is needed to determine 
whether a program is in fact one that prepares students for ``gainful 
employment.''
---------------------------------------------------------------------------

    \41\ The commenter suggests that the fact that the report was 
not ``voted on'' by the committee renders the report suspect. The 
commenter cites no rule that requires reports issued ``by the 
committee'' or even by committee staff to be voted on. The report 
states that it is ``Prepared by the Committee on Health, Education, 
Labor, and Pensions, United States Senate.'' S. Prt. No. 112-37. 
Because no bill accompanied the report, it is not clear why any vote 
would be in order.
    \42\ We cite findings in the HELP report in three paragraphs on 
two pages of the preamble of the NPRM. 79 FR 16434, 16435 (virtually 
identical language is repeated in the Regulatory Impact Analysis at 
79 FR 16937, 16938). Two of those paragraphs also cite to the GAO 
report. We note that the same commenter asserts that Congress has 
already ``addressed'' these abuses by banning incentive compensation 
for recruiters, proscriptions that an industry trade group has 
vigorously opposed in litigation. APSCU v. Duncan, 681 F.3d 427 
(D.C. Cir. 2012).
    \43\ Id.
---------------------------------------------------------------------------

    Lower rates of completion at many for-profit institutions are a 
cause for concern. The six-year degree/certificate attainment rate of 
first-time undergraduate students who began at a four-year degree-
granting institution in 2003-2004 was 34 percent at for-profit 
institutions in comparison to 67 percent at public institutions.\44\ 
However, it is important to note that, among first-time undergraduate 
students who began at a two-year degree-granting institution in 2003-
2004, the six-year degree/certification attainment rate was 40 percent 
at for-profit institutions compared to 35 percent at public 
institutions.\45\ We note that, as suggested by a commenter, completion 
rates for only open-enrollment institutions may be different than those 
discussed here.
---------------------------------------------------------------------------

    \44\ ``Students Attending For-Profit Postsecondary Institutions: 
Demographics, Enrollment Characteristics, and 6-Year Outcomes'' 
(NCES 2012-173). Available at: http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2012173.
    \45\ Id.
---------------------------------------------------------------------------

    The slightly lower degree/certification attainment rates of two-
year public institutions may at least be partially attributable to 
higher rates of transfer from two-year public institutions to other 
institutions.\46\ Based on available data, it appears that relatively 
few students transfer from for-profit institutions to other 
institutions. Survey data indicate about 5 percent of all student 
transfers originate from for-profit institutions, while students 
transferring from public institutions represent 64 percent of all 
transfers occurring at any institution (public two-year institutions to 
public four-year institutions being the most common type of 
transfer).\47\ Additionally, students who transfer from for-profit 
institutions are substantially less likely to be able to successfully 
transfer credits to other institutions than students who transfer from 
public institutions. According to a recent NCES study, an estimated 83 
percent of first-time beginning undergraduate students who transferred 
from a for-profit institution

[[Page 64907]]

to an institution in another sector were unable to successfully 
transfer credits to their new institution. In comparison, 38 percent of 
first-time beginning undergraduate students who transferred between two 
public institutions were not able to transfer credits to their new 
institution.\48\
---------------------------------------------------------------------------

    \46\
    \47\
    \48\ NCES, ``Transferability of Postsecondary Credit Following 
Student Transfer or Coenrollment,'' NCES 2014-163, table 8.
---------------------------------------------------------------------------

    The higher costs of for-profit institutions and resulting greater 
amounts of debt incurred by their former students, together with 
generally lower rates of completion, continue to raise concerns about 
whether some for-profit programs lead to earnings that justify the 
investment made by students, and additionally, taxpayers through the 
title IV, HEA programs.
    In general, we believe that most programs operated by for-profit 
institutions produce positive educational and career outcomes for 
students. One study estimated moderately positive earnings gains, 
finding that ``[a]mong associate's degree students, estimates of 
returns to for-profit attendance are generally in the range of 2 to 8 
percent per year of education.'' \49\ However, recent evidence suggests 
``students attending for-profit institutions generate earnings gains 
that are lower than those of students in other sectors.'' \50\ The same 
study that found gains resulting from for-profit attendance in the 
range of 2 to 8 percent per year of education also found that gains for 
students attending public institution are ``upwards of 9 percent.'' 
\51\ But, other studies fail to find significant differences between 
the returns to students on educational programs at for-profit 
institutions and other sectors.\52\
---------------------------------------------------------------------------

    \49\ Cellini, S. R., and Darolia, R. (2013). College Costs and 
Financial Constraints: Student Borrowing at For-Profit Institutions. 
Unpublished manuscript. Available at www.upjohn.org/stuloanconf/Cellini_Darolia.pdf.
    \50\ Darolia, R. (2013). Student Loan Repayment and College 
Accountability. Federal Reserve Bank of Philadelphia.
    \51\ Cellini, S. R., and Darolia, R. (2013). College Costs and 
Financial Constraints: Student Borrowing at For-Profit Institutions. 
Unpublished manuscript. Available at www.upjohn.org/stuloanconf/Cellini_Darolia.pdf.
    \52\ Lang, K., and Weinstein, R. (2013). ``The Wage Effects of 
Not-for-Profit and For-Profit Certifications: Better Data, Somewhat 
Different Results.'' NBER Working Paper.
---------------------------------------------------------------------------

    Analysis of data collected on the outcomes of 2003-2004 first-time 
beginning postsecondary students in the Beginning Postsecondary 
Students Longitudinal Study shows that students who attend for-profit 
institutions are more likely to be idle--neither working nor still in 
school--six years after starting their programs of study in comparison 
to students who attend other types of institutions.\53\ Additionally, 
students who attend for-profit institutions and are no longer enrolled 
in school six years after beginning postsecondary education have lower 
earnings at the six-year mark than students who attend other types of 
institutions.\54\
---------------------------------------------------------------------------

    \53\ Deming, D., Goldin, C., and Katz, L. The For-Profit 
Postsecondary School Sector: Nimble Critters or Agile Predators? 
Journal of Economic Perspectives, vol. 26, no. 1, Winter 2012.
    \54\
---------------------------------------------------------------------------

    The commenters' claims that the Department's reference in the NPRM 
to qui tam lawsuits and State Attorneys General investigations into 
for-profit institutions demonstrates bias by the Department against the 
for-profit sector are simply unfounded. The evidence derived from these 
actions shows individuals considering enrolling in GE programs offered 
by for-profit institutions have in many instances been given such 
misleading information about program outcomes that they could not 
effectively compare programs offered by different institutions in order 
to make informed decisions about where to invest their time and limited 
educational funding.
    The GAO and other investigators have found evidence that high-
pressure and deceptive recruiting practices may be taking place at some 
for-profit institutions. In 2010, the GAO released the results of 
undercover testing at 15 for-profit colleges across several States.\55\ 
Thirteen of the colleges tested gave undercover student applicants 
``deceptive or otherwise questionable information'' about graduation 
rates, job placement, or expected earnings.\56\ The Senate HELP 
Committee investigation of the for-profit education sector also found 
evidence that many of the most prominent for-profit institutions engage 
in aggressive sales practices and provide misleading information to 
prospective students.\57\ Recruiters described ``boiler room''-like 
sales and marketing tactics and internal institutional documents showed 
that recruiters are taught to identify and manipulate emotional 
vulnerabilities and target non-traditional students.\58\
---------------------------------------------------------------------------

    \55\ For-Profit Colleges: Undercover Testing Finds Colleges 
Encouraged Fraud and Engaged in Deceptive and Questionable Marketing 
Practices (GAO-10-948T), GAO, August 4, 2010 (reissued November 30, 
2010).
    \56\ Id.
    \57\ For Profit Higher Education: The Failure to Safeguard the 
Federal Investment and Ensure Student Success, Senate HELP 
Committee, July 30, 2012.
    \58\ Id.
---------------------------------------------------------------------------

    There has been growth in the number of qui tam lawsuits brought by 
private parties alleging wrongdoing at for-profit institutions, such as 
misleading consumers about their effectiveness by inflating job 
placement rates.\59\ Such conduct can reasonably be expected to cause 
consumers to enroll and borrow, on the basis of these representations, 
amounts that they may not be able to repay.
---------------------------------------------------------------------------

    \59\ ``U.S. to Join Suit Against For-Profit College Chain,'' The 
New York Times, May 2, 2011. Available at: http://www.nytimes.com/2011/05/03/education/03edmc.html?_r=0.
---------------------------------------------------------------------------

    In addition, a growing number of State and Federal law enforcement 
authorities have launched investigations into whether for-profit 
institutions are using aggressive or even deceptive marketing and 
recruiting practices that will likely result in the same high debt 
burdens. Several State Attorneys General have sued for-profit 
institutions to stop these fraudulent marketing practices, including 
manipulation of job placement rates. In 2013, the New York State 
Attorney General announced a $10.25 million settlement with Career 
Education Corporation (CEC), a private for-profit education company, 
after its investigation revealed that CEC significantly inflated its 
graduates' job placement rates in disclosures made to students, 
accreditors, and the State.\60\ The State of Illinois sued Westwood 
College for misrepresentations and false promises made to students 
enrolling in the company's criminal justice program.\61\ The 
Commonwealth of Kentucky has filed lawsuits against several private 
for-profit institutions, including National College of Kentucky, Inc., 
for misrepresenting job placement rates, and Daymar College, Inc., for 
misleading students about financial aid and overcharging for 
textbooks.\62\ And most recently, a group of 13 State Attorneys General 
issued Civil Investigatory Demands to Corinthian Colleges, Inc. 
(Corinthian), Education Management Co., ITT Educational Services, Inc. 
(ITT), and CEC, seeking information about job placement rate

[[Page 64908]]

data and marketing and recruitment practices.\63\ The States 
participating include Arizona, Arkansas, Connecticut, Idaho, Iowa, 
Kentucky, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania, 
Tennessee, and Washington.
---------------------------------------------------------------------------

    \60\ ``A.G. Schneiderman Announces Groundbreaking $10.25 Million 
Dollar Settlement with For-Profit Education Company That Inflated 
Job Placement Rates to Attract Students,'' press release, Aug. 19, 
2013. Available at: www.ag.ny.gov/press-release/ag-schneiderman-announces-groundbreaking-1025-million-dollar-settlement-profit.
    \61\ ``Attorneys General Take Aim at For-Profit Colleges' 
Institutional Loan Programs,'' The Chronicle of Higher Education, 
March 20, 2012. Available at: http://chronicle.com/article/Attorneys-General-Take-Aim-at/131254/.
    \62\ ``Kentucky Showdown,'' Inside Higher Ed, Nov. 3, 2011. 
Available at: www.insidehighered.com/news/2011/11/03/ky-attorney-general-jack-conway-battles-profits.
    \63\ ``For Profit Colleges Face New Wave of State 
Investigations,'' Bloomberg, Jan. 29, 2014. Available at: 
www.bloomberg.com/news/2014-01-29/for-profit-colleges-face-new-wave-of-coordinated-state-probes.html.
---------------------------------------------------------------------------

    Federal agencies have also begun investigations into such 
practices. For example, the Consumer Financial Protection Bureau (CFPB) 
issued Civil Investigatory Demands to Corinthian and ITT in 2013, 
demanding information about their marketing, advertising, and lending 
policies.\64\ The Securities and Exchange Commission also subpoenaed 
records from Corinthian in 2013, seeking student information in the 
areas of recruitment, attendance, completion, placement, and loan 
defaults.\65\ And, the Department itself is gathering and reviewing 
extensive amounts of data from Corinthian regarding, in particular, the 
reliability of its disclosures of placement rates.\66\
---------------------------------------------------------------------------

    \64\ Id.
    \65\ ``Corinthian Colleges Crumbles 14% on SEC probe,'' Fox 
Business, June 11, 2013. Available at: www.foxbusiness.com/government/2013/06/11/corinthian-colleges-/crumbles-14-o/n-sec-probe/.
    \66\ U.S. Department of Education, Press Release, ``Education 
Department Names Seasoned Team to Monitor Corinthian Colleges,'' 
July 18, 2014. Available at: www.ed.gov/news/press-releases/education-department-names-seasoned-/team-monitor-corinthian-colleges.
---------------------------------------------------------------------------

    This accumulation of evidence of misrepresentations to consumers by 
for-profit institutions regarding their outcomes provides a sound basis 
for the Department to conclude that a strong accountability framework 
for assessing outcomes by objective measures is necessary to protect 
consumers from enrolling and borrowing more than they can afford to 
repay. The same accumulation of evidence demonstrates the need for 
requiring standardized, readily comparable disclosures of outcomes to 
consumers, to enable consumers to compare programs and identify those 
more likely to lead to positive results.
    Commenters' claims of bias are further belied by the Department's 
own data estimates. We expect that the great majority of programs, 
including those in the for-profit sector, will pass the D/E rates 
measure and comply with the other requirements of the regulations. 
Further, we believe that the estimated data likely overstate the number 
of failing and zone programs because many programs will improve 
outcomes during the transition period.
    Of the minority of programs that we expect will not pass the D/E 
rates measure, a disproportionate percentage may be operated by for-
profit institutions. However, since a great many more for-profit 
programs will in fact pass the measure, we expect students to continue 
to have access to GE programs operated by for-profit institutions in 
addition to educational options offered by public and non-profit 
institutions. With respect to comments that a disproportionate 
percentage of programs operated by for-profit institutions will not 
pass the D/E rates measure because they provide open enrollment 
admissions to low-income and underrepresented populations of students, 
we do not expect student demographics to overly influence the 
performance of programs on the D/E rates measure. Please see ``Student 
Demographic Analysis of Final Regulations'' in the Regulatory Impact 
Analysis for a discussion of student demographics.
    Finally, we disagree with the commenters that claimed the 
regulations unfairly assess for-profit institutions because programs 
operated by for-profit institutions are in fact less expensive than 
programs operated by public institutions, once State and local 
subsidies are taken into account. While for-profit institutions may 
need to charge more than public institutions because they do not have 
the State and local appropriation dollars and must pass the educational 
cost onto the student, there is some indication that even when 
controlling for government subsidies, for-profit institutions charge 
more than their public counterparts. To assess the role of government 
subsidies in driving the cost differential between for-profit and 
public institutions, Cellini conducted a sensitivity analysis comparing 
the costs of for-profit and community college programs. Her research 
found the primary costs to students at for-profit institutions, 
including foregone earnings, tuition, and loan interest, amounted to 
$51,600 per year on average, as compared with $32,200 for the same 
primary costs at community colleges. Further, Cellini's analysis 
estimated taxpayer contributions, such as government grants, of $7,600 
per year for for-profit institutions and $11,400 for community 
colleges.\67\
---------------------------------------------------------------------------

    \67\ Cellini, S. R. (2012). For Profit Higher Education: An 
Assessment of Costs and Benefits. National Tax Journal, 65 (1):153-
180.
---------------------------------------------------------------------------

    These regulations will help ensure that students are receiving 
training that prepares them for gainful employment, regardless of the 
financial structure of the institution they attend. Although the 
regulations may disproportionately affect programs operated by for-
profit institutions, we believe evidence on the performance, economic 
costs, and business practices of for-profit institutions shows that 
these regulations are necessary to protect students and safeguard 
taxpayer funds.
    Changes: None.
    Comments: A few commenters suggested that, in lieu of the gainful 
employment regulations, the Department adopt the college ratings system 
and College Scorecard to apply equally across all programs.
    Discussion: In addition to these regulations, the Department 
publishes the College Scorecard, which includes data on institutional 
performance that can inform the enrollment decisions of prospective 
students. We also plan to release the college ratings system to provide 
additional information for students and develop the data infrastructure 
and framework for linking the allocation of title IV, HEA program funds 
to institutional performance. Because the College Scorecard and the 
proposed ratings system focus on institution level performance, rather 
than program level performance, we do not believe it is appropriate to 
consider them as alternatives to these regulations for purposes of 
public disclosure or accountability. Further, neither of these 
initiatives allow for determinations of eligibility for the title IV, 
HEA programs as provided for in these regulations.
    Changes: None.

Impact on Students

    Comments: One commenter asserted that the regulations would harm 
millions of students who attend private sector, usually for-profit, 
colleges and universities and requested that the Department withdraw 
the proposed regulations and instead engage in meaningful dialogue with 
stakeholders to reach shared goals. Numerous commenters contended that 
the regulations are biased against programs that serve a significant 
number of non-traditional, underserved, low-income, and minority 
students and, as a result, will reduce opportunities for these 
students. One commenter estimated that, by 2020, the regulations will 
restrict the access to education of between one and two million 
students, and nearly four million within the next decade.
    The commenters argued that students from underserved populations 
have greater financial need, causing them to borrow more, and typically 
start with lower earnings, and so will also have relatively lower 
earnings after

[[Page 64909]]

completion. Several commenters submitted data or information that they 
believed supported this point. One commenter asserted that Pell Grant 
recipients are 3.8 to 5 times more likely to borrow as those who do not 
have Pell Grants and that, among students who complete GE programs, 
African-Americans and Hispanics are 22 to 24 percent more likely to 
borrow than whites. Another commenter referenced NCES Baccalaureate and 
Beyond 2008/09 data to argue that socioeconomic status at the time of 
college entry affects a student's debt-to-earnings ratio one year after 
college and that only students at public institutions in the highest 
quartile of income before college had debt-to-earnings ratios below 8 
percent while students in the lowest quartile had debt-to-earnings 
ratios of about 12 percent in all types of institutions. The commenters 
reasoned that as a result, the programs that serve students from these 
populations are disproportionately likely to be failing programs. 
Several commenters referred to the Department's analysis in the NPRM 
that the commenters believed demonstrates that a large subset of 
students in failing and zone programs will be female, African-American, 
and Hispanic. Some commenters provided additional analyses conducted at 
the direction of an association representing for-profit institutions 
asserting that much of the variance in D/E rates is associated with 
student demographic characteristics.\68\ The commenters contended that 
a substantial body of research exists demonstrating a strong 
correlation between student characteristics and outcomes including 
graduation, earnings, and loan default. One commenter posited that a 
multivariate regression analysis conducted by the Department in 2012 
showed that race, gender, and income were all significant 
characteristics in predicting degree completion, with the odds of 
completing a degree 32 percent lower for male students, 43 percent 
lower for Black students, and 25 percent lower for Hispanic students. 
Other commenters pointed to an article noting that the overall B.A. 
graduation rate at private non-profit colleges in 2011 was 52 percent, 
but for institutions with under 20 percent of students receiving Pell 
Grants, the graduation rate was 79 percent, while for institutions with 
more than 60 percent of students receiving Pell Grants, the B.A. 
graduation rate was 31 percent.
---------------------------------------------------------------------------

    \68\ Guryan, J., and Thompson, M. Charles River Associates. 
(2014). Report on the Proposed Gainful Employment Regulation.
---------------------------------------------------------------------------

    According to the commenters, as a result of the regulations, 
students from underserved populations would be forced to either forego 
postsecondary education or instead attend passing programs, and the 
performance of those passing programs would be harmed by the increases 
in debt and decreases in earnings due to the shift in the composition 
of enrolling students. They also argued that educational opportunities 
for low-income and minority students would be reduced because both the 
Department's and third-party analyses project that most of the programs 
that would lose eligibility for title IV, HEA program funds under the 
regulations would be programs offered by for-profit institutions, which 
serve a large number of these students. One commenter estimated the 
racial and ethnic composition of students in ineligible programs: 
between 25 and 40 percent of African[hyphen]American students, and 
between 21 and 39 percent of Hispanic students who are enrolled in GE 
programs would be in ineligible programs. Similarly between 24 and 41 
percent of female students, between 32 and 46 percent of veteran 
students, and between 26 and 46 percent of Pell-eligible students would 
be in ineligible programs. Two commenters referred to the impact on the 
Latino community in particular, claiming that nearly 840,000 Latinos in 
Orange and Los Angeles counties alone will be denied access to 
community colleges over the next ten years because there are not enough 
programs to address growing demand in the Los Angeles metropolitan 
area.
    Some commenters expressed concern that the regulations would create 
incentives for for-profit institutions to decrease access to low-income 
and minority students. At the same time, they argued, community 
colleges would not by themselves have the capacity to meet the 
increased demand resulting from this decreased access, and from 
programs that become ineligible, at for-profit institutions. The 
commenters suggested that community colleges are not flexible enough in 
course scheduling and other areas to accommodate many non-traditional 
and adult students and are not nimble enough to quickly adjust to labor 
market changes. Accordingly, they said, the regulations run counter to 
the goal of increasing educational opportunities for all students, not 
just those in socioeconomic and demographic groups that tend to enter 
into high-earning occupations, and, over time, the regulations would 
not improve the situations of students from underserved populations.
    Commenters argued that the regulations, and the accountability 
metrics in particular, should factor in the effect of these and other 
student characteristics on outcomes. Some commenters suggested that the 
Department estimate earnings gains using regression-based methods that 
take into account student characteristics, while others suggested 
applying different D/E rates thresholds to each program, based on 
student characteristics, such as the percentage of students receiving a 
Pell Grant. Commenters cited an analysis conducted at the direction of 
an association representing for-profit institutions that focused on a 
subset of programs providing training for healthcare-related 
professions that they claimed showed student demographics are stronger 
predictors of GE program outcomes on the D/E rates and pCDR measures 
than the quality of program instruction.\69\ The commenters said that 
these findings contradicted the analysis conducted by the Department. 
Other commenters said minority status and Pell Grant eligibility, in 
particular, are factors that significantly affect completion, 
borrowing, and default outcomes. Another commenter argued that the 
statutory provisions that allow an institution with high cohort default 
rates to appeal the determination of ineligibility if it serves a high 
number of low-income students are evidence that Congress intended to 
recognize that student demographics are unrelated to program quality. 
As such, the commenter suggested that student demographics should be 
taken into account in the regulations.
---------------------------------------------------------------------------

    \69\ Guryan, J., and Thompson, M. Charles River Associates. 
(2014). Report on the Proposed Gainful Employment Regulation.
---------------------------------------------------------------------------

    Specifically with respect to the pCDR measure, commenters argued 
that its use as an eligibility metric would hold institutions and 
programs accountable for factors beyond their control, including the 
demographics of their students and the amounts they borrowed. The 
commenters argued that, in the context of iCDR, data publically 
available through FSA and NCES show a strong relationship between a 
failing iCDR and high usage of Pell Grants (an indicator of students' 
low-income status), and demonstrate a strong relationship between a 
failing iCDR and minority status. The commenters believed that outcomes 
under the pCDR measure would similarly be tied to students' 
socioeconomic and minority statuses, resulting in less institutional 
willingness to enroll minority, low-income students or students from 
any

[[Page 64910]]

subgroup that shows increased risk of student loan defaults.
    One commenter stated that the regulations would have a negative 
effect on minority students because, on average, they do not have the 
existing financial resources to pay for more expensive programs and, 
thus, rely on debt to pay for programs leading to well-paying jobs such 
as medical programs. The commenter asserted that the regulations would 
restrict access to those programs for minority students and therefore 
increase disparities in economic opportunity between whites and 
minorities. Another commenter said the regulations are biased against 
institutions enrolling more first-generation college students, because 
these students, on average, have fewer financial resources, rely more 
on borrowing, and are less likely to complete the program.
    On the other hand, several commenters argued that the regulations 
would help increase access to high-quality postsecondary education for 
underserved students. Based on the experience of financial aid 
programs--such as the Cal Grants program in California--that have 
tightened standards for institutions receiving State-funded student 
aid, commenters believed that the regulations are likely to direct more 
funds to programs producing positive student outcomes. They predicted 
that the redirection of public funding will encourage programs with 
strong performance to expand enrollment to meet the demands of students 
who would otherwise attend programs that are determined ineligible 
under the D/E rates measure or are voluntarily discontinued by an 
institution. They also argued that the regulations would encourage low-
quality programs to take steps to improve outcomes of non-traditional 
students. One commenter predicted large financial gains for low-income 
and minority students who enroll in better performing programs.
    Discussion: We do not agree that the regulations will substantially 
reduce educational opportunities for minorities, economically 
disadvantaged students, first-generation college students, women, and 
other underserved groups of students. We further disagree that the 
available evidence suggests that the D/E rates measure is predominantly 
a measure of student composition, rather than program quality. As 
provided in the Regulatory Impact Analysis, the Department's analysis 
indicates that the student characteristics of programs do not overly 
influence the performance of programs on the D/E rates measure. See 
``Student Demographic Analysis of Final Regulations'' in the Regulatory 
Impact Analysis for a discussion of the Department's analysis.
    For these regulations, the Department modified the two regression 
analyses it developed for the NPRM to better understand the extent to 
which student demographic factors may explain program performance under 
the regulations. As with the NPRM, the regression analyses are based on 
the 2012 GE informational D/E rates. We summarize the regression 
analysis for the annual earnings rate here.
    For the annual earnings rate regression analysis, we explored the 
influence of demographic factors such as those cited by commenters. 
These were measured at the program level for the percentage of students 
who completed a program and have the following demographic 
characteristics: Zero expected family contribution estimated by the 
FASFA; race and ethnicity status (white, Black, Hispanic, Asian or 
Pacific Islander, American Indian or Alaska Native); female; 
independent status; married; had a mother without a bachelor's degree. 
\70\ We held the effects of credential level and institutional sector 
of programs constant. The regression analysis shows that annual 
earnings rates results do not have a strong association with programs 
serving minorities, economically disadvantaged students, first-
generation college students, women, and other underserved groups of 
students. Descriptive analyses, also provided in the RIA, further 
indicate that the characteristics of students attending GE programs are 
not strong predictors of which programs pass the D/E rates measure, 
further suggesting the regulations do not disproportionately negatively 
affect programs serving minorities, economically disadvantaged 
students, first-generation college students, women, and other 
underserved groups of students.
---------------------------------------------------------------------------

    \70\ Please note that race and ethnicity status was derived from 
data reported by institutions to IPEDS. See the Regulatory Impact 
Analysis for additional details on methodology.
---------------------------------------------------------------------------

    Although we included a regression analysis on pCDR in the NPRM, we 
do not respond to comments on this analysis because the regulations no 
longer include pCDR as an accountability metric to determine 
eligibility for title IV, HEA program funds.
    Changes: None.
    Comments: Several commenters asserted that the problems associated 
with low completion rates and churn would not be resolved if low-income 
and minority students who are attending failing programs at for-profit 
institutions transfer to programs at community colleges. According to 
these commenters, completion rates are lower at public two-year 
institutions than at for-profit two-year institutions.
    Discussion: We disagree that the regulations will negatively affect 
the completion rates of low-income and minority students if, as a 
result of the regulations, more of these students transfer to public 
two-year institutions. As stated previously in this section, we 
acknowledge six-year certificate/degree attainment rates may be 
slightly lower at public two-year institutions compared to for-profit 
two-year institutions. However, we believe this slight difference in 
attainment rates is too small to provide compelling evidence that these 
regulations will harm low-income or minority students due to a possible 
shift in enrollment to public institutions. Further, as also discussed 
previously, one possible factor that contributes to graduation rates at 
public two-year institutions being lower than graduation rates at for-
profit two-year institutions is that a goal of many community college 
programs is to prepare students to transfer from public two-year 
institutions into programs offered at other institutions, particularly 
public four-year institutions. Without taking into account transfer 
outcomes, differences in graduation rates among for-profit two-year 
institutions and public two-year institutions do not provide convincing 
evidence that the regulations will negatively affect completion rates.
    Further, the Department would not expect that the regulations would 
disproportionately harm low-income or minority students, particularly 
where institutions raise quality to provide better outcomes for 
students, or where they are more selective in their admissions. 
Research shows that when challenged to attend more selective 
institutions, minority and low-income students have increased 
attainment, and that characteristics of institutions play a bigger role 
in determining student outcomes than do individual characteristics of 
attendees.\71\ \72\
---------------------------------------------------------------------------

    \71\ Bowen, W, Chingos, M., and McPherson, M. Crossing the 
Finish Line: Completing College at America's Public Universities. 
Princeton, NJ: Princeton UP, 2009.
    \72\ Bound, J., Lovenheim, M., and Turner, S. 2007. 
``Understanding the Decrease in College Completion Rates and the 
Increased Time to the Baccalaureate Degree.'' PSC Research Report 
No. 07-626. November 2007.
---------------------------------------------------------------------------

    Regardless of the distinctions between programs operated by public 
and for-profit institutions, our estimates

[[Page 64911]]

indicate that the substantial majority of programs at for-profit 
institutions will pass the D/E rates measure and we believe the net 
effect of the D/E rates measure will be that students will have the 
opportunity to enroll in programs at both public and for-profit 
institutions with better performance than programs that do not pass the 
D/E rates measure. In addition, students leaving a failing program at a 
for-profit institution may transfer to another for-profit program, but 
one that is performing well on the D/E rates measure.
    Changes: None.
    Comments: One commenter claimed the regulations do not adequately 
protect veteran students from deceptive practices by for-profit 
institutions that result in enrollment in low-quality programs. One 
commenter said that for-profit institutions increased recruiting of 
veterans by over 200 percent in just one year. Another commenter 
contended that 500,000 veterans dropped out of the top eight for-profit 
schools over the course of just one year.
    Discussion: We appreciate the commenters' concerns with respect to 
protecting students from deceptive practices by for-profit 
institutions. As discussed in the NPRM, the Senate HELP Committee 
recently investigated deceptive practices targeted at military 
veterans, particularly within the for-profit sector. In its report, it 
noted finding extensive evidence of aggressive and deceptive recruiting 
practices, high tuition, and regulatory evasion and manipulation by 
for-profit colleges in their efforts to enroll service members, 
veterans, and their families.\73\
---------------------------------------------------------------------------

    \73\ U.S. Senate, Committee on Health, Education, Labor and 
Pensions, For Profit Higher Education: The Failure to Safeguard the 
Federal Investment and Ensure Student Success, Washington: 
Government Printing Office, July 30, 2012.
---------------------------------------------------------------------------

    We believe that the regulations will help protect all prospective 
students, including veterans, from unscrupulous recruiting practices. 
As discussed in ``Section 668.410 Consequences of the D/E Rates 
Measure'' and in ``Section 668.412 Disclosure Requirements for GE 
Programs,'' prospective students will have the benefit of a fulsome set 
of disclosures about a program and its students' outcomes to inform 
their educational and financial decision making. Further, prospective 
students will be warned under Sec.  668.410 if the program in which 
they intend to enroll could become ineligible based on its D/E rates 
for the next award year. By requiring that at least three days pass 
after a warning is delivered to a prospective student before the 
prospective student may be enrolled, the prospective student will 
benefit from a ``cooling-off period'' for the student to consider the 
information contained in the warning without direct pressure from the 
institution, and for the prospective student to consider alternatives 
to the program either at the same institution or another institution. 
Moreover, the accountability framework is designed to improve the 
quality of GE programs available to prospective students by 
establishing measures that will assess whether programs provide quality 
education and training that allow students obtain gainful employment 
and thereby to pay back their student loan debt. The certification 
requirements in Sec.  668.414 will ensure that a program eligible for 
title IV, HEA program funds meets certain basic minimum requirements 
necessary for students to obtain gainful employment in the occupation 
for which the program provides training. Finally, by conditioning a 
program's continuing eligibility for title IV, HEA program funds on its 
leading to acceptable student outcomes, we believe that the D/E rates 
measure will help ensure that prospective students, including veterans, 
will be less likely to enroll in a low-quality GE program.
    Changes: None.

Accountability Metrics

    Comments: A number of commenters opposed the Department's proposal 
to use the D/E rates measure and the pCDR measure for accountability 
purposes. These commenters also offered suggestions for alternative 
metrics the Department should consider adopting in the final 
regulations.

D/E Rates Measure

    Many commenters stated that the Department should not use the D/E 
rates measure as an accountability metric because it is flawed and, 
more specifically, would not capture the lifetime earnings gains that 
arise from attending a GE program. Without knowing lifetime earnings, 
these commenters contended, it is difficult to assess what an 
appropriate amount of debt is or whether a program is providing value 
to students. They asserted that the standard way to evaluate whether it 
is worthwhile to attend a postsecondary education program is to compare 
the full benefits against the cost. Consequently, they reasoned that 
the D/E rates measure is faulty because it only captures earnings after 
a short window of time.
    Several commenters offered studies that show that a college degree 
leads to an annual increase in wages of somewhere between 4 to 15 
percent. One commenter stated that the earnings premium between a high 
school graduate and a college graduate is lowest from ages 25-29 but 
peaks from ages 45-54. One commenter asserted that, based on an 
institutional survey of students five years after their graduation from 
associate and bachelor's degree programs that compared the students' 
initial 2009 median salaries to their 2014 median salaries, the 
students' salaries increased about 50 percent over the first five years 
after graduation. Thus, the commenter suggested that the regulations 
consider earnings no less than five years after graduation for the 
calculation of D/E rates.
    Commenters also expressed concern that the earnings assessed by the 
D/E rates measure do not include other returns from higher education, 
such as fringe benefits, contributions to retirement accounts, 
subsidized insurance, paid vacations, and employment stability. 
Further, they contended that the D/E rates measure does not account for 
the social benefits that accrue to students, in addition to the 
pecuniary benefits. Other commenters posited that the benefits of 
higher education have generally trended upwards over time and so the D/
E rates measure understates the future benefits of programs that 
provide training for occupations in growing fields, such as health 
care.
    One commenter suggested that as a result of differences in what 
for-profit institutions, as opposed to community colleges, receive in 
the form of State subsidies, and because for-profit institutions pay 
taxes, any accountability metrics should be divorced from the tuition 
charged, and should instead focus on the earnings increase resulting 
from increased education, completion rates at institutions, or job or 
advanced degree placement rates.
    Finally, one commenter claimed the D/E rates measure is not valid 
because it is not predictive of default outcomes. Based on the 2012 GE 
informational rates, the commenter claimed students in programs in the 
lowest performing decile under the D/E rates measure were still more 
than four times as likely to be in repayment than in default. The 
commenter stated that, if the D/E rates measure were truly an indicator 
of affordability, there would have been much higher default and 
forbearance rates for students in programs with the highest D/E rates.

pCDR Measure

    A number of commenters also opposed the Department's proposal to 
include pCDR as an accountability metric, arguing that this metric is 
largely

[[Page 64912]]

unrelated to whether a program prepares students for gainful 
employment. Several commenters argued that the Department lacks the 
legal authority to adopt pCDR to determine GE program eligibility and 
contended that the use of cohort default rates to assess program 
eligibility is contrary to the intent of Congress, because Congress 
never explicitly authorized the Department to use cohort default rates 
to assess program eligibility. The same commenters further contended 
that the history of congressional attention to the iCDR eligibility 
standard over the years, applied with periodic amendments, reflected 
Congress's intent that cohort default rates be used only for 
institutional eligibility determinations, and left no room for the 
Department to apply that test for programmatic eligibility. Similarly, 
they contended that Congress's choice to apply cohort default rates as 
an eligibility standard for all institutions receiving title IV, HEA 
program funds indicated a congressional intent that such a test should 
not be applied only to a subset of institutions--chiefly, for-profit 
schools.
    Some commenters contended that the ruling by the court in APSCU v. 
Duncan requires the Department to base any program eligibility standard 
on expert studies or industry practice, or both. Because the Department 
did not cite to such support in the NPRM for adopting the iCDR 
methodology and the institutional eligibility threshold to determine 
program eligibility, these commenters believed the Department was 
barred from using cohort default rates to determine programmatic 
eligibility. Commenters contended that the Department provided no 
reasoned explanation in the NPRM for the proposed use of cohort default 
rates at the program level.
    Commenters also asserted that the Department provided no reasoned 
basis for adopting a 30 percent cohort default rate as the threshold 
for program eligibility for title IV, HEA program funds. They asserted 
that the Department failed to consider the bases on which Congress, in 
its 2008 amendments to the HEA, increased the iCDR threshold rate from 
25 percent to 30 percent. They argued that Congress, in amending the 
HEA to count defaults over a three-year term and raising the iCDR 
eligibility standard to 30 percent, recognized that setting a lower 
standard would deter institutions from enrolling ``minority, low-income 
students, or any subgroup that shows any risk of more defaults on 
student loans.'' The commenters conceded that iCDR was an important way 
to protect the Federal fiscal interest, but asserted that Congress did 
not consider iCDR to be a measure of educational quality, and that 
Congress did not consider rates greater than 30 percent to be evidence 
that institutions were not preparing their students adequately.
    Several commenters asserted that measures of default like pCDR 
reflect personal decisions by individual borrowers, specifically 
whether or not to repay their debt, and not the performance of a 
program. Other commenters stated that institutions cannot control how 
much students borrow, or need to borrow. In this regard, commenters 
noted that, although institutions can control the cost of attendance, 
they cannot control other factors contributing to borrowing behavior, 
such as living expenses and the student's financial resources at the 
time of enrollment, and that institutions have only a limited ability 
to affect repayment once a student has left the institution.
    Some commenters contended that the proposed pCDR measure would 
impose a stricter standard than the iCDR standard on which it was 
based, because the iCDR standard allows offset of poor results of some 
programs against the more successful rates achieved by other programs 
offered by the institution.
    While some commenters considered pCDR a poor metric for the reasons 
described, others expressed concern that pCDR would be a poor measure 
of performance because institutions could encourage students struggling 
to repay their debt to enter forbearance or deferment in order to evade 
the consequences of failing the pCDR measure. They stated that programs 
would not be held accountable for the excessive debt burden of these 
students because, by pushing students into deferment or forbearance 
during the three-year period that the pCDR measure would track 
defaults, any default would occur after the time during which the 
program would be held accountable under the proposed regulations. 
Several commenters expressed concern that, because the metric is 
subject to manipulation, the 30 percent threshold would be too lenient 
and should be lower, with some commenters suggesting a 15 percent 
threshold.

Alternative Metrics

    Commenters proposed a number of alternatives to the D/E rates and 
pCDR measures to assess the performance of gainful employment programs. 
A number of commenters, arguing that both the D/E rates and pCDR 
measures are too tenuously linked to what institutions do to affect the 
quality of training students receive, encouraged the Department to 
consider metrics more closely linked to student academic achievement, 
loan repayment behavior, or employment outcomes like job placement 
rates. Commenters proposed alternative metrics that they felt better 
account for factors that are largely outside of programs' control, such 
as fluctuations in local labor market conditions. Some commenters 
suggested that alternative metrics should be tailored to measure 
student outcomes in specific occupational fields, such as cosmetology 
or medical professions. For example, several commenters said the 
Department should use licensure exam pass rates and residency placement 
rates in tandem to evaluate medical schools. They said these metrics 
would take into account occupational preparedness and are better 
metrics than the D/E rates measure because earnings rise steadily 
across long periods of time among students completing medical degrees. 
On the other hand, one commenter expressed concern about job placement 
rates as a metric because there are no standard definitions of 
placement, national accreditation agencies each have different 
methodologies, and regional accreditation agencies do not require rates 
be reported.
    A few commenters said programs should be evaluated according to 
metrics focusing on student success in a program. Commenters suggested 
the Department consider retention and graduation rates as alternative 
metrics, as completion of a degree or certificate program is closely 
linked to whether students obtain employment. One commenter criticized 
the Department for not including a graduation rate metric in the 
regulations because, based on GE informational rates, for-profit 
institutions with default rates higher than graduation rates have a 
very large percentage of programs that do not graduate enough students 
to meet the n-size requirements for D/E rates to be calculated. The 
commenter noted a similar pattern among some community colleges with 
very low graduation rates. The commenter also arrived at the same 
conclusion based on a study conducted by College Measures, a non-profit 
organization, which examined GE programs at 1,777 two-year public and 
for-profit institutions. The study referenced indicated that, among the 
724 public and 24 for-profit institutions that had graduation rates 
below 30 percent, 29 percent of the for-profit programs with low 
graduation rates failed the D/E rates measure, while only

[[Page 64913]]

2 percent of the public institutions with low graduation rates failed 
the D/E rates measure. Based on this analysis, the commenter further 
asserted that the regulations are biased toward passing programs 
operated by public institutions because they do not include a 
graduation rate metric. According to the commenter, any program with a 
starting class that has fewer than 70 students and less than a 10 
percent graduation rate would be automatically exempt from the 
regulation, even counting four years of graduates. Another commenter 
said the Department should focus on each program's curriculum and other 
aspects of the program controlled by the institution rather than the 
proposed metrics.
    Several commenters said the Department should include a repayment 
rate or a negative amortization test instead of pCDR, which they viewed 
as unreliable and easily manipulated by institutions. Some commenters 
favored using a repayment rate rather than pCDR because the former 
would hold programs accountable for students who go into forbearance 
and are unable to reduce the principal balances on their loans. Other 
commenters asserted that a repayment rate is a preferable metric for 
students who choose income-based repayment plans because under such 
plans, students with low incomes can avoid default even though their 
loans are in negative amortization, making pCDR a less reliable metric 
than repayment rate.
    Several commenters suggested specific ways in which the Department 
could set a passing threshold for a repayment rate or negative 
amortization test. Some commenters stated that the regulations should 
provide that programs with more than half of loans in negative 
amortization would be considered failing. Several other commenters said 
the Department should invert the pCDR measure by failing programs with 
less than 70 percent of students reducing the balance on their debt. 
One commenter asserted that the Department should include a repayment 
rate metric based on the repayment definition from the 2011 Prior Rule. 
The commenter suggested that 45 percent would be an appropriate passing 
threshold for a repayment rate based on Current Population Survey (CPS) 
census data that estimates that 46.2 percent of young adults with a 
high school diploma could possibly afford student debt payments.
    Some commenters argued the Department has adequate expertise and 
authority, as the issuer of all Federal Direct Loans, to set a loan 
repayment threshold appropriate for its own loan portfolio without 
needing to rely on an unrelated external standard. Additionally, 
commenters suggested the Department convene a panel of experts to set a 
repayment rate threshold for the regulations. One commenter said the 
Department should use available data to set a repayment rate threshold 
that would be difficult for programs to manipulate.
    A few commenters offered what they believed are limitations of 
relying on a repayment rate metric. One commenter said the regulations 
should not include a repayment rate metric because such a standard 
would disproportionately affect programs providing access to low-income 
and minority students. Another commenter suggested that if the 
Department includes a repayment rate metric in the regulations, it 
should prohibit institutions from making loan payments on students' 
behalf in an attempt to increase the proportion of students counted as 
successfully in repayment. As an alternative to pCDR or a repayment 
rate metric, one commenter proposed that the regulations evaluate iCDR 
and the percentage of enrolled students borrowing to set an eligibility 
standard that would identify and curtail abuses in the short run and 
suspend program participation if both iCDR and borrowing rates are 
high.
    Some commenters believed that, if the 90/10 provisions in section 
487(a)(24) of the HEA limiting the percentage of revenue for-profit 
institutions may receive from title IV, HEA programs were eliminated, 
there would be no need for the D/E rates measure. Several commenters 
said the 90/10 provisions should be modified to include GI benefits and 
other Federal sources of aid. Some commenters argued that the 90/10 
provisions should be modified to provide for an 85/15 ratio such that a 
for-profit institution receiving more than an 85 percent share of 
revenue from title IV, HEA programs and other Federal programs would be 
determined ineligible to participate in the title IV, HEA programs.
    Other commenters asked the Department to set standards that would 
cap the prices charged or amount of loans disbursed for different kinds 
of programs. For instance, one commenter proposed that loan 
disbursements could be capped for all cosmetology programs based on the 
average earnings of individuals who enter the field.
    Several commenters contended the Department should use risk-
adjusted lifetime earnings gains net of the average cost of program 
attendance as an alternative metric. One commenter suggested that the 
regulations consider earnings before and after attendance in a program 
in order to measure program success. The commenter also argued that the 
amount of debt incurred should not be used to measure the success of a 
program.

Discussion

D/E Rates Measure

    Although the creation of a program ``value added'' measure using 
some function of earnings gains may provide some information on program 
quality, we disagree that it is more appropriate than the D/E rates 
measure as a basis for an eligibility standard. We do not believe it is 
aligned with the accountability framework of the regulations, which is 
based on discouraging institutions from saddling students with 
unmanageable amounts of debt. Furthermore, the commenters have failed 
to establish an appropriate standard supported in the research that 
demonstrates how such a measure could be used to determine whether a 
program adequately prepares students for gainful employment in a 
recognized occupation.
    The accountability framework of the regulations focuses on whether 
students who attend GE programs will be able to manage their debt. As 
we discussed in the NPRM, the gainful employment requirements are tied 
to Congress' historic concern that vocational and career training 
offered by programs for which students require loans should equip 
students to earn enough to repay their loans. APSCU v. Duncan, 870 
F.Supp.2d at 139; see also 76 FR 34392. Allowing students to borrow was 
expected to neither unduly burden the students nor pose ``a poor 
financial risk'' to taxpayers. In authorizing federally backed student 
lending, Congress considered expert assurances that vocational training 
would enable graduates to earn wages that would not pose a ``poor 
financial risk'' of default.
    Congress' decision in this area is supported by research that shows 
that high levels of debt and default on student loans can lead to 
negative consequence for borrowers. There is some evidence suggesting 
that high levels of student debt decrease the long-term probability of 
marriage.\74\ For those who do not complete a degree, greater amounts 
of student debt may raise the probability of bankruptcy.\75\ There is 
also evidence that high levels of debt

[[Page 64914]]

increase the probability of being denied credit, not paying bills on 
time, and filing for bankruptcy--particularly if students underestimate 
the probability of dropping out.\76\ Since the Great Recession, student 
debt has been found to be associated with reduced home ownership 
rates.\77\ And, high student debt may make it more difficult for 
borrowers to meet new mortgage underwriting standards, tightened in 
response to the recent recession and financial crisis.\78\
---------------------------------------------------------------------------

    \74\ Gicheva, D. ``In Debt and Alone? Examining the Causal Link 
between Student Loans and Marriage.'' Working Paper (2012).
    \75\ Gicheva, D., and U. N. C. Greensboro. ``The Effects of 
Student Loans on Long-Term Household Financial Stability.'' Working 
Paper (2013).
    \76\ Id.
    \77\ Shand, J. M. (2007). ``The Impact of Early-Life Debt on the 
Homeownership Rates of Young Households: An Empirical 
Investigation.'' Federal Deposit Insurance Corporation Center for 
Financial Research.
    \78\ Brown, M., and Sydnee, C. (2013). Young Student Loan 
Borrowers Retreat from Housing and Auto Markets. Liberty Street 
Economics, retrieved from: http://libertystreeteconomics.newyorkfed.org/2013/04/young-student-loan-borrowers-retreat-from-housing-and-auto-markets.html.
---------------------------------------------------------------------------

    Further, when borrowers default on their loans, everyday activities 
like signing up for utilities, obtaining insurance, and renting an 
apartment can become a challenge. Such borrowers become subject to 
losing Federal payments and tax refunds and wage garnishment.\79\ 
Borrowers who default might also be denied a job due to poor credit, 
struggle to pay fees necessary to maintain professional licenses, or be 
unable to open a new checking account.\80\ As a responsible lender, one 
important role for the Department is to hold all GE programs to a 
minimum standard that ensures students are able to service their debt 
without undue hardship, regardless of whether students experience 
earnings gains upon completion.
---------------------------------------------------------------------------

    \79\ https://studentaid.ed.gov/repay-loans/default.
    \80\ www.asa.org/for-students/student-loans/managing-default/.
---------------------------------------------------------------------------

    Research has consistently demonstrated the significant benefits of 
postsecondary education. Among them are private pecuniary benefits \81\ 
such as higher wages and social benefits such as a better educated and 
flexible workforce and greater civic 
participation.82 83 84 85 Even though the costs of 
postsecondary education have risen, there is evidence that the average 
financial returns to graduates have also increased.\86\
---------------------------------------------------------------------------

    \81\ Avery, C., and Turner, S. (2013). Student Loans: Do College 
Students Borrow Too Much-Or Not Enough? Journal of Economic 
Perspectives, 26(1), 165-192.
    \82\ Moretti, E. (2004). Estimating the Social Return to Higher 
Education: Evidence from Longitudinal and Repeated Cross-Sectional 
Data. Journal of Econometrics, 121(1), 175-212.
    \83\ Kane, Thomas J., and Rouse, C. E. (1995). Labor Market 
Returns to Two- and Four-Year College. The American Economic Review, 
85 (3), 600-614.
    \84\ Cellini, Stephanie R. and Chaudhary, L. (2012). ``The Labor 
Market Returns to For-Profit College Education.'' Working paper.
    \85\ Baum, S., Ma, J., and Payea, K. (2013) ``Education Pays 
2013: The Benefits of Education to Individuals and Society'' College 
Board. Available at http://trends.collegeboard.org/.
    \86\ Avery, C., and Turner, S. (2013). Student Loans: Do College 
Students Borrow Too Much-Or Not Enough? Journal of Economic 
Perspectives, 26(1), 165-192.
---------------------------------------------------------------------------

    We recognize the value of programs that lead to earnings gains and 
agree that gains are essential. However, we believe that the D/E rates 
measure, rather than a measure of earnings gains, better achieves the 
objectives of these regulations because it assesses earnings in the 
context of whether they are at a level that would allow borrowers to 
service their debt without serious risk of financial or emotional harm 
to students and loss to taxpayers.
    We also disagree with commenters who claim a low correlation 
between D/E rates and default undermines D/E rates as an indicator of 
financial risk to students. As our discussion of the D/E rates 
thresholds provides in more detail, our analyses indicate an 
association between ultimate repayment outcomes, including default, and 
D/E rates. Based on the best data available to the Department, 
graduates of programs with D/E rates above the passing thresholds have 
higher default rates and lower repayment rates than programs below the 
thresholds. Although many other factors may contribute to default 
outcomes, we believe high D/E rates are an important indicator of 
financial risk and possibility of default on student loans. In addition 
to addressing Congress' concern of ensuring that students' earnings 
would be adequate to manage their debt, research also indicates that 
debt-to-earnings is an effective indicator of unmanageable debt burden. 
An analysis of a 2002 survey of student loan borrowers combined 
borrowers' responses to questions about perceived loan burden, 
hardship, and regret to create a ``debt burden index'' that was 
significantly positively associated with borrowers' actual debt-to-
income ratios. In other words, borrowers with higher debt-to-income 
ratios tended to feel higher levels of burden, hardship, and 
regret.\87\
---------------------------------------------------------------------------

    \87\ Baum, S. & O'Malley, M. (2003). College on credit: How 
borrowers perceive their education debt. Results of the 2002 
National Loan Survey (Final Report). Braintree, MA: Nellie Mae.
---------------------------------------------------------------------------

    Further, although annual earnings may increase for program 
graduates over the course of their lives as a result of additional 
credentialing, the Department disagrees that this fact undermines the 
appropriateness of determining eligibility based on the D/E rates 
measure. Borrowers are still responsible for managing debt payments, 
which begin shortly after they complete a program, even in the early 
stages of their career.
    Repayment under the standard repayment plan is typically expected 
to be completed within 10 years; the return on investment from training 
may well be experienced over a lifetime, but benefits ultimately 
available over a lifetime may not accrue soon enough to enable the 
individual to repay the student loan debt under and within the 
schedules available under the title IV, HEA programs. These regulations 
evaluate debt service using longer repayment terms than the typical 10-
year plan, taking into account our experience with the history of 
actual borrower repayment and the use of forbearances and deferment. 
However, even the extended repayment expectations we use to amortize 
debt under the D/E rates measure (10, 15, and 20 years for non-
baccalaureate credentials, baccalaureate and master's degrees, and 
doctoral or professional degrees, respectively) do not encompass a 
lifetime of benefits. Rather, we believe it is important to measure 
whether the ratio of debt to earnings indicates whether a student is 
able to manage debt both in the early years after completion, and in 
later years, since students must be able to sustain loan payments at 
all stages, regardless of the benefits that may accrue to them over 
their entire career.

pCDR Measure

    As we discussed in the NPRM, the Department's proposal to include 
pCDR as a measure of whether a program prepares students for gainful 
employment in a recognized occupation is, like the D/E rates measure, 
grounded both in statute and legislative history. We included the pCDR 
measure as an accountability metric in the proposed regulations because 
it would measure actual repayment outcomes and because it would assess 
the outcomes of both students who completed a GE program and those who 
had not. Both reasons are responsive to the concerns of Congress in 
making the student aid loan programs available to students in career 
training programs. As previously discussed, the legislative history 
regarding GE programs shows that Congress considered these programs to 
warrant eligibility on the basis that they would produce skills and, 
therefore, earnings at a level that would allow students to manage 
their debt. This concern extended not only to students who completed a 
program, but also to those who transferred or dropped out of a program. 
Accordingly, to measure whether a program is leading to

[[Page 64915]]

unmanageable debt for both students who complete a program and those 
who do not, we proposed adopting the identical eligibility threshold 
for pCDR that Congress established for iCDR.
    The Department strongly believes in the importance of holding GE 
programs accountable for the outcomes of students who do not complete a 
program and ensuring that institutions make strong efforts to increase 
completion rates. As previously discussed, many commenters offered 
alternate metrics for the Department to consider adopting, including 
those that would measure the outcomes of students who do not complete 
their programs. Given the wealth of feedback we received on this issue 
through the comments, we believe further study is necessary before we 
adopt pCDR or another accountability metric that would take into 
account the outcomes of students who do not complete a program. We also 
believe further study is necessary before adopting other metrics based 
on CDR, including ``borrowing indices'' that take into account iCDR and 
the percentage of students who take out loans at the institution. Using 
the information we will receive from institutions through reporting, we 
will continue to develop a robust measure of outcomes for students who 
do not complete a program, which may include some measure based on 
repayment behavior. Because pCDR has been removed as an accountability 
metric, we do not specifically address the comments related to its 
operation for accountability purposes.
    Despite our decision not to use pCDR as an accountability metric, 
we continue to believe in the importance of holding GE programs 
accountable for the outcomes of students who do not complete a program 
and ensuring that institutions make strong efforts to increase 
completion rates. Default rates are important information for students 
to consider as they decide where to pursue, or continue, their 
postsecondary education and whether or not to borrow to attend a 
particular program. Accordingly, we are retaining pCDR as one of the 
disclosures that institutions may be required to make for GE programs 
under Sec.  668.412. We believe that requiring this disclosure, along 
with other potential disclosures such as completion, withdrawal, and 
repayment rates, will bring accountability and transparency to GE 
programs with high rates of non-completion.

Alternative Metrics

    We appreciate the suggestions to use retention rates, employment or 
job placement rates, and completion rates as alternative measures to 
the D/E rates measure. While these are all valid and useful indicators 
for specific purposes, there is no evidence that any of these measures, 
by themselves, indicates whether a student will be likely to repay his 
or her debt. For example, placing a student in a job related to the 
training provided by a program is a good outcome, but without 
considering any information related to the student's debt or earnings, 
it is difficult to say whether the student will be able to make monthly 
loan payments. We also disagree that the D/E rates measure is tenuously 
linked to the performance of programs because it does not take into 
account these alternative metrics. We believe the measure appropriately 
holds programs accountable for whether students earn enough income to 
manage their debt after completion of the program.
    We do not agree that, without a graduation rate metric, poorly 
performing programs will not be held accountable under the regulations 
due to having an insufficient number of students who complete the 
programs to be evaluated under the D/E rates measure. First, in order 
to address this concern, we calculate the D/E rates measure over a 
four-year cohort period for small programs in order to make it more 
likely that programs with low graduation rates are evaluated. Second, 
although the regulations do not include pCDR as an accountability 
metric, they will require programs to disclose completion rates and 
pCDR to students and we believe these disclosure items will help 
students and families make more informed enrollment decisions. Third, 
as previously stated, the focus of the D/E rates measure is to hold 
programs accountable for whether students are able to manage their debt 
after completion, and we do not believe it is appropriate to base 
eligibility for title IV, HEA program funding on a metric, such as 
graduation rate, that does not indicate whether a student will be 
likely to repay his or her debt.
    We disagree with comments suggesting we tailor alternative metrics 
to measure student outcomes in specific occupational fields, such as 
cosmetology or medical professions. It is neither feasible nor 
appropriate to apply different metrics to different kinds of programs. 
By itself, the occupation an individual receives training for does not 
by itself determine whether debt is manageable. Rather, it is related 
to the debt that the individual accumulates and the earnings achieved 
as a result of the program's preparation--exactly what the D/E rates 
measure assesses.
    Similarly, we believe it is inappropriate to rely on licensure exam 
pass rates and residency placement rates to evaluate medical programs 
and other graduate programs. There is no evidence that any of these 
measures, by themselves, would indicate whether a student will be 
likely to be able to repay his or her debt.
    We also disagree that programs should be evaluated according to 
each program's curriculum and other aspects of the program controlled 
by the institution rather than under the D/E rates measure. Although 
factors such as program curriculum and quality of instruction may 
contribute to the value of the training students receive, other factors 
such as earnings and student debt levels affect whether students are 
able to manage their debt payments after completion. Accordingly, we 
believe it is more appropriate to evaluate programs based on the 
outcomes of their students after completion, rather than the curricular 
content or educational practices of the institutions operating the 
programs.
    We continue to believe that a repayment rate metric is an 
informative measure of students' ability to repay their loans and an 
informative measure of outcomes of both students who do and do not 
complete a program. However, as discussed in the NPRM, we have been 
unable to determine an appropriate threshold for distinguishing whether 
a program meets the minimum standard for eligibility. We have not 
identified any expert opinion, nor has any statistical analysis 
demonstrated, that a particular level of repayment should serve as an 
eligibility standard. We appreciate suggestions for repayment rate 
thresholds of 70 percent and 45 percent. Commenters indicated 70 
percent may be appropriate because it seems to correspond to 100 
percent minus 30 percent, the threshold for iCDR. We do not believe 
this rationale is sufficient as repayment rate reflects the percentage 
of students reducing the principal on their loans, rather than the 
percentage of students avoiding default. The commenter who recommended 
45 percent relied on Census data for justification. However, we have 
been unable to identify any specific support in the Census data for 
this proposition.
    The Department's status as lender does not eliminate the need to 
support any standard adopted to define eligibility. As a result, we 
decline to adopt a repayment-based eligibility metric at this time.
    Similarly, we lack expert opinion or statistical analysis that 
would support other metrics and thresholds based on borrower repayment. 
For example, we

[[Page 64916]]

are unable to identify expert opinion or statistical analysis that 
supports negative amortization as a metric, or the proposed 50 percent 
threshold, as an appropriate measure for whether students are able to 
manage their debt. Some students who have chosen income-based or 
graduated repayment plans may be able to manage their debt payment, but 
are observed as being in negative amortization. On the other hand, 
students who reduce the principal on their debt may be earning too 
little to manage their debt without experiencing financial hardship.
    Finally, with respect to suggestions that the 90/10 provisions 
should be modified, we note that such changes are beyond the 
Department's regulatory authority because the 90/10 requirements are 
set in statute. Moreover, even if the Department had authority to 
change the 90/10 provisions, we do not believe doing so would serve the 
purposes of these regulations. First, the 90/10 provisions measure the 
revenues of institutions, not students' ability to repay debt 
accumulated as a result of enrolling in a GE program. Second, the 
provisions apply only to for-profit institutions and could not be 
equally applied to GE programs in other sectors.
    Changes: We have removed pCDR as an accountability metric. Other 
changes affecting the use of pCDR as a disclosure item are discussed in 
``Section 668.413 Calculating, Issuing, and Challenging Completion 
Rates, Withdrawal Rates, Repayment Rates, Median Loan Debt, Median 
Earnings, and Program Cohort Default Rate.''
    Because the final regulations include only the D/E rates measure as 
an accountability metric, we have removed the term and definition of 
``GE measures'' from Sec.  668.402.
    Comments: Commenters posited that because the D/E rates measure 
does not measure actual benefits, it would have the effect of 
artificially reducing program prices and, as a result, lowering quality 
and academic standards.
    Discussion: The Department disagrees that the D/E rates measure 
will result in GE programs with lower educational quality or less 
rigorous academic standards than they would have in the absence of the 
regulations. According to our data, the great majority of GE programs 
in all sectors will pass the D/E rates measure. Hence, most programs 
will not have to lower their prices as a result of the D/E rates 
measure.
    Programs with high D/E rates will have several ways to ensure that 
the performance of their programs meet the standards of the regulations 
while maintaining or improving the quality of the training they 
provide, such as: Providing financial aid to students with the least 
ability to pay in order to reduce the number of students borrowing and 
the amount of debt that students must repay upon completion; improving 
the quality of the vocational training they offer so that students are 
able to earn more and service a larger amount of debt; and decreasing 
prices for students and offsetting any loss in revenues by reducing 
institutional or program expenditures in areas not affecting programs 
quality, such as administrative overhead, recruiting, and advertising.
    Changes: None.
    Comments: One commenter asserted that short periods of attendance 
at GE programs may provide students with benefits not measured by the 
D/E rates or pCDR measures because underserved students can still 
acquire some skills even if they do not complete their program. The 
commenter argued that the regulations should recognize the benefits 
associated with partial completion of a program as a positive outcome 
by relying on a metric that measures incremental increases in the net 
present value of earnings. The commenter stated that the proposed 
regulations would not accomplish this because the D/E rates measure 
does not include the outcomes of students who do not complete a program 
and the pCDR measure punishes all ``churn,'' regardless of whether 
partial completion may have some positive benefits.
    Discussion: We do not agree that the regulations should 
specifically recognize partial completion. Although students, including 
those from underserved backgrounds, may gain some benefit from 
attending a GE program even if they do not complete, we do not believe 
that some other negative outcome, such as high debt burden in the case 
of the D/E rates measure, should be ignored. Further, these students 
would presumably benefit even more by reaching completion.
    Changes: None.
    Comments: A few commenters said the D/E rates measure is flawed 
because it treats short-term certificate programs the same as graduate 
programs. The commenters said certain programs, such as certificate 
programs, are designed to leave graduates with little debt, but more 
short-term earnings gains, while graduate programs may produce larger 
debt levels, but have larger increases in lifetime earnings. Commenters 
suggested that the Department establish an alternative metric that 
takes into account the fact that students in professional graduate 
programs take out large amounts of debt but earn high enough lifetime 
earnings to service that debt.
    Discussion: We believe that the D/E rates measure is an appropriate 
metric to assess all GE programs, including graduate professional 
programs. These regulations will help ensure that students who attend 
GE programs are able to manage their debt. Although graduates of 
professional programs may experience increased earnings later, as 
discussed previously, earnings must be adequate to manage debt both in 
the early years after entering repayment and in later years, regardless 
of what an individual's lifetime earnings may be.
    Further, as discussed later in this section, the discretionary 
income rate will help accurately assess programs that may result in 
higher debt that may take longer to repay but also provide relatively 
higher earnings. Also, as discussed in ``Section 668.404 Calculating D/
E Rates,'' the regulations apply a relatively longer 20-year 
amortization period to the D/E rates calculation for graduate programs, 
and assess earnings for medical and dental programs at a later time 
after completion to account for time in a required internship or 
residency.
    Changes: None.

D/E Rates Thresholds

    Comments: Some commenters suggested that the D/E rates thresholds 
should be those established in the 2011 Prior Rule--a discretionary 
income rate threshold of 30 percent and an annual earnings rate 
threshold of 12 percent. Commenters suggested that because the D/E 
rates thresholds in these regulations differ from those in the 2011 
Prior Rule, the D/E rates thresholds are arbitrary.
    Other commenters cited studies and data in support of alternative 
thresholds and stated that the Department's choice of thresholds more 
stringent than those they believed were supported by the studies is 
arbitrary and capricious, particularly in their application to the for-
profit industry.
    Commenters argued the 12 percent threshold for the annual earnings 
rate is inappropriate because, based on an NCES study, a substantial 
percentage of first-time bachelor's degree recipients have an annual 
income rate greater than 12 percent.\88\ The study analyzed earnings 
and debt levels collected by NCES in its 1993/94, 2000/01, and 2008/09 
Baccalaureate and Beyond Longitudinal Studies Survey. According to the 
study, in 2009, 31 percent of bachelor's degree recipients who borrowed 
and entered repayment had an annual income rate greater than 12

[[Page 64917]]

percent one year after graduation. Commenters noted 26 percent of 
recipients who borrowed at public institutions and 39 percent of 
recipients who borrowed at private, non-profit institutions exceeded 
the 12 percent threshold, suggesting the threshold for the annual 
earnings rate is too low. Commenters also contended the annual earnings 
rate threshold is inappropriately low because the same study indicated 
the average monthly loan payment as a percentage of income among 
bachelor's degree recipients who borrowed, were employed, and were 
repaying their loans one year after graduation was about 13 percent in 
2009.
---------------------------------------------------------------------------

    \88\ NCES, ``Degrees of Debt,'' NCES 2014-11.
---------------------------------------------------------------------------

    One commenter reached similar conclusions based on a study that 
used Beginning Postsecondary Students Longitudinal Study (BPS) data to 
indicate annual earnings rates are, on average, about 10.5 percent 
among all bachelor's degree recipients six years after enrollment.\89\
---------------------------------------------------------------------------

    \89\ Avery, C., and Turner, S. (2013). Student Loans: Do College 
Students Borrow Too Much-Or Not Enough? Journal of Economic 
Perspectives, 26(1), 165-192.
---------------------------------------------------------------------------

    According to some commenters, a 2010 study conducted by Mark 
Kantrowitz indicates that the majority of personal finance experts 
believe that an acceptable annual debt-to-earnings ratio falls between 
10 percent and 15 percent.\90\ These commenters suggested that the 
Department's reliance on research conducted by Sandy Baum and Saul 
Schwartz in 2006 in establishing the 8 percent annual earnings rate 
threshold is arbitrary. The commenters stated that Baum and Schwartz 
acknowledge that the 8 percent threshold is based on mortgage 
underwriting practices, and they believe that there is not sufficient 
research to justify using an 8 percent annual earnings rate in the 
context of the regulations. Specifically, the commenters stated that 
Baum and Schwartz criticized the 8 percent threshold as not necessarily 
applicable to higher education loans because the 8 percent threshold 
(1) reflects a lender's standard of borrowing, (2) is unrelated to 
individual borrowers' credit scores or their economic situations, (3) 
reflects a standard for potential homeowners rather than for recent 
college graduates who generally have a greater ability and willingness 
to maintain higher debt loads, and (4) does not account for borrowers' 
potential to earn a higher income in the future. Commenters emphasized 
that Baum and Schwartz believe that using the difference between the 
front-end and back-end ratios historically used in the mortgage 
industry as a benchmark for manageable student loan borrowing has no 
particular merit or justification. The commenters believed the 
Department should recognize that borrowing for education costs is 
different from borrowing for a home mortgage because education tends to 
cause earnings to increase. As a result, the commenters believed the 
Department should increase the threshold.
---------------------------------------------------------------------------

    \90\ Kantrowitz, M. (2010). Finaid.com. What is Gainful 
Employment? What is Affordable Debt?, available at www.finaid.org/educators/20100301gainfulemployment.pdf.
---------------------------------------------------------------------------

    Some commenters contended that the research by Baum and Schwartz 
also suggests that increased burden beyond the 8 percent annual 
earnings rate may be a conscious choice by those early in a career to 
take on increased burden and that the research justifies an annual 
earnings rate threshold of 12 to 18 percent, and a discretionary income 
rate threshold of 30 to 45 percent as ``reasonable.'' \91\ One 
commenter said the Department could arrive at an annual earnings rate 
threshold higher than 8 percent using a methodology similar to the one 
cited by the Department in the NPRM. Specifically, the commenter said a 
higher threshold is justified by regulations issued by the Consumer 
Financial Protection Bureau (CFPB) that became final on January 10, 
2014, defining the total debt service-to-earnings ratio at 43 percent 
for the purpose of a qualified mortgage. Moreover, the commenter cited 
the 2008 consumer expenditures survey showing that, on average, 
associate degree recipients pay 27 percent of income and bachelor's 
degree recipients pay 25 percent of income toward housing costs, 
including mortgage principal and interest. Thus, the commenter said 
this would yield 16 percent and 18 percent of income available to pay 
for other debt, such as education-related loans. The commenter also 
asserted a higher annual earnings rate threshold is warranted because 
some mortgage lenders use a 28 percent to 33 percent threshold for 
mortgage debt, which still leaves 10 percent to 15 percent of income 
available for other debt.
---------------------------------------------------------------------------

    \91\ Baum, S., and Schwartz, S. (2006). How Much Debt is Too 
Much? Defining Benchmarks for Managing Student Debt.
---------------------------------------------------------------------------

    Some commenters suggested that the Department should base the 
annual earnings rate threshold on a 2003 GAO study ``Monitoring Aid 
Greater Than Federally Defined Need Could Help Address Student Loan 
Indebtedness'' (GAO-03-508).\92\ Commenters said that the GAO study 
indicated that 10 percent of first-year income is the generally agreed-
upon standard for student loan repayment and that the Department itself 
established a performance indicator of maintaining borrower 
indebtedness and average borrower payments for Federal student loans at 
less than 10 percent of borrower income in the first repayment year in 
the Department's ``FY 2002 Performance and Accountability Report.'' 
\93\
---------------------------------------------------------------------------

    \92\ The GAO report was not undertaken to determine acceptable 
debt burdens, but rather, as stated in the report, ``to determine 
how often students who were federal financial aid recipients 
received aid that was greater than their federally defined financial 
need.'' GAO-03-508 at 19. The report contains neither an analysis of 
debt burden nor reference to the 10 percent debt burden rate as a 
``generally-agreed upon'' standard; the GAO report merely cites, 
without comment, the 10 percent figure as a Department performance 
indicator.
    \93\ The Department used the 10 percent debt/income indicator 
without elaboration. The stated purpose of the indicator was for the 
Department to assess its own progress in meeting certain standards, 
including the debt-to-earnings ratios of students. See page 165, 
available at http://www2.ed.gov/about/reports/annual/2002report/index.html.
---------------------------------------------------------------------------

    One commenter suggested that title IV, HEA program funds that 
students use to pay room and board costs should be factored into the D/
E rates calculations because these funds are allowed to be used for 
those purposes and schools may be tempted to shift costs between 
tuition and room and board in order to create more favorable D/E rates. 
The commenter proposed that if these costs are factored into the D/E 
rates calculations, the passing thresholds should be increased from 8 
percent to 15 percent for the annual earnings rate and from 20 percent 
to 30 percent for the discretionary income rate.
    One commenter criticized the D/E rates measure and the thresholds 
of 8 and 20 percent because they would be sensitive to changes in the 
interest rate. The commenter explained that an increase in the interest 
rate would yield a lower maximum allowable total annual debt service 
amount as a percentage of annual earnings, since the monthly payment 
will be higher. For example, the commenter noted that an increase in 
the loan interest rate to 6.8 percent would increase the annual debt 
service amount, and therefore the debt-to-annual earnings ratio of a 
program, significantly, making it more difficult for institutions to 
pass the D/E rates measure.
    Some commenters suggested that the 8 percent annual earnings rate 
and 20 percent discretionary income rate are too high to support 
sustainable debt levels. Commenters suggested that the annual earnings 
rate threshold is too high because, as Baum and Schwartz

[[Page 64918]]

explained, a supportable annual earnings rate of 8 percent assumes that 
all non-housing debts do not exceed 8 percent of annual income. 
Commenters suggested that all other debts, including, but not 
exclusively, student loan debts, should be included in that 8 percent 
threshold, and, thus, the Department should provide a buffer to 
borrowers with other debts and investments to ensure sustainable debt 
levels. Other commenters suggested that the D/E rates thresholds are 
too high because they do not account for other educational costs 
(beyond tuition, fees, books, supplies, and equipment) which may limit 
students' ability to repay debt.
    In recommending that the annual earnings rate threshold be 
strengthened, some commenters noted that allowing a passing threshold 
of up to 8 percent for student loan debt alone already fails to account 
for a student's other debts, but allowing up to 12 percent before a 
program is failing the D/E rates measure is without a sound rationale 
and should be eliminated from the regulations after a phase-in period.
    Commenters also noted that a student's debt is likely to be 
understated because the same interest rate that is used for calculating 
the annual debt service for Federal Direct Unsubsidized loans would 
also be used to calculate the debt service of private education loans, 
which are used more by students attending for-profit institutions, and 
which typically have rates equal to, or higher, than the Direct 
Unsubsidized loan rate. For these reasons, the commenters argued that 
the Department should avoid using any threshold higher than 8 percent 
of annual earnings.
    With respect to the discretionary income rate threshold, commenters 
suggested that changes made by section 2213 of the Student Aid and 
Fiscal Responsibility Act (SAFRA) to lower the cap on allowable income-
based repayments from 15 percent to 10 percent of discretionary income 
support a lower discretionary income rate threshold.\94\ Furthermore, 
commenters stated that the 20 percent discretionary income rate 
threshold recommended by Baum and Schwartz provides an absolute maximum 
discretionary income rate that anyone could reasonably pay and that 
should never be exceeded. Accordingly, the commenters contended that 
the discretionary income rate thresholds for the D/E rates measure are 
far too high.
---------------------------------------------------------------------------

    \94\ Healthcare and Education Reconciliation Act of 2010, Public 
Law 111-152, Sec.  2213, March 30, 2010, 124 Stat 1029, 1081.
---------------------------------------------------------------------------

    Discussion: We do not agree with the commenters that argued for 
passing D/E rates thresholds of 12 percent of annual earnings and 30 
percent of discretionary income, rather than 8 percent and 20 percent. 
Instead, we establish 12 percent and 30 percent as the upper boundaries 
of the zone. Although these thresholds differ from those established in 
the 2011 Prior Rule, they are supported by a reasoned basis as we 
outlined in the NPRM and in the following discussion.
    We first clarify the difference between the term ``debt'' as used 
in the D/E rates measure and as used in the literature and opinions on 
which those commenters who consider the D/E rates thresholds too strict 
rely. In connection with the 2011 Prior Rule and during the negotiated 
rulemaking process for these regulations, institutional representatives 
repeatedly stressed the inability of institutions to control the amount 
of debt that their students incurred.\95\ In response to that concern, 
in Sec.  668.404(b)(1) of the regulations, the Department limits the 
amount of debt that will be evaluated under the D/E rates measure to 
the amount of tuition and fees and books, supplies, and equipment, 
unless the actual loan amount is smaller--in which case the Department 
evaluates the actual loan amount, including any portion taken out for 
living expenses. Thus, the D/E rates measure will typically capture, as 
a commenter noted, not the actual total student debt, but only a 
portion of that debt--up to the amount of direct charges. The 
commenters cite analysis and authority opining that the appropriate 
levels of student loan debt that borrowers can manage are in the range 
of 10 percent to 15 percent of annual income.\96\ That position is not 
inconsistent with the standard we adopt here because those opinions 
address the actual student loan debt that borrowers must repay--what 
could be called the borrower's real debt burden. That approach is 
reasonable when addressing actual borrower debt burden, and it is the 
Department's approach when calculating the debt burden for an 
individual student borrower in other regulations. See, e.g., section 
2213 of the SAFRA and 34 CFR 685.209. In contrast, the D/E rates 
measure assesses aggregate debt burden for a cohort of borrowers, and 
does so using a formula that holds the institution accountable only for 
the borrowing costs under its control--tuition, fees, books, equipment, 
and supplies. Accordingly, we decline to raise the annual earnings rate 
threshold to 12 percent and discretionary income rate threshold to 30 
percent to capture the total amount borrowed; and we also decline to 
lower the rates to below 8 percent and 20 percent, respectively, to 
account for the exclusion of other debt.
---------------------------------------------------------------------------

    \95\ Indeed, in the notice of proposed rulemaking for the 2011 
Prior Rule, the Department proposed counting the full amount of loan 
debt for calculating the debt-to-earnings ratios. 75 FR 43639. In 
response to comments, in the 2011 Prior Rule, the Department capped 
the loan debt at the lesser of tuition and fees or the total amount 
borrowed. 76 FR 34450.
    \96\ See, e.g., Kantrowitz, M. (2010). Finaid.com. What is 
Gainful Employment? What is Affordable Debt?, available at 
www.finaid.org/educators/20100301gainfulemployment.pdf. The article 
addresses the proposed standard included in the notice of proposed 
rulemaking for the 2011 Prior Rule, which included all debt, and 
states ``The most common standards promoted by personal finance 
experts are 10% and 15% of [gross] income.'' At 10.
---------------------------------------------------------------------------

    In reference to the comment suggesting that title IV, HEA program 
funds that students use to pay room and board costs should be factored 
into the D/E rates calculations, we continue to believe that, for the 
purpose of the D/E rates measure, loan debt should be capped at the 
amount charged for tuition and fees and books, supplies, and equipment, 
because those costs are within an institution's control. We do not 
believe that it is reasonable to include room and board charges in the 
amount at which loan debt is capped. Unlike tuition and fees, books, 
equipment, and supplies, costs which all students must pay for, room 
and board are within the choice of the student, and their inclusion 
runs counter to the general position that we hold schools accountable 
under these metrics for those costs that are under their control. Costs 
of room and board--or allowance for room and board, for students not in 
institutional housing--vary from institution to institution, depend on 
the housing choices actually available to, as well as the choices 
within those options of, individuals, and even the locale of the 
available housing choices. Including room and board would not only 
appear impracticable but difficult to implement in a manner that treats 
similar or identical programs in an evenhanded manner for 
accountability purposes as well as disclosure purposes.
    We also disagree with the commenters who believe the failing 
thresholds should be lower because the debt payment calculations do not 
take into account debt other than student loan debt. Because of the 
substantial negative consequences associated with a program's loss of 
title IV, HEA program eligibility, we believe it is appropriate to 
maintain the failing thresholds at 12 percent and 30 percent. Some 
programs may enroll students with very little debt other than the debt 
they accrue to attend their program. Decreasing the failing thresholds 
on the basis that students, on average, accrue non-educational debt

[[Page 64919]]

would risk setting an overly strict standard for some programs.
    We also clarify that, as discussed in ``Sec.  668.404 Calculating 
D/E Rates,'' we calculate interest rates for the annual debt payment 
using a sliding scale average based on the credential level of a 
program and, for most students, these interest rates are below the 
actual interest payments made by students. Although we agree the 
interest rates used in the calculation of D/E rates, as discussed in 
``Sec.  668.404 Calculating D/E Rates,'' for most programs, result in 
debt calculations that are conservatively low estimates of the actual 
debt payments made by students, we disagree with the commenters arguing 
that we should set the failing thresholds for the D/E rates below 12 
percent and 30 percent because of our interest rate assumptions. Since 
the interest rates used in the calculation of the D/E rates measure are 
conservatively low estimates of the actual debt payment made by 
students, we also disagree with the commenters who believe the D/E 
rates thresholds are too low because they are sensitive to interest 
rates.
    As we stated in the NPRM, the passing thresholds for the 
discretionary income rate and the annual earnings rate are based upon 
mortgage industry practices and expert recommendations. The passing 
threshold for the discretionary income rate is set at 20 percent, based 
on research conducted by economists Sandy Baum and Saul Schwartz, which 
the Department previously considered in connection with the 2011 Prior 
Rule.\97\ Specifically, Baum and Schwartz proposed a benchmark for a 
manageable debt level of not more than 20 percent of discretionary 
income. That is, they proposed that borrowers have no repayment 
obligations that exceed 20 percent of their income, a level they found 
to be unreasonable under virtually all circumstances.\98\ The passing 
threshold of 8 percent for the annual earnings rate has been a fairly 
common mortgage-underwriting standard, as many lenders typically 
recommend that all non-mortgage loan installments not exceed 8 percent 
of the borrower's pretax income.\99\
---------------------------------------------------------------------------

    \97\ Baum, S., and Schwartz, S. (2006). How Much Debt is Too 
Much? Defining Benchmarks for Managing Student Debt. See also S. 
Baum, ``Gainful Employment,'' posting to The Chronicle of Higher 
Education, http://chronicle.com/blogs/innovations/gainful-employment/26770, in which Baum described the 2006 study:
    This paper traced the history of the long-time rule of thumb 
that students who had to pay more than 8% of their incomes for 
student loans might face difficulties and looked for better 
guidelines. It concluded that manageable payment-to-income ratios 
increase with incomes, but that no former student should have to pay 
more than 20% of their discretionary income for all student loans 
from all sources.
    \98\ Id.
    \99\ Id. at 2-3.
---------------------------------------------------------------------------

    Additionally, the 8 percent cutoff has long been referred to as a 
limit for student debt burden. Several studies of student debt have 
accepted the 8 percent standard.\100\ \101\ \102\ \103\ Some State 
agencies have established guidelines based on this limit. In 1986, the 
National Association of Student Financial Aid Administrators identified 
8 percent of gross income as a limit for excessive debt burden.\104\ 
Finally, based on a study that compared borrowers' perception of debt 
burden versus their actual debt-to-earnings ratios, Baum and O'Malley 
determined that borrowers typically feel overburdened when that ratio 
is above 8 percent.\105\
---------------------------------------------------------------------------

    \100\ Greiner, K. (1996). How Much Student Loan Debt Is Too 
Much? Journal of Student Financial Aid, 26(1), 7-19.
    \101\ Scherschel, P. (1998). Student Indebtedness: Are Borrowers 
Pushing the Limits? USA Group Foundation.
    \102\ Harrast, S.A. (2004). Undergraduate Borrowing: A Study of 
Debtor Students and their Ability to Retire Undergraduate Loans. 
NASFAA Journal of Student Financial Aid, 34(1), 21-37.
    \103\ King, T., & Frishberg, I. (2001). Big Loans, Bigger 
Problems: A Report on the Sticker Shock of Student Loans. 
Washington, DC: The State PIRG's Higher Education Project. Available 
at www.pirg.org/highered/highered.asp?id2=7973.
    \104\ Illinois Student Assistance Commission (2001). Increasing 
College Access . . . or Just Increasing Debt? A Discussion about 
Raising Student Loan Limits and the Impact on Illinois Students.
    \105\ Baum, S., and O'Malley, M. (2002, February 6). College on 
Credit: How Borrowers Perceive their Education Debt: Results of the 
2002 National Student Loan Survey. Final Report. Braintree, MA: 
Nellie Mae Corporation.
---------------------------------------------------------------------------

    We note that we disagree with the characterization of some 
commenters that the paper by Baum and Schwartz that we rely on for 
support of the 20 percent discretionary income rate threshold rejects 
the 8 percent annual earnings rate threshold and that for this reason, 
a higher threshold for the annual earnings rate is more 
appropriate.\106\ In their review of relevant literature, Baum and 
Schwartz specifically acknowledge the widespread acceptance of the 8 
percent standard and conclude that, although it is not as precise as a 
standard based on a function of discretionary earnings, it is ``not . . 
. unreasonable.'' \107\ Further, drawing from their analysis of 
manageable debt in relation to discretionary earnings, Baum and 
Schwartz recommend a sliding scale limit for debt-to-earnings, based on 
the level of discretionary earnings, that results in a ``maximum Debt-
Service Ratio'' standard generally stricter than 8 percent.\108\
---------------------------------------------------------------------------

    \106\ Baum, S., and Schwartz, S. (2006). How Much Debt is Too 
Much? Defining Benchmarks for Managing Student Debt.
    \107\ Id., at 3.
    \108\ Id., at 12, Table 10
---------------------------------------------------------------------------

    More recently, financial regulators released guidance that debt 
service payments from all non-mortgage debt should remain below 12 
percent of pretax income. In particular, current Federal Housing 
Administration (FHA) underwriting standards set total debt at an amount 
not exceeding 43 percent of annual income, a standard that, as noted by 
a commenter, was adopted by the CFPB in recently published regulations, 
with housing debt comprising no more than 31 percent of that total 
income, leaving 12 percent for all other debt, including student loan 
debt, car loans, and all other consumer debt.\109\ That 12 percent is 
consumed by credit card debt (2.25 percent) and by other consumer debt 
(9.75 percent), which includes student loan debt. \110\ The 2010 
Federal Reserve Board Survey of Consumer Finances found that student 
debt comprises ``among families headed by someone less than age 35, 
65.6 percent of their installment debt was education related in 2010.'' 
\111\ Eight percent is an appropriate minimum standard because it falls 
reasonably within the 12 percent of gross income allocable to non-
housing debt under current lending standards as well as the 9.75 
percent of gross income attributable to non-credit card debt.\112\ 
Thus, we disagree with

[[Page 64920]]

commenters that state current FHA underwriting standards provide strong 
support for a threshold greater than 8 percent for the annual earnings 
rate.
---------------------------------------------------------------------------

    \109\ FHA, Risk Management Initiatives: New Manual Underwriting 
Requirements, 78 FR 75238, 75239 (December 11, 2013).
    \110\ Vornovytskyy, M., Gottschalck, A., and Smith, A., 
Household Debt in the U.S.: 2000 to 2011, U.S. Census Bureau, Survey 
of Income and Program Participation Panels. Available at 
www.census.gov/people/wealth/files/Debt%20Highlights%202011.pdf. 
Table A-2 shows that median credit card debt of households under 35 
years of age as of 2011 was $3,000, and median other unsecured debt 
for that same cohort, including student loans and other unsecured 
debt, was $13,000. The ``other'' debt accounts for 81 percent of 
unsecured household debt. Assuming that the lending standards 
described here allocate 12 percent to non-housing debt, and 81 
percent of that allocation is 9.75 percent allocable to non-credit 
card debt, which includes student loan debt, the 8 percent annual 
earnings rate appears to fall within this range.
    \111\ Bricker, J., Kennickell, A., Moore, K., and Sabelhaus, J. 
(2012). ``Changes in U.S. Family Finances from 2007 to 2010: 
Evidence from the Survey of Consumer Finances,'' Federal Reserve 
Bulletin, 98(2). Available at www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf.
    \112\ Vornovytskyy, M., Gottschalck, A., and Smith, A., 
Household Debt in the U.S.: 2000 to 2011, U.S. Census Bureau, Survey 
of Income and Program Participation Panels. Available at 
www.census.gov/people/wealth/files/Debt%20Highlights%202011.pdf. 
Table A-2 shows that median credit card debt of households under 35 
years of age as of 2011 was $3,000, and median other unsecured debt 
for that same cohort, including student loans and other unsecured 
debt, was $13,000. The ``other'' debt accounts for 81 percent of 
unsecured household debt. Assuming that the lending standards 
described here allocate 12 percent to non-housing debt, and 81 
percent of that allocation is 9.75 percent allocable to non-credit 
card debt, which includes student loan debt, the 8 percent annual 
earnings rate appears to fall within this range.
---------------------------------------------------------------------------

    In the 2011 Prior Rule, the passing thresholds for the debt-to-
earnings ratios were based on the same expert recommendations and 
industry practice, but were increased by 50 percent to 30 percent for 
the discretionary income rate and 12 percent for the annual earnings 
rate to ``provide a tolerance over the baseline amounts to identify the 
lowest-performing programs, as well as to account for former students . 
. . who may have left the workforce voluntarily or are working part-
time.'' 76 FR 34400. As we explained in the NPRM, we continue to 
believe that the stated objectives of the 2011 Prior Rule--to identify 
poor performing programs, to build a ``tolerance'' into the thresholds, 
and to ensure programs are accurately evaluated as to whether they 
produce graduates with acceptable levels of debt--are better achieved 
by setting 30 percent for the discretionary income rate and 12 percent 
for the annual earnings rate as the upper boundaries for a zone, or as 
failing thresholds, rather than as the passing thresholds. We base this 
change on our evaluation of data obtained after the 2011 Prior Rule. We 
conclude that even though programs with D/E rates exceeding the 20 
percent and 8 percent thresholds may not all be resulting in egregious 
levels of debt in relation to earnings, these programs still exhibit 
poor outcomes and unsustainable debt levels. For the following reasons, 
our analysis of the programs we evaluated using data reported by 
institutions after the 2011 Prior Rule went into effect indicates that 
the stricter thresholds would more effectively identify poorly 
performing programs.
    First, we examined how debt burden that would have passed the 2011 
Prior Rule thresholds would affect borrowers with low earnings. 
Students who completed programs that passed the 2011 Prior Rule 
thresholds (12 percent/30 percent) but would not pass the 8 percent/20 
percent thresholds adopted in these regulations had average earnings of 
less than $18,000.\113\ Graduates of programs that would pass the 
thresholds of the 2011 Prior Rule (12 percent/30 percent) could be 
devoting up to almost $2,200, or 12 percent, of their $18,000 in annual 
earnings toward student loan payments. We believe it would be very 
difficult for an individual earning $18,000 to manage that level of 
debt, and we establish lower passing thresholds to help ensure programs 
are not leading to such results.
---------------------------------------------------------------------------

    \113\ 2012 GE informational D/E rates.
---------------------------------------------------------------------------

    Next, we compared repayment outcomes for programs that meet the 8 
percent/20 percent thresholds with those that did not, and that 
comparison also supports lowering the passing thresholds. Specifically, 
we examined data showing how borrowers default on, and repay, Federal 
loans through the first three years of repayment. We compared borrower 
performance among three groups of programs: Programs that pass the 8 
percent/20 percent thresholds, programs that do not pass the 8 percent/
20 percent thresholds, but would pass the 2011 Prior Rule 12 percent/30 
percent thresholds (programs in the zone under these regulations), and 
programs that fail under the 12 percent/30 percent thresholds of both 
the 2011 Prior Rule and these regulations. Borrowers in the first group 
(passing programs under these regulations), from programs that pass the 
8 percent/20 percent thresholds, have an average default rate of 19 
percent, and an average repayment rate of 45 percent.\114\ Borrower 
performance for the other two groups is different than those in the 
passing group: Borrowers in the second group (zone programs under these 
regulations)--those from programs that met the 2011 Prior Rule passing 
thresholds (12 percent/30 percent) but would not meet the 8 percent/20 
percent thresholds--have a default rate of 25 percent and only a 32 
percent average repayment rate.\115\ Borrowers in the third group 
(failing programs under these regulations), from programs that fail 
even the 2011 Prior Rule thresholds (12 percent/30 percent), have rates 
like those in the zone group: About a 28 percent default rate and an 
average repayment rate of about 32 percent.\116\ Together, these 
results indicate that zone programs are much more similar to their 
failing counterparts than their passing counterparts. Accordingly, 
although zone programs are allowed additional time before ineligibility 
in comparison to failing programs, programs in both groups are 
ultimately treated the same if their results do not change because 
expert recommendations, industry practice, and the Department's 
analysis all indicate that they are both resulting in similarly poor 
student outcomes and not resulting in gainful employment. By reducing 
the passing thresholds for the D/E rates measure to 8 percent and 20 
percent, we treat as unacceptable those programs that exceed these 
thresholds, but allow a limited time to evaluate whether the 
unacceptable performance persists before revoking eligibility.
---------------------------------------------------------------------------

    \114\ Id.
    \115\ Id.
    \116\ Id.
---------------------------------------------------------------------------

    With regard to the stated intention to adopt a rate that includes a 
tolerance to reduce the likelihood that a program will be 
mischaracterized, we believe that the three-tier pass, zone, fail 
construction and the corresponding thresholds for these categories make 
it unnecessary to create buffer by raising the passing thresholds as 
was done in the 2011 Prior Rule. As discussed in the NPRM, setting the 
failing thresholds at 12 percent and 30 percent lower the probability 
to close to zero that passing programs will lose eligibility because 
they are mischaracterized, due to atypical factors associated with a 
non-representative cohort of students, as failing. Likewise, creating a 
buffer between the passing and failing thresholds, where programs in 
the zone have a longer time to loss of eligibility than those that fail 
the thresholds, lowers the probability to close to zero that passing 
programs will lose eligibility because they are mischaracterized as 
being in the zone as a result of atypical factors.
    Further, a four year zone makes it unlikely that fluctuations in 
labor market conditions could cause a passing program to become 
ineligible. According to the National Bureau of Economic Research, 
recessions have, on average, lasted 11.1 months since 1945.\117\ An 
otherwise passing program is unlikely to fall in the zone for four 
consecutive years due to an economic downturn or fluctuations within 
the local labor markets.
---------------------------------------------------------------------------

    \117\ National Bureau of Economic Research (2014), US Business 
Cycle Expansions and Contractions, available at www.nber.org/cycles.html.
---------------------------------------------------------------------------

    Under the regulations, programs can satisfy the D/E rates measure 
in one of two ways. Programs whose graduates have low earnings relative 
to debt would benefit from the calculation based on total income, and 
programs whose graduates have higher debt loads that are offset by 
higher earnings would benefit from the calculation based on 
discretionary income. Even for programs where the average annual 
earnings rate for students who complete the program exceeds 8 percent, 
as long as the average discretionary income rate is below the 20 
percent threshold, the program will be deemed passing.

[[Page 64921]]

    We adopted a buffer in the 2011 Prior Rule in part to avoid 
mischaracterization of a program and in part to account for students 
who completed the program who are working part-time or who are not 
employed. As discussed in this section, because the D/E rates measure 
assesses whether students who complete a GE program will earn enough to 
manage the debt they incur, that assessment must take into account the 
outcomes of students who are not working or are not working full time, 
either by choice or involuntarily, without regard to whether such 
outcomes are typical. As stated previously, where such outcomes are 
atypical, several aspects of the regulations, including the pass, zone, 
and fail thresholds, use of mean and median earnings, use of a multi-
year cohort period with a minimum n-size, and allowing several years of 
non-passing results before a program loses eligibility for title IV, 
HEA program funds reduce the likelihood to close to zero that a 
typically passing program will be made ineligible by being 
mischaracterized as failing or in the zone due to an atypical cohort of 
students who complete the program such as those identified by the 
commenter. Where it is typical for students to work time or regularly 
leave the labor force for long periods, institutions should adjust 
their costs and other features of their programs to ensure that these 
students can manage their debt.
    Accordingly, for the reasons provided, a buffer is unnecessary. We 
revise the passing D/E rates in these regulations because we conclude 
that the 50 percent buffer in the 2011 Prior Rule is unnecessary. We 
instead establish a zone to identify programs that exceed the 8 percent 
and 20 percent thresholds, and use the 12 percent and 30 percent 
measures as the upper limits. This approach accounts for the reasons 
that a buffer was added in the 2011 Prior Rule, to make accurate and 
fair assessments of programs, while ensuring that once there is 
certainty that an accurate and fair assessment is being made, programs 
with sustained poor outcomes are not allowed to remain eligible and 
harm students.
    We do not agree that alternative thresholds--including annual 
earnings rates thresholds of 10 percent, 13 percent, and 15 percent, as 
suggested by commenters--would be more appropriate for determining 
eligibility under the title IV, HEA programs. We recognize that some 
research points to these as reasonable thresholds. Likewise, some 
research may even point to thresholds below 8 percent for the annual 
earnings rate.\118\ However, we believe that 8 percent for education-
related debt is well within the range of acceptable debt levels 
identified by researchers and the standard that is generally most 
supported.\119\ \120\ \121\ \122\ Based on the best available evidence, 
students whose annual earnings rate exceeds 8 percent are substantially 
more likely to default on their loans or experience serious financial 
or emotional harm.
---------------------------------------------------------------------------

    \118\ Baum, S., and Schwartz, S. (2006). How Much Debt Is Too 
Much? Defining Benchmarks for Managing Student Debt.
    \119\ Greiner, K. (1996). How Much Student Loan Debt Is Too 
Much? Journal of Student Financial Aid, 26(1), 7-19.
    \120\ Scherschel, P. (1998). Student Indebtedness: Are Borrowers 
Pushing the Limits? USA Group Foundation.
    \121\ Harrast, S.A. (2004). Undergraduate Borrowing: A Study of 
Debtor Students and their Ability to Retire Undergraduate Loans. 
NASFAA Journal of Student Financial Aid, 34(1), 21-37.
    \122\ King, T., & Frishberg, I. (2001). Big Loans, Bigger 
Problems: A Report on the Sticker Shock of Student Loans. 
Washington, DC: The State PIRG's Higher Education Project. Available 
at www.pirg.org/highered/highered.asp?id2=7973.
---------------------------------------------------------------------------

    Similarly, we disagree with the commenters that suggested that 
annual earnings rates be set between 10 and 15 percent because the 
majority of personal finance experts believe that an acceptable annual 
debt-to-earnings ratio falls within this range.\123\ As stated 
previously, in the sources cited by the commenters, the personal 
finance experts often refer to the amount of total debt that 
individuals can manage, whereas the focus of the D/E rates measure, and 
the basis for the thresholds, is the acceptable level of debt incurred 
for enrollment in a GE program. Moreover, such expert advice does not 
take into consideration that the discretionary income rates allow some 
programs with annual income rates above 8 percent to pass, if their 
students earn enough to manage their debt, based on the best available 
evidence.
---------------------------------------------------------------------------

    \123\ Kantrowitz, M. (2010). Finaid.com. What is Gainful 
Employment? What is Affordable Debt?, available at www.finaid.org/educators/20100301gainfulemployment.pdf.
---------------------------------------------------------------------------

    We also disagree with the contention made by some commenters that a 
recent NCES study shows the thresholds to be inappropriately low 
because a large fraction of graduating undergraduate students have 
debt-to-earnings ratios above 12 percent, suggesting many non-GE 
programs in the public and non-profit sector would fail the annual 
earnings rate if they were subject to the regulations.\124\ The NCES 
methodology for calculating student debt-to-earnings ratios is not 
comparable to the methodology for calculating D/E rates at the program 
level under these regulations. Specifically, the NCES methodology for 
calculating each of loan debt, earnings, and the debt-to-earnings 
ratios results in higher estimates of debt burden than is observed 
under the D/E rates methodology. For example: First, the NCES study 
does not include students who only receive Pell Grants, while these 
students are included in the D/E rates calculations as having zero 
debt, which substantially lowers the median loan debt for each program. 
Also, while the NCES study includes all students paying loans for any 
reason, the D/E rates exclude students who are still enrolled in 
school, are serving in the military, have a total and permanent 
disability, or are deceased, the overall effect of which is to, again, 
lower the D/E rates for each program. Second, the NCES study measures 
actual amount borrowed, not the amount borrowed capped at the total of 
tuition, fees, books, equipment and supplies, as is the case under 
these regulations. As discussed earlier, in every instance in which the 
actual amount borrowed exceeds tuition, fees, books and supplies, the 
D/E rates will be capped at that tuition, fees, books and supplies--not 
the actual (larger) loan amount. In every one of those instances, the 
D/E rates calculated under these regulations will necessarily be lower 
than the amount of loan debt calculated in conventional studies, such 
as the NCES study (which includes no indication that the term ``debt'' 
had any special, restricted meaning) and the literature addressing this 
issue. Third, the NCES study measures earnings only one year after 
completion, but under the D/E rates measure, earnings are measured 
about three years after completion. Since earnings tend to increase 
after completion of postsecondary programs as students gain more 
experience in the workforce, D/E rates under the regulations will tend 
to be lower than those reflected in the NCES study. Fourth, the NCES 
study does not include a discretionary income rate. We believe some 
programs with relatively high annual earnings rates will pass the 
discretionary income rate metric because they have graduates who have 
higher earnings even though they have large amounts of debt. Fifth, 
under the D/E rates measure, we use the higher of mean and median of 
earnings and the median of debt, rather than just means. We believe 
this aspect of the regulations will also lead to lower D/E rates than 
those reflected in the NCES study because it makes the D/E rates 
measure less sensitive in extreme cases of high debt and low earnings 
among students

[[Page 64922]]

who complete a program at each institution. These differences in 
methodology reflect policy goals that have been incorporated into the 
regulations, including goals relating to the accessibility and 
affordability of GE programs, as well as Department interests in 
ensuring the equitable application of these regulations to institutions 
in different sectors and the coordination of these regulations with 
other Federal student aid programs. As a result, the results of the 
NCES study do not provide a useful basis for evaluating the D/E rates 
thresholds.
---------------------------------------------------------------------------

    \124\ NCES, ``Degrees of Debt,'' NCES 2014-11.
---------------------------------------------------------------------------

    Similarly, we disagree with commenters who argued that BPS data 
showing that, on average, graduating bachelor's degree students have 
annual earnings rates above 8 percent indicate the thresholds are 
inappropriate. The data cited by the commenters exclude graduates who 
graduated with zero debt, which comprise about one-third of students 
graduating with a bachelor's degree.\125\ Also, earnings levels in BPS 
are reported six years after enrollment, while the D/E rates measure 
earnings about three years after completion. Another limitation of BPS 
survey data is that they only measure income from the student's primary 
job, while the D/E rates include all sources of income reported to the 
Social Security Administration (SSA).
---------------------------------------------------------------------------

    \125\ NCES, Degrees of Debt (2014). See Figure 1 for percent of 
bachelor's degree recipients who did not borrow and Figure 7 for the 
ratio of monthly loan payments to monthly income. The analysis uses 
data from U.S. Department of Education, National Center for 
Education Statistics, 1993/94, 2000/01, and 2008/09 Baccalaureate 
and Beyond Longitudinal Studies (B&B:93/94, B&B:2000/01, and B&B:08/
09).
---------------------------------------------------------------------------

    Changes: None.
    Comments: Commenters said the D/E rates measure lacks a rational 
basis as an accountability metric. They contended that, in adopting the 
D/E rates measure, the Department places too much weight on the study 
by Baum and Schwartz and mortgage underwriting standards in identifying 
thresholds. Commenters said the Department disregards other studies and 
data sources showing that most programs would not pass the D/E rates 
measure if it were applied to all postsecondary programs. The 
commenters asserted the Department should be applying a metric 
supported by other data studies, relying on data from NPSAS, along with 
studies conducted by NCES and the American Enterprise Institute, on 
debt and earnings levels of college graduates.
    Commenters also asserted that the data the Department used to 
analyze the proposed regulations was biased and weak because it only 
included a small fraction of all GE programs. For this reason, they 
argued the Department should have considered additional data sources 
that would have provided more accurate information about the impact of 
the regulations.
    Discussion: The Department considered a number of data and research 
sources and authorities in formulating the D/E rates measure. In 
addition to the analysis and recommendation of Baum and Schwartz, we 
considered research on earnings gains by other scholars, including 
Cellini and Chaudhary,\126\ Kane and Rouse,\127\ Avery and Turner,\128\ 
and Deming, Goldin, and Katz.\129\ We also took into account lending 
ratios currently set by the FHA and the CFPB, as they estimate 
sustainable levels of non-housing debt. As stated previously, we do not 
believe that the NCES study and the other studies suggested by 
commenters use a comparable methodology, and further, we do not agree 
with the conclusions the commenters draw from these studies.
---------------------------------------------------------------------------

    \126\ Cellini, S., and Chaudhary, L. (2012). ``The Labor Market 
Returns to For-Profit College Education.'' Working paper.
    \127\ Kane, T., and Rouse, C. E. (1995). Labor Market Returns to 
Two- and Four-Year College. The American Economic Review, 85(3), 
600-614.
    \128\ Avery, C., and Turner, S. (2013). Student Loans: Do 
College Students Borrow Too Much--Or Not Enough? Journal of Economic 
Perspectives, 26(1), 165-192.
    \129\ Deming, D., Goldin, C., and Katz, L. (2013). For Profit 
Colleges. Future of Children, 23(1), 137-164.
---------------------------------------------------------------------------

    In analyzing the potential impact of the D/E rates measure, we 
relied primarily on data from NSLDS because it contains a complete 
record of all students receiving title IV, HEA program funds from each 
program. Although we also have access to data from sample surveys, such 
as BPS and NPSAS, we did not rely on such data because we had access to 
a full data set of students in GE programs. NPSAS data also do not 
allow for the calculation of D/E rates that are comparable to the D/E 
rates being evaluated under this regulation. Because NCES and NPSAS 
data focus on studying all undergraduate students rather than just 
students who attend GE programs, NCES and NPSAS data provide 
information on a different population of students than those we expect 
to be evaluated under the D/E rates measure. Additionally, NCES survey 
data do not provide earnings information about students three to four 
years after graduation, which is the timeframe for calculating D/E 
rates.
    We do not agree that our analyses did not sufficiently consider 
data presented by the American Enterprise Institute.\130\ As noted 
earlier in the summary of comments about the impact of the regulations 
on for-profit institutions, the American Enterprise Institute data 
suggest, based on data from the University of Texas, that a large 
fraction of programs operated by University of Texas would fail the D/E 
rates measure. These data are not appropriate for analyzing these 
regulations. First, as with the data used for the NCES report, the 
University of Texas data do not allow for calculation of D/E rates 
using a comparable methodology. Second, the American Enterprise 
Institute only considered data for a small subset of programs and 
students--that is, those who attended programs in the University of 
Texas system. We believe considering such a small subset of gainful 
employment programs has limited analytical value, and, thus, we relied 
on the data we had available on all gainful employment programs.
---------------------------------------------------------------------------

    \130\ Schneider, M. (2014). American Enterprise Institute. Are 
Graduates from public Universities Gainfully Employed? Analyzing 
Student Loan Debt and Gainful Employment.
---------------------------------------------------------------------------

    We disagree with claims that our analyses are unreliable and biased 
because we included only a fraction of gainful employment programs. 
Using our data, we analyzed all programs that we estimate would meet 
the minimum ``n-size'' requirement to be evaluated under the D/E rates 
measure--that is, all programs for which 30 students completed the 
program--for the cohort of students we evaluated.
    Changes: None.
    Comments: Some commenters recommended raising the D/E rates 
thresholds to account for longer-term earnings benefits from earned 
program credentials. Commenters offered research demonstrating that 
increased benefits from program completion, including non-pecuniary 
benefits, may not be immediately apparent and may increase over time in 
a way that the proposed regulations would not take into account.
    Discussion: While we agree that gross earnings and earnings gains 
as a result of obtaining additional credentials will increase for 
program graduates over the course of their lives, and gains for some 
occupations may be more delayed than others, we do not believe that 
this merits increasing the D/E rates thresholds for the purpose of 
program accountability. As stated previously, these regulations will 
help ensure program graduates have sustainable debt levels both in the 
early part of their careers and in later years so loan payments are 
kept manageable and do

[[Page 64923]]

not interfere with individuals' ability to repay other debts or result 
in general over-indebtedness.
    Further, our analysis indicates that the passing thresholds for the 
D/E rates measure are set at a level that reflects repayment outcomes. 
The Department's data indicate the average volume-based repayment rate, 
measured at about the third year of repayment, of programs in the zone 
is comparable to those above the failing thresholds, while passing 
programs, on average, have a substantially higher average repayment 
rate. Average cohort default rates, measured within the first three 
years of repayment, are similar for zone and failing programs and 
substantially higher than the average default rate of passing programs.
    Changes: None.
    Comments: A number of commenters suggested that different 
thresholds for the D/E rates measure should be applied to institutions 
or programs that serve students with backgrounds that may increase 
their risk factors for over-indebtedness. Some commenters suggested 
that the thresholds be adjusted on a sliding scale based on the number 
of students served by a program who are eligible for Pell Grants.
    One commenter also suggested that different D/E rates thresholds be 
applied to programs, such as those in the cosmetology sector, that 
serve mostly women, who the commenter suggested are more likely to 
choose part-time employment or to not work in order to raise children. 
This same commenter suggested that programs serving a high proportion 
of single parents are unfairly punished by the thresholds for the D/E 
rates measure because single parents would have an incentive to earn 
limited incomes in order to continue to qualify for various assistance 
programs.
    Discussion: We do not agree that alternative metrics or thresholds 
should be applied to different types of programs or institutions or to 
programs serving different types of students, such as minority or low-
income students. As described in greater detail in the Regulatory 
Impact Analysis, the Department has examined the effects of student 
demographic characteristics on results under the annual earnings rate 
measure and does not find evidence to indicate that the composition of 
a GE program's students is determinative of outcomes. While the 
Department recognizes that the background of students has some impact 
on outcomes and that some groups may face greater obstacles in the 
labor market than others, we do not agree that the appropriate response 
to those obstacles is to set alternative standards based on them. As 
discussed previously, we seek to apply the same set of minimum 
standards across all GE programs, regardless of their sector, location, 
or the students they serve. As our analysis shows, the substantial 
majority of programs will meet these minimum standards, even when 
comparing programs with higher proportions of students with increased 
``risk factors.'' The regulations will help ensure that programs only 
remain eligible for title IV, HEA program funds if they meet these 
minimum standards that define maximum levels of indebtedness that are 
acceptable for any student. We intend for the regulations to allow 
these successful programs to grow, and for institutions to establish 
new programs that achieve and build upon these results, so that all 
students, regardless of background or occupational area, will have 
options that will lead to positive results.
    Changes: None.
    Comments: One commenter suggested that the D/E rates thresholds are 
punitive, as more programs would fail under these regulations than 
would have failed under the 2011 Prior Rule.
    Discussion: While the Department acknowledges that it is possible 
that more programs would not meet the passing thresholds under these 
regulations as compared to those in the 2011 Prior Rule, as previously 
discussed, the Department must ensure an appropriate standard is 
established to protect students from unmanageable levels of debt. As 
stated previously, we believe the D/E rates thresholds in these 
regulations appropriately define the maximum levels of indebtedness 
that are acceptable for all students.
    Changes: None.
    Comments: One commenter suggested that the Department include the 
outcomes of students who do not borrow in a program's D/E rates 
calculation and suggested that the thresholds be increased to account 
for this change.
    Discussion: The regulations provide for the consideration of the 
outcomes of students who have completed a program and have only 
received Pell Grants and, therefore, have no debt for the D/E rates 
calculation. Further, we assess debt as a median when calculating the 
D/E rates, so that programs in which a majority of the students who 
have completed the program but do not have any title IV loans would 
have D/E rates of zero and would pass the D/E rates measure.
    As discussed in ``Section 668.401 Scope and Purpose,'' we are not 
including individuals who did not receive title IV, HEA program funds 
in the calculation of the D/E rates measure. We disagree, however, that 
this warrants adjustments or increases to the D/E rates thresholds. The 
expert research, industry practices, and internal analysis that we 
relied on in determining the thresholds apply to all students.
    Changes: None.

Zone

    Comments: Multiple commenters suggested that the addition of the 
zone results in unnecessarily complex and burdensome regulations that 
will confuse borrowers and institutions. One commenter suggested that 
the zone would create undue burden on State agencies and their 
monitoring responsibilities. Some commenters expressed concern that the 
zone yields additional uncertainty for institutions and students 
regarding the future of a program. Commenters also argued that the zone 
should be adjusted for student characteristics.
    Some commenters suggested removing the zone and returning to the 
2011 Prior Rule thresholds of 12 percent for the earnings rate and 30 
percent for the discretionary income rate. Other commenters suggested 
that despite the presence of a zone, the regulations do not allow 
sufficient time for programs to take corrective actions and improve so 
that they can move from the zone to passing under the D/E rates 
measure, making the zone tantamount to failure. One of these 
commenters, using the 2012 GE informational D/E rates, calculated the 
aggregate failure rate, counting the zone as a failure, near 31.0 
percent--about a five-fold increase in the number of programs 
ultimately losing eligibility for title IV, HEA program funds, as 
compared with the 2011 Prior Rule. The commenter also said about 42 
percent of programs at for-profit colleges will be failing or in the 
zone, when weighted by program enrollment, including more than one-
third of certificate programs, three-quarters of associate degree 
programs, one-fifth of bachelor's degree programs, and one-third of 
professional degree programs. The commenter posited that more than 1.1 
million students are enrolled in programs that will lose eligibility 
for title IV, HEA program funds under the proposed regulations.
    Other commenters agreed with the Department's proposal for a zone 
but argued that the length of time that a program could be in the zone 
before being determined ineligible is arbitrary. Some of the commenters 
said that the length of the zone is insufficient to measure programs 
where there is a longer time after completion before a student is 
employable, such as with medical programs. Some of the

[[Page 64924]]

commenters complained that the four-year zone period, when taken 
together with the transition period, is too long, and would initially 
allow failing programs to have operated for eight years without relief 
to students who are enrolled during that time. Some of these commenters 
suggested a three-year zone as an alternative.
    Some commenters suggested that the Department should provide for a 
zone only in the first few years after the regulations are implemented 
and then eliminate the zone. The commenters stated that this approach 
would help to remove the worst performing programs relatively quickly 
and allow poor performers that are closer to passing the D/E rates 
measure time to improve. The commenters said that eliminating the zone 
after a few years would prevent taxpayers from subsidizing low-
performing programs that would otherwise be allowed to continue to 
enroll unlimited numbers of students while in the zone.
    Other commenters suggested that the zone is insufficient because it 
provides minimal protection while potentially confusing students about 
the riskiness of a program they may be attending or considering for 
enrollment. Some of these commenters stated that the zone provides 
limited transparency, as institutions with potentially failing programs 
are required to warn students of potential loss of eligibility only in 
the year before they might be deemed ineligible. Some commenters 
suggested the Department eliminate the zone to ensure that students are 
not attending programs in which students who complete the program have 
a discretionary income rate above 20 percent, an unacceptable outcome.
    Other commenters proposed that, while a zone may be necessary, the 
regulations should include a firm upper threshold by which, should a 
program's D/E rates exceed the threshold, the program would immediately 
lose eligibility. Commenters suggested that there are cases in which 
outcomes for students are so egregious that programs need to lose 
eligibility immediately to protect students from additional harm.
    Discussion: The Department disagrees that the zone should be 
eliminated or phased out. The zone under the D/E rates measure serves 
several important purposes.
    First, as stated previously, a four-year zone provides a buffer to 
account for statistical imprecision due to random year-to-year 
variations, virtually eliminating the possibility that a program would 
mistakenly be found ineligible on the basis of D/E rates for students 
who completed the program in any one year. As discussed in the NPRM, 
our analysis shows that the chances that an unrepresentative population 
of students who completed a program could occur in four out of four 
consecutive years such that a program's D/E rates exceed the 8 percent 
and 20 percent thresholds four years in a row when in fact its D/E 
rates are on average less than 8 percent and 20 percent for a typical 
year is close to zero percent.
    As also stated previously, we believe that programs with an annual 
earnings rate above 8 percent and discretionary income rate above 20 
percent are producing poor outcomes for students. A permanent four-year 
zone holds all of these programs accountable while ensuring that the 
Department is making an accurate assessment. In comparison, raising the 
passing thresholds to 12 percent and 30 percent to create a buffer for 
accuracy would allow many poorly performing programs to evade 
accountability.
    With a shorter zone period, programs would be at risk of 
mischaracterization. Similarly, it is necessary to have a two out of 
three year time period to ineligibility for failing programs in order 
to ensure that an accurate assessment is made. Our analysis indicates 
the probability of mischaracterizing a program that is typically in the 
zone as failing in a single year could be as high as 4.1 percent. By 
allowing programs to remain eligible after a single failing result, we 
believe we are providing programs near the borderline of the 12 percent 
threshold a reasonable opportunity to remain eligible until we confirm 
that our assessment is accurate. Accordingly, we do not agree that 
programs with an annual earnings rate above 12 percent and 
discretionary income rate above 30 percent should immediately lose 
eligibility. We believe that the program disclosures and warnings 
mitigate the need to establish any threshold where a one-year outcome 
would immediately trigger a loss of eligibility.
    While the zone may lead to at least some additional uncertainty for 
institutions and students, we believe this concern is outweighed by our 
interest in ensuring that all poorly performing programs are held 
accountable. To provide at least some level of protection to students, 
as discussed in ``Sec.  668.410 Consequences of the D/E Rates 
Measure,'' an institution will also be required to issue warnings to 
current and prospective students for a program in any year in which the 
program faces potential ineligibility based upon its next set of final 
D/E rates.
    Second, the four-year zone helps to ensure that programs with rates 
that are usually passing or close to meeting the passing threshold are 
not deemed failing or made ineligible due to economic fluctuations. As 
stated previously, recessions have, on average, lasted 11.1 months 
since 1945.\131\ It is implausible that a program would fall in the 
zone for four consecutive years due to an economic downturn or 
fluctuations within the local labor markets.
---------------------------------------------------------------------------

    \131\ National Bureau of Economic Research (2014). US Business 
Cycle Expansions and Contractions, available at www.nber.org/cycles.html.
---------------------------------------------------------------------------

    Third, a four-year zone, coupled with the transitional D/E rates 
calculation, described in more detail in ``Section 668.404 Calculating 
D/E Rates,'' will provide institutions with more time to show 
improvement in their programs after the regulations become effective. 
Programs will have several years after these regulations take effect to 
improve and achieve passing rates. During the transition period, an 
alternative D/E rates calculation will be made so that institutions can 
benefit from any immediate reductions in cost they make. As discussed 
in ``Section 668.404 Calculating D/E Rates,'' we have changed the 
transition period by extending the length to ensure that institutions 
that make sufficient reductions in tuition and fees are able to benefit 
from such efforts. Because institutions have the ability to affect the 
debt that their students accumulate by lowering tuition and fees, we 
believe it is possible for zone and failing programs to improve as a 
result of the transitional D/E rates calculation. Analysis of the zone 
programs in the 2012 GE informational D/E rates data set suggests that 
zone programs would need to reduce their median annual loan payment by 
roughly 16 percent in order to pass.
    While we acknowledge that the zone may add some additional level of 
complexity to the regulations, we believe it is necessary to ensure 
that programs that lead to poor outcomes are held accountable. With 
respect to the commenter who believed the zone would create additional 
burden for State regulators, we are unable to identify a reason for why 
this would be the case.
    Changes: None.

Time Period to Ineligibility

    Comments: Some commenters contended that the Department should 
revise the regulations to provide for a longer time before which a 
program that is failing the D/E rates measure would be determined 
ineligible under the title IV, HEA programs. The commenters

[[Page 64925]]

stated that the time period should be longer because improvement would 
be impossible over the two out of three year period proposed. They 
argued that the Department should adopt the ineligibility time period 
from the 2011 Prior Rule, where programs would not be determined 
ineligible unless they failed the metrics in three out of four years.
    Other commenters asserted that the two out of three year timeframe 
is not justified and is designed to deny eligibility to for-profit 
institutions before they have an opportunity to improve. A few 
commenters said the proposed period before ineligibility is 
particularly short for programs with longer lengths, such as advanced 
degree programs, because these programs would have even less 
opportunity to improve than would short-term certificate programs based 
on the fact that students completing these programs would have started 
attending the program in years even further before the implementation 
of the regulations.
    In contrast, other commenters believed that even two out of three 
years is too long because allowing these programs to remain eligible 
for that period of time would harm too many students. They argued that 
failing programs already produce unacceptably poor outcomes and that 
allowing them to continue to operate will lead to more students taking 
out high amounts of debt with little benefit. The commenters proposed 
that failing programs should become immediately ineligible once the 
regulations are effective should they fail to pass the D/E rates 
measure.
    Discussion: Institutions should already be striving to improve 
program outcomes for their students, and the outcomes for graduates 
every year may be influenced by prior changes an institution made to 
its program. Based on our analysis, we expect that 74 percent of 
programs will pass the D/E rates measure, and 91 percent will either 
pass or be in the zone. Any program with a discretionary income rate 
above 30 percent and an annual earnings rate above 12 percent is 
producing poor outcomes for its students and should, in order to 
minimize the program's negative impact on students, be given as limited 
a period as is necessary to ensure statistical accuracy of program 
measurement before it loses its eligibility. Accordingly, we will allow 
programs to operate until they have failed twice within three years to 
be certain we are only making ineligible those programs that 
consistently do not pass the D/E rates measure. Because, as discussed 
in the NPRM, the probability that a passing program is determined 
ineligible due to statistical imprecision is nearly non-existent with a 
two out of three year period, we believe that this is an appropriate 
length of time to ineligibility for failing programs and that the 
longer three out of four year period of the 2011 Prior Rule is 
unnecessary.
    Because of the 2011 Prior Rule and informational rates, 
institutions have had relevant information for a sufficient amount of 
time to make improvements. Further, the transition period will allow 
institutions to continue to improve their programs even after the 
regulations take effect. Even institutions that only begin to make 
improvements after the regulations take effect, or those that did not 
have informational rates for programs that were not in existence or are 
medical or dental programs, will get substantial, if not full, benefit 
of the transition period. Institutions that make immediate changes that 
at minimum move a failing program into the zone will then have 
additional years of the transition period coupled with the zone to 
continue to improve.
    We are revising Sec.  668.403(c)(4) to state more clearly the 
circumstances in which a program becomes ineligible under the D/E rates 
measure.
    Changes: We have revised the language in Sec.  668.403(c)(4) to 
clarify that a GE program becomes ineligible if the program either is 
failing the D/E rates measure in two out of any three consecutive award 
years for which the program's D/E rates are calculated; or has a 
combination of zone and failing D/E rates for four consecutive award 
years for which the program's D/E rates are calculated.

Other Issues Regarding the D/E Rates Measure

    Comments: Some commenters suggested that programs should be 
required to pass both the annual earnings rate and discretionary income 
rate metrics in order to pass the D/E rates measure. These commenters 
argued that programs should be expected to generate sufficient income 
for graduates to cover basic living expenses and pay back their student 
loans. They expressed concern that many programs pass the annual 
earnings rate metric even though their students have to spend more than 
their entire discretionary income on debt service. Similarly, some 
commenters suggested that the regulations include a minimum earnings 
level below which a program would automatically fail both the annual 
earnings rate and discretionary income rate metrics, arguing that there 
is a baseline income below which any required debt payments would 
result in unmanageable debt. Multiple commenters made a related 
suggestion to base the D/E rates measure only on discretionary income, 
and eliminate the annual earnings rate, so that programs would be 
deemed failing if their students have earnings below the poverty line.
    On the other hand, some commenters argued that the discretionary 
income rate metric is unnecessary because very few programs would be 
affected by it.
    Discussion: The annual earnings rate and the discretionary income 
rate, which comprise the D/E rates measure, serve distinct and 
important purposes in the regulations. The annual earnings rate more 
accurately assesses programs with graduates that have low earnings but 
relatively low debt. The discretionary income rate will help capture 
programs with students that have higher debt but also relatively higher 
earnings.
    The annual earnings rate by itself would fail to properly assess 
many programs that, according to expert recommendations, meet minimum 
standards for acceptable debt levels. As a result, the Department 
disagrees with those commenters who suggested that including the 
discretionary income rate is of limited value. Without the 
discretionary income rate, programs where students have high levels of 
debt, but earnings adequate to manage that debt, would not pass the D/E 
rates measure. While there may be a more limited universe of programs 
that would pass the D/E rates measure based on the discretionary income 
rate threshold, the Department believes it is important to maintain 
this threshold to protect those programs that may be producing good 
outcomes for students.
    Requiring programs to pass both the annual earnings rate and 
discretionary income rate, removing the annual earnings rate 
altogether, or establishing a minimum earnings threshold for the D/E 
rates measure would all have the same impact--making ineligible 
programs that, based on expert analysis, leave students with manageable 
levels of debt. In some cases, programs may leave graduates with low 
earnings, but these students may also have minimal debt that experts 
have deemed manageable at those earnings levels. For other programs, 
students may be faced with high levels of debt, but also be left with 
significantly higher earnings such that high debt levels are 
manageable. In both cases, the discretionary income rate and the annual 
earnings rate, respectively, ensure programs meet a minimum standard 
while also being allowed to operate when providing

[[Page 64926]]

acceptable outcomes for graduates. We provide an analysis in the 
Regulatory Impact Analysis of how many programs passed, failed, or were 
in the zone under the 2011 GE informational D/E rates.
    Changes: None.
    Comments: Many commenters contended that the D/E rates measure is 
flawed because (1) students' earnings are affected by economic 
conditions beyond the control of the institution, such as fluctuations 
in the national or regional economy, and (2) earnings vary by regional 
or geographic location, particularly between rural and urban areas. A 
few commenters believed it would be difficult for institutions to 
predict local labor market conditions with enough reliability to set 
tuition and fees sufficiently low to ensure their programs pass the D/E 
rates measure.
    Discussion: We believe that institutions should be responsive to 
regional labor market needs and should only offer programs if they 
reasonably expect students to be able to find stable employment within 
that occupation. We do not agree that institutions cannot assess their 
graduates' employment and earnings prospects in order to price their 
programs appropriately. Indeed, it is an institution's responsibility 
to conduct the due diligence necessary to evaluate the potential 
outcomes of students before offering a program. We do not believe that 
this is an unreasonable expectation because some accreditors and State 
agencies already require institutions to demonstrate that there is a 
labor market need for a program before it is approved.
    However, we agree that a program should not be determined 
ineligible under the D/E rates measure due to temporary and 
unanticipated fluctuations in local labor market conditions. We believe 
that several components of the accountability framework will help 
ensure that passing programs do not become ineligible due to such 
fluctuations.
    The regulations provide for a zone that allows programs to remain 
eligible for up to four years despite not passing the D/E rates measure 
in any of those years. The zone protects passing programs from losing 
their eligibility for title IV, HEA program funds where their increase 
in D/E rates was attributable to temporary fluctuations in local labor 
market conditions. Most economic downturns are far too short to cause a 
program that would otherwise be passing to have D/E rates in the zone 
for four consecutive years due to fluctuations in the local labor 
market. As stated previously, recessions have, on average, lasted 11.1 
months since 1945--far shorter than the four years in which programs 
are permitted to remain in the zone.\132\
---------------------------------------------------------------------------

    \132\ National Bureau of Economic Research (2014). U.S. Business 
Cycle Expansions and Contractions, available at www.nber.org/cycles.html.
---------------------------------------------------------------------------

    Sensitivity to temporary economic fluctuations outside of an 
institution's control is also reduced by calculating the D/E rates 
based on two-year and four-year cohorts of students, rather than a 
single-year cohort, and calculating a program's annual earnings as 
means and medians. Calculating D/E rates based on students who 
completed over multiple years reduces the impact of short term 
fluctuations in the economy that may affect a particular cohort of 
graduates but not others. Similarly, means and medians mitigate the 
effects of economic cycles by measuring central tendency and reducing 
the influence of students who may have been most impacted by a 
downturn.
    Changes: None.
    Comments: Some commenters argued that the D/E rates measure is 
flawed because for some occupations, such as cosmetology, earnings may 
be depressed because a significant number of program graduates tend to 
leave but then return to the workforce, sometimes repeatedly, or to 
work part-time. According to the commenters, this is particularly the 
case in occupations in which workers are predominately women, who may 
leave and return to the workforce for family purposes more frequently 
than workers in other occupations. The commenters contended that, for 
students entering such occupations, earnings will be low, so that the 
regulations will be biased against programs providing training in these 
occupations.
    Discussion: In examining programs generating an unusually large 
number of graduates without full-time employment, the Department 
believes it is reasonable to attribute this outcome less to individual 
student choices than to the performance of the program itself. The D/E 
rates measure will identify programs where the majority of program 
graduates are carrying debts that exceed levels recommended by experts. 
If an institution expects a program to generate large numbers of 
graduates who are not seeking employment or who are seeking only part-
time employment, it should consider reducing debt levels rather than 
expecting students to bear even higher debt burdens. Regardless of 
whether a student works full-time or part-time or intermittently, the 
student is still burdened in the same way by the loans he or she 
received in order to attend the program.
    Changes: None.
    Comments: Commenters argued that the D/E rates measure is 
inequitable across programs in different States because, according to 
the commenters, some States provide more financial aid grants to 
students and greater financial support to institutions, requiring 
students to acquire less debt. Commenters said the regulations should 
take State funding into account because, otherwise, programs in States 
with less funding for higher education would be adversely affected by 
the D/E rates measure.
    Discussion: While we recognize that there may be differences in 
support for higher education among States, such that borrowers' debt 
levels may depend on the State in which they reside, those differences 
are not relevant to address the question of whether students are 
overburdened with debt as a result of enrolling in a particular 
program. Some States' investments in higher education may permit 
students who benefit from that support to borrow less, in which case 
programs in that State may have an easier time passing the D/E rates 
measure, but it would not change the need to ensure borrowers are 
protected from being burdened in other States that do not provide as 
much support for higher education. Accordingly, we decline to adjust 
the D/E rates measure to account for State investment in higher 
education.
    Changes: None.
    Comments: Many commenters did not support the Department's proposal 
in the NPRM that a program must pass both the D/E rates measure and 
pCDR measure to remain eligible for title IV, HEA program funds. The 
commenters stated that this approach is inconsistent with the position 
the Department took under the 2011 Prior Rule, under which a program 
would remain eligible if it passed either the debt-to-earnings ratios 
or the second debt measure in that regulation, the loan repayment rate. 
The commenters contended that the Department did not justify this 
departure from the 2011 Prior Rule. They suggested that programs should 
remain eligible for title IV, HEA program funds if they pass either the 
D/E rates measure or the pCDR measure. They asserted that there is a 
lack of overlap between programs that fail the D/E rates measure and 
programs that fail the pCDR measure and this indicates that the two 
metrics set different and conflicting standards.
    We also received a number of comments in support of the 
Department's proposal to require that programs pass both the D/E rates 
and pCDR measures. A few of these

[[Page 64927]]

commenters were concerned that the pCDR measure does not adequately 
protect students, citing concerns about the validity of the metric and 
its susceptibility to manipulation. As a result, they argued that 
programs should be required to pass both measures if pCDR is included 
in the final regulations. Some commenters argued that the lack of 
overlap between the measures supports requiring programs to pass both 
because it indicates that they assess two distinct and important 
aspects of program performance. Other commenters were concerned that 
allowing programs to remain eligible solely on the basis of passing the 
D/E rates measure would harm students because the D/E rates measure 
assesses only the outcomes of students who complete a program and does 
not hold programs accountable for low completion rates.
    Similarly, a few commenters suggested the independent operation of 
pCDR undermines the validity of the D/E rates measure because there are 
many programs with high D/E rates but low pCDR rates or where fewer 
than 30 percent of students default, which, in their view, showed that 
the D/E rates measure does not provide a reasonable basis for 
eligibility determinations. They contended that because such programs 
would be ineligible under the proposed regulations, the independent 
operation of the metrics would result in the application of an 
inconsistent standard.
    Other commenters believed that the pCDR measure by itself is a 
sufficient measure of whether a program prepares students for gainful 
employment. Some of these commenters argued that a cohort default rate 
measured at the program level, as set forth in the NPRM, with a three-
year period before ineligibility and with time limits on deferments and 
forbearances would sufficiently address concerns about the validity of 
the metric and its susceptibility to manipulation. The commenters 
contended that the three-year cohort default window is longer than any 
combination of deferments or forbearances, and that using a three-year 
default rate measure would ensure borrowers are counted as being in 
default on a loan if they consistently do not make minimum payments 
during the three-year window. One commenter said the pCDR measure would 
protect taxpayers better than the D/E rates measure by ensuring fewer 
defaults, and, accordingly, this commenter asserted, passing the pCDR 
measure should be sufficient to remain eligible.
    Discussion: As discussed elsewhere in this section, we have not 
included the pCDR measure as an accountability metric in the final 
regulations. The Department will assess program performance using only 
the D/E rates measure. Accordingly, we do not address comments 
regarding whether the measures should operate independently or whether 
pCDR is a reasonable measure of continuing eligibility for title IV, 
HEA program funds.
    We do not agree that the D/E rates measure by itself is an improper 
measure of whether a program prepares students for gainful employment 
simply because some programs have high D/E rates but a low pCDR. These 
results are not surprising for two reasons. First, the measures use 
different approaches to assess the outcomes of overlapping, but 
disparate groups of students. The D/E rates measure certain outcomes of 
students who completed a program, while pCDR measures certain outcomes 
of both students who do, and do not, complete a program. Second, the 
measures assess related, but different aspects of repayment behavior. 
While the pCDR measure identifies programs where a large proportion of 
students have defaulted on their loans, it does not recognize programs 
where too many borrowers are experiencing extreme difficulty in making 
payments and reducing loan balances but have not yet defaulted as the 
D/E rates measure does.
    Changes: None.
    Comments: Some commenters said the D/E rates measure is unfair in 
its application to medical programs. One commenter noted that some 
medical degree programs in the non-profit sector would not be subject 
to the regulations, while the same medical programs in the for-profit 
sector would be. Another commenter compared the earnings outcomes of 
medical programs subject to the regulations to those of some social 
work degree programs operated by non-profit institutions that are not 
subject to the regulations. The commenter claimed the regulations are 
inequitable because D/E rates are generally higher among social workers 
than those students completing medical certificate programs.
    Discussion: As discussed in ``Section 668.401 Scope and Purpose,'' 
the Department's regulatory authority in this rulemaking is limited to 
defining statutory requirements under the HEA that apply only to GE 
programs. The Department does not have the authority in this rulemaking 
to regulate those higher education institutions or programs that do not 
base their eligibility on the offering of programs that prepare 
students for gainful employment, even if such institutions or programs 
would not pass the D/E rates measure. Further, the regulations 
establish minimum standards regarding reasonable debt levels in 
relation to earnings for all GE programs, regardless of how programs 
that provide training for occupations in different fields, such as 
social work and medicine, compare to one another.
    Changes: None.
    Comments: We received a number of comments on how the Department 
should treat GE programs for which D/E rates are calculated in some 
years but not others. Some commenters asserted that the Department 
should not disregard years for which D/E rates are not calculated for a 
program and instead should treat the program as if it had passed the D/
E rates measure for that year. They argued that any other result would 
be unfair because a program could be determined ineligible as a result 
of failing the D/E rates measure in two out of three consecutive years 
for which rates were calculated, even though those assessments had been 
made very far apart in time from one another.
    One commenter suggested using the most recent five award years 
regardless of whether D/E rates were calculated during any or all of 
the years. Another commenter supported resetting a program's results 
under the D/E rates measure after two consecutive years in which D/E 
rates are not calculated.
    Discussion: We do not believe that it is unfair or invalid to use a 
program's D/E rates for non-consecutive years in determining the 
program's continuing eligibility for title IV, HEA program funds. The 
probability of mischaracterizing a program as failing or in the zone 
due to an unusual cohort of students or other anomalies does not 
increase if D/E rates are calculated during non-consecutive years.
    In determining a program's continuing eligibility, rather than 
making assumptions about a program's D/E rates in years where less than 
30 students complete the program, we believe it is important to use the 
best available evidence as to whether a program produces positive 
student outcomes, which is the program's most recent actual results. If 
the program has in fact improved since a prior result under the D/E 
rates measure, its improved performance will be apparent once it has 
enough students who completed the program to be assessed under the D/E 
rates measure again.
    We agree, however, that the longer the hiatus between years for 
which rates are calculated, the less compelling the inference becomes 
that a prior result is reflective of current performance. Accordingly, 
we are revising Sec.  668.403

[[Page 64928]]

to provide that, in making an eligibility determination, we will not 
consider prior D/E rates after four consecutive years in which D/E 
rates are not calculated. A four-year limitation aligns with the 
general operation of the D/E rates measure which, under the zone, finds 
outcomes over a four-year period as relevant. We are also clarifying 
that, generally, subject to the four-year ``reset,'' if a program's D/E 
rates are not issued or calculated for an award year, the program 
receives no result under the D/E rates measure for that award year and 
the program's status under the D/E rates measure is unchanged from the 
last year for which D/E rates were calculated. For example, where a 
program receives its first failing result and the institution is 
required to give student warnings as a result, the program will still 
be considered to be a first time failing program and the institution 
will continue to be required to give student warnings in the next award 
year even if the program's next D/E rates are not calculated or issued 
because it did not meet the minimum n-size requirement.
    Changes: We have revised Sec.  668.403 to add new paragraph (c)(5), 
which provides that, if a program's D/E rates are not calculated or 
issued for an award year, the program receives no result under the D/E 
rates measure for that award year and the program's status under the D/
E rates measure is unchanged from the last year for which D/E rates 
were calculated, provided that, if the Secretary does not calculate D/E 
rates for the program for four or more consecutive award years, the 
Secretary disregards the program's D/E rates for any award year prior 
to the four-year period in determining whether the program is eligible 
for title IV, HEA program funds.
    We have also revised Sec.  668.404(f) to make a corresponding 
technical change that the Secretary will not issue draft or final D/E 
rates for a GE program that does not meet the n-size requirements or 
for which SSA does not provide earnings data.
    Comments: Some commenters recommended that the Department's 
accountability framework recognize, or exempt from the regulations in 
whole or in part, programs with exceptional performance under the 
accountability metrics. A few commenters suggested that institutions or 
programs with low default rates should be exempt from assessment under 
the D/E rates measure. Several commenters proposed 15 percent as the 
appropriate threshold to identify exceptional performance under iCDR, 
while a few commenters suggested that programs with a pCDR below 30 
percent should be exempt from the D/E rates measure. Similarly, a few 
commenters suggested exemptions for programs or institutions with low 
rates of borrowing. Specifically, commenters said a program should be 
deemed to be passing the D/E rates measure if the majority of students 
who complete the program do not have any debt at the time of 
graduation.
    Other commenters suggested the Department exempt programs with high 
completion or job placement rates from both the pCDR measure and D/E 
rates measure. They said high performance on these alternative metrics 
would demonstrate that programs are successfully preparing students for 
gainful employment in a recognized occupation. Several commenters 
contended that a program that provides the highest lifetime net 
benefits to students who complete the program is an exceptional 
performer. The commenters proposed that this would be established by 
subtracting average costs of program attendance from average graduate 
earnings after factoring in low-income and subgroup characteristics of 
graduates.
    One commenter recommended the Department apply a higher annual 
earnings rates passing threshold of 13 percent for programs operated by 
for-profit institutions that adopt programs similar to trial enrollment 
periods, which would allow students to tryout a program for short 
period of time with the option of withdrawing from the program without 
paying any tuition or fees. The commenter also suggested the Department 
should provide that institutions that implement trial enrollment 
periods are eligible under the title IV, HEA programs if their programs 
satisfy the pCDR requirements alone, as the 2011 Prior Rule provided 
with respect to repayment rate.
    Discussion: We appreciate the suggestions for recognizing GE 
programs that exhibit exceptional performance. There are exemplary 
programs at institutions across all sectors, including at for-profit 
institutions and community colleges. We also believe that it is 
important to identify these programs to recognize their achievements 
and so that they can be emulated.
    However, we disagree with the commenters who suggested that 
programs or entire institutions should be exempted from some or all 
parts of the regulations as a reward for exceptional performance. The 
Department must apply the same requirements to all programs under these 
regulations and assess all programs equally. Accordingly, we decline to 
adopt the commenters' suggestions.
    We also disagree with the commenter who recommended we apply an 
annual earnings rate threshold of 13 percent for programs operated by 
for-profit institutions that offer tuition- and fee-free enrollment 
trial periods. The calculation of the D/E rates measures does not 
evaluate students who withdraw before completing a program, and we 
accordingly, do not believe an enrollment trial period is pertinent to 
the thresholds for the D/E rate measures. Institutions may, of course, 
offer enrollment trial periods for their programs and we encourage them 
to do so.
    We will continue to consider ways to recognize exceptional 
programs. In the meantime, we expect that the disclosure requirements 
of the regulations will help students identify programs with 
exceptional performance. We also expect that the disclosures will allow 
institutions to identify these programs for the purpose of adopting 
successful practices that lead to exceptional results for students. 
Finally, we note that programs that are performing at an exceptional 
level will pass the D/E rates measure and this will be reflected in 
their disclosures and promotional materials.
    Changes: None.

Section 668.404 Calculating D/E Rates Including Students Who Do Not 
Complete the Program in the D/E Rates Measure

    Comments: We received a number of comments responding to the 
Department's question about whether we should include students who do 
not complete a GE program in calculating D/E rates.
    Several commenters urged the Department to hold institutions 
accountable for students who do not complete GE programs, arguing that 
these students often accumulate large amounts of debt, even in short 
periods of time, that they struggle to repay. Some commenters believed 
students who do not complete a program should be included in the D/E 
rates calculations to avoid allowing poor-quality programs to remain 
eligible for title IV, HEA program funds. Other commenters argued it 
would be inappropriate to include the debt and earnings of students who 
do not complete because the earnings of those students and their 
ability to repay their loans do not reflect the quality of the program 
they attended. These commenters believed that if students do not 
complete a GE program, they cannot benefit from the training the 
program offers. The

[[Page 64929]]

commenters reasoned that students who do not complete a program are 
much less likely to qualify for the types of jobs for which the program 
provides training, and far more likely to obtain employment in 
completely different fields. One commenter that favored excluding 
students who do not complete a program stated that the reasons a 
student drops out of a program are correlated with socioeconomic 
factors (e.g., the student is a single parent, is unprepared for 
college work, or is a first-generation college student) that are also 
correlated with low earnings. The commenter cited a study conducted by 
Charles River Associates, commissioned by APSCU, showing that, of the 
students who do not complete a program, 50 percent drop out within the 
first six months of enrolling in the program and 75 percent drop out 
within the first year. The commenter asserted that the debt these 
students accumulate is relatively low, and, accordingly, churn is not 
necessarily a negative outcome and institutions should not be 
discouraged from allowing non-traditional students to explore different 
options.
    Some commenters, however, did not support including students who do 
not complete a program because programs with high drop-out rates may 
have low D/E rates as many students would not remain enrolled long 
enough to accumulate large amounts of debt.
    Discussion: As discussed in ``Section 668.403 Gainful Employment 
Program Framework,'' we agree it is important to hold institutions 
accountable for the outcomes of students who do not complete a GE 
program. However, we do not believe that the D/E rates measure is an 
appropriate metric for this purpose for some of the reasons noted by 
the commenters. In addition, we agree that including students who do 
not complete a program in the D/E rates measure could have the perverse 
effect of improving the D/E rates of some of those programs because 
students who drop out early may accrue relatively lower amounts of debt 
than students who complete the program.
    Changes: None.
    Comments: One commenter recommended that the Department determine 
which students to include in the calculation of D/E rates based on the 
amount of debt that a student accumulates, rather than only on whether 
or not a student completed the program. The commenter agreed with 
others that an institution should not be held accountable in situations 
where students incur a minimal amount of debt before dropping out of a 
GE program, acknowledging that students who do not complete a program 
will likely have lower earnings than those who complete the program. 
However, the commenter argued that, at the same time, institutions 
should be accountable for students who accumulate a significant amount 
of debt to attend a GE program but ultimately do not complete that 
program. The commenter believed that, at a certain point, if a student 
has accrued high levels of debt for attending a program, then the 
program should have prepared the student for gainful employment in that 
field to some extent. As an example, the commenter offered that all 
students who borrow more than $15,000 should be included in the 
calculation of D/E rates.
    Discussion: The Department appreciates but cannot adopt this 
suggestion. First, we lack sufficient data and evidence to set a 
threshold for the amount of debt that would be considered sufficiently 
excessive to warrant including a student in the calculation. Second, as 
previously discussed, we do not believe it is appropriate to include in 
the D/E rates measure students who did not complete a GE program. 
Finally, the notion that including in the D/E rates measure only those 
students with significant or high levels of debt would not account for 
the students who incur less debt but are having difficulty repaying 
their loans because of low earnings.
    Changes: None.

Two-Year Cohort Period

    Introduction: We received a number of comments on the two-year 
cohort period that the Department uses in calculating the D/E rates. To 
aid readers in their review of the comment summaries and our responses, 
we provide the following context.
    Under the regulations, the two-year cohort period covers the two 
consecutive award years that are the third and fourth award years prior 
to the award year for which the D/E rates are calculated or, for 
programs whose students are required to complete a medical or dental 
internship or residency, the sixth and seventh award years prior to the 
award year for which D/E rates are calculated. The Department will 
calculate the D/E rates for a GE program by determining the annual loan 
payment for the students who completed the program during the two-year 
cohort period and obtain from SSA the mean and median aggregate 
earnings of that group of students for the most recently available 
calendar year. Because the earnings data we obtain from SSA are for a 
calendar year, and because students included in the two-year cohort 
period may complete a program at any time during the cohort period, the 
length of time that a particular student could potentially be employed 
before the year for which we obtain earnings data from SSA varies from 
18 to 42 months. Counting the year for which we obtain earnings data 
(earnings year) would extend this period of employment to 30 to 54 
months. For example, for D/E rates calculated for the 2015 award year 
(July 1, 2014 to June 30, 2015), the two-year cohort period is award 
years 2011 (July 1, 2010 to June 30, 2011) and 2012 (July 1, 2011 to 
June 30, 2012). We will obtain the annual earnings of students who 
completed the program during this two-year cohort period from SSA for 
the 2014 calendar year. So, a student who completes the program at the 
very beginning of the two-year cohort period, on July 1, 2010, and is 
employed immediately after completion could be employed for up to 42 
months--from July 2010 through December 2013--before the year for which 
earnings are used to calculate the D/E rates, and up to 54 months if 
the earnings year itself is included. A student who completes the 
program at the very end of the two-year cohort period, on June 30, 
2012, and is employed immediately after completing the program could be 
employed for up to 18 months--July 1, 2012 through December 2013--
before the year for which earnings data are obtained, and up to 30 
months if the earnings year itself is included. Accordingly, although 
in the NPRM we, and many of the commenters, referred to a three-year 
employment period, there is a range of possible employment periods for 
students who complete a program in a two-year cohort period.
    Comments: Several commenters requested that the Department clarify 
which year is the ``most currently available'' year for SSA earnings 
data in Sec.  668.404(c).
    Discussion: The following chart provides the earnings calendar year 
that corresponds to each award year for which D/E rates will be 
calculated.
BILLING CODE 4000-01-P

[[Page 64930]]

[GRAPHIC] [TIFF OMITTED] TR31OC14.000

BILLING CODE 4000-01-C
    Changes: None.
    Comments: Commenters raised various concerns regarding the 
definition of the ``two-year cohort period.''
    Some commenters believed that evaluating earnings after three years 
is arbitrary, will lead to underestimating how much borrowing is 
reasonable for education, and will not adequately account for the long-
term benefits of completing a program. These commenters asserted that 
many students

[[Page 64931]]

experience substantial increases in earnings later in their careers as 
they gain experience or various licensures, and that using earnings 
after only three years would therefore understate the value of the 
program. Similarly, some commenters asserted that many individuals 
experience significant income fluctuations in the initial years of 
their careers.
    Some commenters expressed concern that evaluating programs using 
graduates' earnings three years after graduation will cause 
institutions to stop offering programs with strong long-term salary 
growth potential but with low starting salaries. Along these lines, 
other commenters believed that this approach will lead institutions to 
offer a disproportionate number of programs in higher-paying fields 
like business and information technology rather than programs in less 
lucrative fields like teaching and nursing. To address these concerns, 
several commenters recommended modifying the proposed regulations to 
evaluate programs based on graduates' earnings at a later time in their 
careers. The commenters suggested different points in time that would 
be appropriate, varying from three to 10 years after completion. Other 
commenters recommended using a rolling average of graduates' earnings 
over several years, rather than a snapshot at three years.
    Some commenters asserted that, in some cases, the Department will 
be obtaining earnings data for graduates who were employed for just 18 
months. They suggested that students' ultimate earnings, particularly 
for professional school graduates, would be better reflected by 
allowing for a longer period after graduation or after the completion 
of residency training or fellowships for medical or dental school 
graduates before D/E rates are calculated.
    Discussion: We believe that measuring earnings for the employment 
range covered by the two-year cohort period strikes the appropriate 
balance between providing ample time for students to become employed 
and increase earnings past entry level and yet not letting so much time 
pass that the D/E rates are no longer reflective of the current or 
recent performance of the program.
    The D/E rates measure primarily assesses whether the loan debt 
incurred by students actually ``pay[s] dividends in terms of benefits 
accruing from the training students received,'' and whether such 
training has indeed equipped students to earn enough to repay their 
loans such that they are not unduly burdened. H.R. Rep. No. 89-308, at 
4 (1965); S. Rep. No. 89-758, at 7 (1965). As discussed in ``Sec.  
668.403 Gainful Employment Program Framework,'' high D/E rates indicate 
that the earnings of a program's graduates are insufficient to allow 
them to manage their debt. The longer the Department waits to assess 
the ability of a cohort of students to repay their loans, the less 
relevant that assessment becomes for prospective students, and the more 
likely it is that new students will attend a program that is later 
determined to be ineffective at preparing students for gainful 
employment. Assessing the outcomes of less recent graduates would also 
make it more difficult for institutions to improve student and program 
outcomes under the D/E rates measure as it would take many years before 
subsequently enrolled students who complete the program would be 
included in the D/E rates calculation.
    There is no evidence that relying on earnings during the employment 
range used in the regulations would actually create the disincentives 
or result in the harms that commenters suggest. Specifically, many 
programs training future nurses, teachers, and other modest-earning 
professions, as characterized by the commenters, would successfully 
pass the D/E rates measure. For example, of the 497 licensed practical/
vocational nurse training programs in the 2012 GE informational D/E 
rates data set, 493 (99 percent) passed, 4 (1 percent) fell in the 
zone, and none of the programs failed. In addition, of the 113 programs 
categorized as education programs by the two-digit CIP code,\133\ 109 
(96 percent) passed, 3 (3 percent) were in the zone, and only 1 (1 
percent) failed. This suggests that programs preparing students for 
``less lucrative'' occupations or occupations with delayed economic 
benefits are not problematic as a class--many programs in these 
categories succeed in ensuring that the debt of their students is 
proportional to earnings.
---------------------------------------------------------------------------

    \133\ The two-digit CIP code, 13, is the classification for the 
education programs including Early Childhood Education and Training, 
Elementary Education and Teaching, and many other types of programs 
related to education.
---------------------------------------------------------------------------

    Changes: None.
    Comments: Some commenters believed that using both two-year and 
four-year cohort periods would be confusing, make it difficult to 
compare programs, and result in misleading comparisons. The commenters 
reasoned that because economic conditions may vary markedly from year 
to year, including earnings of graduates who are employed for an 
additional two years under a four-year cohort period would inflate the 
earnings used in calculating the D/E rates. Consequently, the 
commenters suggested that the Department use only a two-year cohort 
period. In cases where fewer than 30 students complete a program during 
the two-year cohort period, the commenters suggested that the 
Department treat the program as passing the D/E rates measure.
    Some commenters argued that the Department did not provide any data 
showing the effect of the four-year cohort period on GE programs or 
otherwise adequately justify the use of a four-year cohort period. 
These commenters suggested removing the four-year cohort period 
provisions until the Department completes a more thorough assessment.
    Some commenters believed that the proposed regulations did not 
adequately specify when and how the Department intends to use the two-
year cohort period and four-year cohort period, specifically taking 
issue with what they believed was the repetitious use of the reference 
to ``the cohort period.'' The commenters opined that the Department 
should specify when the two-year cohort period and four-year cohort 
period are used, in the same manner in which proposed Sec.  
668.502(a)(1) of subpart R describes how the Department would determine 
the cohort for the pCDR measure. Similarly, the commenters were 
concerned that institutions would be confused by the language used in 
proposed Sec.  668.404(f)(1) to describe the circumstances under which 
the Department would not calculate D/E rates if fewer than 30 students 
completed the program.
    Discussion: We agree that using the four-year cohort period may add 
some complexity, but believe that this concern is outweighed by the 
benefits of evaluating more programs under the D/E rates measure as 
some programs that do not meet the minimum n-size of 30 students who 
complete the program over the two-year cohort period would do so when 
the four-year cohort period is applied.
    With respect to the commenters who argued that the Department did 
not adequately justify using a four-year cohort period, we disagree. In 
the NPRM, the Department acknowledged that one of the limitations of 
using an n-size of 30 as opposed to an n-size of 10 is that use of a 
larger n-size results in significantly fewer GE programs being 
evaluated. We estimated that, at an n-size of 30, the programs that 
will be evaluated under the D/E rates measure account for 60 percent of 
the enrollment of students receiving title IV, HEA program funds in GE 
programs.

[[Page 64932]]

Using the four-year cohort period will help to increase the number of 
students in programs that are accountable under the D/E rates measure.
    In response to comments regarding how the Department intends to use 
the two- and four-year cohort periods, we note that the preamble 
discussion in the NPRM under the heading ``Section 668.404 Calculating 
D/E rates,'' 79 FR 16448-16449, contains a thorough explanation. In 
short, the calculations for both D/E rates would be based on the debt 
and earnings outcomes of students who completed a program during a 
cohort period. As with the 2011 Prior Rule, for D/E rates to be 
calculated for a program, a minimum of 30 students would need to have 
completed the program, after applying the exclusions in Sec.  
668.404(e), during the cohort period. If 30 or more students completed 
the program during the third and fourth award years prior to the award 
year for which D/E rates are calculated, then the cohort period would 
be that ``two-year'' cohort period. If at least 30 students did not 
complete the program during the two-year cohort period, then the cohort 
period would be expanded to include the previous two years, the fifth 
and sixth award years prior to the award year for which the D/E rates 
are being calculated, and rates would be calculated if 30 or more 
students completed the program during that ``four-year cohort period.'' 
If 30 or more students did not complete the program over the two-year 
cohort period or the four-year cohort period, then D/E rates would not 
be calculated for the program.
    The two- and four-year cohort periods as described would apply to 
all programs except for medical and dental programs whose students are 
required to complete an internship or residency after completion of the 
program. For medical and dental programs, the two-year cohort period 
would be the sixth and seventh award years prior to the award year for 
which D/E rates are calculated. The four-year cohort period for these 
programs would be the sixth, seventh, eighth, and ninth award years 
prior to the award year for which D/E rates are calculated.
    Changes: We have revised the definition of ``cohort period'' in 
Sec.  668.402 to clarify that we use the two-year cohort period when 
the number of students completing the program is 30 or more. We use the 
four-year cohort period when the number of students completing the 
program in the two-year cohort period is less than 30 and when the 
number of students completing the program in the four-year cohort 
period is 30 or more.
    Comments: Another commenter suggested that the Department replace 
the term ``cohort period'' with the term ``GE cohort period'' to avoid 
confusion with the iCDR regulations.
    Discussion: We appreciate the commenter's concern but we do not 
believe that the regulations are confusing with respect to the term 
``cohort period.'' While ``cohort'' is a defined term under the iCDR 
regulations, those regulations do not use the term ``cohort period.'' 
The term ``cohort period'' appears only in these regulations.
    Changes: None.
    Comments: One commenter raised concerns about calculating D/E rates 
for graduates of veterinary or medical school using earnings after only 
three years following completion of the program. Using the example of a 
student graduating during the 2011-2012 award year from a veterinary 
program, whose earnings the commenter believed would be measured based 
upon SSA earnings data for calendar year 2014, the commenter asserted 
that the D/E rates would not be an accurate reflection of the student's 
ability to earn an income or be gainfully employed.
    Discussion: We believe that the commenter may have misunderstood 
the D/E rates calculation for graduates of medical and dental programs 
whose students are required to complete a period of internship or 
residency. The regulations do, in fact, consider the resulting delay 
between when such students complete their respective programs and when 
they may begin professional practice. For medical and dental programs, 
the two-year cohort period would be the sixth and seventh award years 
prior to the award year for which D/E rates are calculated. The four-
year cohort period would be the sixth, seventh, eighth, and ninth award 
years prior to the award year for which D/E rates are calculated. In 
the example given by the commenter, SSA earnings for the 2014 calendar 
year would be used in the D/E rates calculations for the 2014-2015 
award year. The two-year cohort period for a medical program would be 
2007-2008 and 2008-2009.
    Veterinarians, on the other hand, do not have a required internship 
or residency. They can begin practice immediately following graduation 
from veterinary school. As with other types of training programs that 
do not require an internship or residency after program completion, we 
believe that graduates of veterinary programs will have sufficient time 
after completion of their program to become employed and increase 
earnings beyond an entry level in order for the program they attended 
to be accurately assessed under the D/E rates measure.
    Changes: None.
    Comments: One commenter said that since there has been no 
informational rate data provided for medical school programs, 
institutions with these types of programs would be at a greater 
disadvantage under accountability metrics that determine a program's 
continuing eligibility for title IV, HEA program funds based on 
historical program performance.
    Discussion: The Department did not provide informational rate data 
for medical school programs because we do not have such data. However, 
an institution can reasonably be expected to know about the borrowing 
patterns of its students, because the institution's financial aid 
office typically ``packages'' financial aid, including loans, in 
arranging financial aid for students. All institutions should also be 
conducting the necessary local labor market research, including 
engaging with potential employers, to determine the typical earnings 
for the occupations for which their programs provide training. 
Institutions may use this information to estimate their results under 
the D/E rates measure. Additionally, we believe that the ``zone'' 
provisions described under ``Section 668.403 Gainful Employment Program 
Framework,'' together with the transition period in Sec.  668.404(g) 
described later in this section, will provide programs with an adequate 
opportunity to make adjustments and improvements to their programs as 
needed.
    Changes: None.

Use of Mean and Median Earnings

    Comments: Some commenters supported the proposal in Sec.  
668.404(c)(2) to use the higher of the mean or median annual earnings 
to calculate the D/E rates, arguing that using the higher of the two 
would better reflect the earnings of students who complete programs and 
would therefore be fairer to institutions than using only the mean or 
only the median.
    Other commenters recommended using either the mean or the median 
earnings to calculate D/E rates, rather than the higher of the two. 
These commenters believed that the proposed approach would make it 
difficult for consumers, schools, researchers, policymakers, and others 
to understand the D/E rates. The commenters also said that the 
informational rates released by the Department in 2010, which were 
calculated using the higher of the mean or median earnings, were 
confusing. The commenters expressed further concern that, in addition 
to causing

[[Page 64933]]

confusion, the use of either the mean or the median annual earnings 
would undermine the public's ability to compare D/E rates across GE 
programs. These commenters did not believe that the Department 
presented a reasoned basis for using the higher of the mean or median 
earnings and argued that the Department's proposed approach would 
weaken the D/E rates measure.
    Some commenters believed that the Department should use the mean in 
all cases, but they did not elaborate on their reasons for that 
approach. Other commenters recommended using the median in all cases 
because they believed that it would be inconsistent to use median loan 
debt in the numerator of the D/E rates but the mean earnings in the 
denominator. They also argued that using the median would guarantee 
that the earnings data reflect the outcomes of at least 50 percent of 
the students who complete a program and that the earnings of one 
outlier student would not skew the calculation.
    Discussion: We agree with commenters that it is important that 
consumers and other stakeholders receive clear, useful information 
about program outcomes. By using the higher of the mean or median 
earnings, the regulations strike a balance between providing 
stakeholders information that is easy to use and comprehend and 
ensuring an accurate assessment of program performance.
    Because using the mean or median earnings may affect a particular 
program, we use the higher of the mean or median earnings to account 
for the following circumstances:
     In cases where mean earnings are greater than median 
earnings, we use the mean because the median may be sensitive to zero 
earnings. For example, if the majority of the students on the list 
submitted to SSA have zero earnings, the program would fail the D/E 
rates measure even if most of the remaining students had relatively 
high earnings. In other words, when the median is less than the mean, 
there may be a large number of students with zero earnings. So, we use 
the mean earnings to diminish the sensitivity of the D/E rates to zero 
earnings and better reflect the central tendency in earnings for 
programs where many students have extremely low and extremely high 
earnings.
     In cases where median earnings are greater than mean 
earnings, we use the median because it is likely that there are more 
students who completed a program with relatively high earnings than 
with relatively low earnings. For these cases, we believe that median 
earnings are a more representative estimate of central tendency than 
mean earnings. Relatively high median earnings indicate higher 
employment rates, and by using the median when it is higher than the 
mean, we reward programs where a high fraction of students who complete 
a program obtain employment.
    Changes: None.
    Comments: A few commenters suggested that, if the Department 
calculates the D/E rates using the higher of mean and median earnings, 
the Department should publish both the mean and median earnings data 
for each GE program and indicate which figure was used in the D/E rates 
calculation. These commenters argued that disclosing this information 
would mitigate some of the concerns about difficulties comparing and 
conducting analyses across programs.
    Discussion: As an administrative matter, we agree to post the mean 
and median earnings for all GE programs on the Department's Web site, 
and we will identify whether the mean or the median earnings were used 
to calculate the D/E rates for any particular program.
    Changes: None.
    Comments: A commenter suggested that, in calculating the D/E rates, 
we use the earnings of the student's household, and not just the 
earnings of the student.
    Discussion: We do not believe it would be appropriate to use 
household earnings in the calculation of D/E rates. The earnings of 
other members of the household have no relation to the assessment of 
the effectiveness of the program in which the student was enrolled.
    Changes: None.
    Comments: One commenter recommended using the earnings of the top 
10 percent of earners in the cohort in the denominator of the D/E rates 
calculations, rather than the higher of the mean or median earnings of 
all students who completed the program in the cohort period (other than 
those excluded under Sec.  668.404(e)). The commenter believed that 
using the top 10 percent of earners would best represent the earnings 
potential of students who complete the program and would mitigate the 
effects of students who opt to leave the workforce, work other than 
full-time, work in a different field, or are not top performers at 
work.
    Discussion: The regulations seek to measure program-level 
performance, which we believe is best accomplished by including the 
outcomes of all students who completed a program. An assessment of just 
the top 10 percent of earners may provide information on how those 
particular students are faring, but would say little about actual 
overall program performance. For example, if the other 90 percent of 
students were unable to secure employment, then reviewing the outcomes 
of just the top 10 percent would result in a substantially inaccurate 
assessment. Further, as discussed in this section and in ``Sec.  
668.403 Gainful Employment Program Framework,'' we believe several 
aspects of the regulations, including use of mean and median earnings, 
use of a multi-year cohort period with a minimum n-size, and allowing 
several years of non-passing results before a program loses eligibility 
for title IV, HEA program funds reduce the likelihood to close to zero 
that a typically passing program will be mischaracterized as failing or 
in the zone due to an atypical cohort of students who complete the 
program such as those identified by the commenter.
    Changes: None.
    Comments: One commenter argued that the Department should consider 
policies that would help students succeed in the recovering labor 
market, rather than examine average graduate earnings.
    Discussion: We agree with the commenter that policies should be 
designed to help students succeed in the job market. These regulations 
are intended to accomplish this very objective, at least partly by 
measuring student earnings outcomes. As a result of the disclosure 
requirements, which will include earnings information, students and 
prospective students will have access to more and better information 
about GE programs so that they can choose a program more likely to lead 
to successful employment outcomes. The minimum certification 
requirements will ensure that all GE programs provide students who 
complete programs with the basic academic qualifications necessary for 
obtaining employment in their field of training. And, because programs 
will be held accountable for the outcomes of their students under the 
D/E rates measure, which requires an assessment of earnings, we expect 
that, over time, institutions will offer more high-quality programs in 
fields where students can secure employment at wages that allow them to 
repay their debt.
    Changes: None.

Poverty Guideline

    Comments: Some commenters noted that in calculating the 
discretionary income rate under the proposed regulations, the 
Department would use the most currently available annual earnings and 
the most currently available Poverty Guideline, but those

[[Page 64934]]

items would correspond to different years. The commenters provided an 
example where the most currently available annual earnings year might 
be the 2014 tax year, but the Poverty Guideline used to calculate the 
rate could be for the 2015 year. According to the commenter, this 
discrepancy could negatively affect a program's discretionary income 
rate because the benefit of obtaining the education would not be 
observed if historical earnings are used. The commenters suggested 
that, to the extent possible, the Department should use the Poverty 
Guideline for the same year that the Department obtains SSA earnings 
data.
    Discussion: Under the discretionary income rate, a portion of 
annual earnings, the amount equal to 150 percent of the Poverty 
Guideline for a family size of one, is considered to be protected or 
reserved to enable students to meet basic living costs. Only the 
remaining amount of annual earnings is considered to be available to 
make loan payments.
    As explained by the Department of Health and Human Services (HHS), 
the Poverty Guidelines issued at the beginning of a calendar year 
reflect price changes for the most recently completed calendar 
year.\134\ In the example provided by HHS, the Poverty Guidelines 
issued in January 2014 take into account the price changes that 
occurred during the entire 2013 calendar year. Because the HHS process 
typically results in higher Poverty Guidelines from year to year, we 
agree with the commenters that the Poverty Guideline used to calculate 
the discretionary income rate should correspond with the year for which 
we obtain earnings data from SSA. Otherwise, earnings would be over-
protected. For example, as shown in the chart under ``Two-Year Cohort 
Period,'' we will not obtain earnings data from SSA for the 2014 
calendar year until early 2016. So, under the proposed regulations we 
would have calculated the discretionary income rate using 2014 calendar 
year earnings and the Poverty Guideline published by HHS in 2016, which 
would reflect price changes in 2015. It would be more appropriate to 
use the Poverty Guideline that reflects the price changes during the 
calendar year for which we obtained earnings, 2014, which would be the 
Poverty Guideline published in 2015 by HHS.
---------------------------------------------------------------------------

    \134\ Available at http://aspe.hhs.gov/poverty/faq.cfm.
---------------------------------------------------------------------------

    Changes: We have revised Sec.  668.404(a)(1) to specify that in 
calculating the discretionary income rate, the Department will use the 
Poverty Guideline for the calendar year immediately following the 
calendar year for which the Department obtains earnings data from SSA.
    Comments: One commenter stated that according to 2011-2012 NPSAS 
data, of students attending for-profit institutions, 50 percent have 
dependent children and 30 percent have at least two dependent children. 
In view of this information, the commenter concluded that because the 
discretionary income rate is calculated based on an assumed family size 
of one, student debt burden is understated.
    Similarly, other commenters suggested that the Department use the 
Poverty Guideline for families. The commenters believed that 
institutions should be sensitive to students with dependents who are 
seeking to improve their credentials and earnings by enrolling in GE 
programs and that using the appropriate Poverty Guideline would provide 
that incentive to institutions.
    Discussion: Although we agree that applying the Poverty Guideline 
based on actual family size would result in a more precise assessment 
of loan burden, it would be difficult and highly burdensome, if not 
impossible, to adopt this approach. There is no apparent way for either 
institutions or the Department to collect information about the family 
size of students after they complete a program. At or before the time 
students enroll in a GE program, they may have reported the number of 
dependents on the FAFSA, but that information may change between the 
time students completed the program and when the Department calculates 
the D/E rates. Even if we were able to collect accurate information, 
applying a different Poverty Guideline for each student who completed a 
program, or otherwise accounting for differences in family size, would 
not only complicate the calculation but result in D/E rates that may 
not be comparable as there would be different assumptions for 
discretionary income for different programs. The rate for a program 
with an average family size of two would be different than the rate for 
the same program with an average family size of four, creating 
situations where the Department would not be uniformly assessing the 
performance of programs and making it difficult for students and 
prospective students to compare programs.
    Changes: None.

Loan Debt

    Comments: Several commenters were critical of the Department's 
proposal to calculate a program's loan debt only as a median. The 
commenters recommended that we apply the lower of the mean or median 
loan debt to the D/E rates calculation. Some of these commenters argued 
that using the median loan debt would create distorted assessments of 
debt burden for programs that have a small number of students who 
completed.
    A number of commenters stated that using median loan debt would 
unfairly benefit low-cost programs offered by community colleges 
because the regulations cap loan debt at the lesser of the student's 
tuition and fees and books, supplies, and equipment or the amount of 
debt the students incurred for enrollment in the program. Other 
commenters suggested that instead of using the lesser of these amounts 
to calculate the median loan debt, the Department should use the total 
amount of loan funds that a student used to pay direct charges after 
taking into account any grants or scholarships the student received to 
pay for these charges. The commenters argued that if the D/E rates 
measure is designed to hold institutions accountable for how much they 
assess students for direct charges, the amount assessed should be the 
amount of direct costs net of institutional aid. Otherwise, the 
student's actual costs for direct charges would be overstated.
    Some commenters asserted that because independent students may be 
able to borrow larger amounts than dependent students, a program for 
which the majority of students who completed the program were 
independent students would tend to have a higher median loan debt. For 
this reason, the commenters opined that institutions might be inclined 
to discourage independent students from enrolling or avoid enrolling 
other students that are more likely to borrow.
    Discussion: We elected to use the median loan debt because a 
median, as a measure of central tendency of a set of values, is less 
affected by outliers than a mean. Means are generally more sensitive to 
extremely high and low values compared to values that do not fall on 
either extreme, while medians are more sensitive to the values near the 
50th percentile of a population being sampled.\135\ We also elected to 
use median loan debt, as opposed to the mean, to reward programs that 
keep costs sufficiently low such that the

[[Page 64935]]

majority of students do not have to borrow. For example, if a majority 
of students in a program only receive Pell Grants and do not borrow, 
the median loan debt will be zero for that program. Taking into 
consideration the same logic, we elected to use the mean for earnings 
because, although the mean is more sensitive to extreme values, it is 
also less sensitive to zero earnings values. For example, if a majority 
of students in a program earn zero dollars, the median would be zero, 
but the mean may still be a substantially greater number than zero if 
some students have high levels of earnings. We believe it is 
appropriate to credit such programs for the minority of students who 
have high earnings and that such a calculation more accurately reflects 
the central tendency in the earnings of the students who completed the 
program.
---------------------------------------------------------------------------

    \135\ We note that, because the D/E rates are calculated based 
on a 100 percent sample of the students in the cohort, the median of 
debt is the value at the 50th percentile (i.e., the midpoint of the 
distribution of debt) and the values on either side of the median do 
not influence the value of the median.
---------------------------------------------------------------------------

    With regard to programs with a small number of students completing 
the program, as discussed in this section, we mitigate the potential 
for distorted outcomes by requiring a minimum n-size of 30 students who 
completed the program in the cohort period for D/E rates to be 
calculated.
    We do not agree with the comment that programs offered by community 
colleges would benefit more from the capping of a student's loan amount 
to tuition and fees, and books, equipment, and supplies, because many 
students at community colleges do not borrow or borrow amounts less 
than the total amount of tuition and fees and books, equipment, and 
supplies. For these students, the loan cap would not be applied in 
determining a program's median loan debt.
    With regard to the suggestion that median loan debt should be based 
on the total amount of loans used to pay direct charges, the commenter 
is referring to situations where grant or scholarship funds are used 
ahead of loan funds to pay for direct costs. In these situations the 
grants and scholarships may be designated to pay direct costs so the 
amount of loan debt would be no more than the amount of direct costs 
that were not paid by the grant and scholarships funds. Whereas the 
suggestion would reduce the amount of the loan debt used to calculate 
the D/E rates by effectively replacing loan funds with grant or 
scholarship funds, we believe doing so is contrary to the intent of 
these regulations to evaluate whether students are able to service the 
amount of loan debt for the amount up to the direct charges assessed by 
the institution.
    In response to the concerns that an institution might alter its 
admissions policies based on a student's dependency status or need to 
borrow, we note that because the loan cap limits the amount of debt on 
a student-by-student basis to the total amount of direct charges 
(tuition and fees, and books, supplies, and equipment), the principal 
factor influencing a program's median loan debt may be tied more to the 
amount of the direct charges than to the amount that individual 
students borrow. In addition, as discussed in the Regulatory Impact 
Analysis, our analysis shows that dependency status or socioeconomic 
background are not determinative of results and so we do not believe 
the regulations create this incentive.
    Changes: None.
    Comments: A few commenters asked the Department to clarify how it 
will calculate a program's median loan debt. They argued that the 
proposed methodology could be interpreted in two ways, each likely 
yielding a different result. Under one reading, the Department would 
determine student by student the lesser of the loan debt and the total 
program costs assessed to that student, and then calculate the median 
of all of those amounts. Under another reading, the Department would 
determine the median amount of all students' loan debts and the median 
amount of all students' total program costs and use the lesser amount.
    Discussion: The commenters' first reading is correct. We will 
determine individually, for each student who completes a program, the 
lesser of the total amount of a student's loan debt and the total costs 
assessed that student for tuition and fees and books, supplies, and 
equipment, and use whichever of these amounts is lower to calculate the 
median loan debt for the program.
    Changes: We have revised Sec.  668.404(b)(1) to more clearly 
describe how the Department will calculate the median loan debt for a 
program. We have also revised Sec.  668.404(d)(2) to clarify that for 
the purpose of determining the lesser amount of loan debt or the costs 
of tuition and fees and books, supplies, and equipment, we attribute 
these costs to a GE program in the same way we attribute the loan debt 
a student incurs for attendance in other GE programs.
    Comments: One commenter stated that loan debt incurred by a medical 
school graduate increases because interest accrues while the student is 
in a residency period and that this additional debt would affect D/E 
rates.
    Discussion: In determining a student's loan debt, the Department 
uses the total amount of loans the student borrowed for enrollment in a 
GE program, net of any cancellations or adjustments made on those 
loans. Any interest that accrues on those loans or that is subsequently 
capitalized is not considered loan debt for the purpose of calculating 
a program's D/E rates.
    Changes: We have revised Sec.  668.404(d)(1)(i) to clarify that the 
total amount borrowed by a student for enrollment in a GE program is 
the total amount disbursed less any cancellations or adjustments.
    Comments: Some commenters recommended that the Department clarify 
the timing and conditions under which the Department would remove loan 
debts for students for whom SSA does not have earnings information.
    Discussion: As explained more fully in ``Sec.  668.405 Issuing and 
Challenging D/E Rates,'' at the time that SSA provides the Department 
with the mean and median earnings of the students who completed a 
program, SSA will also provide a count of the number of students for 
whom SSA could not find a match in its records, or who died. Before 
calculating the program's median loan debt, we will remove the number 
of highest loan debts equal to the number of students SSA did not 
match. Since we do not have information on each individual student who 
was not matched with SSA data, we remove the highest loan debts to 
provide a conservative estimate of median loan debt that ensures we do 
not overestimate the amount of debt borrowed by students who were 
successfully matched with SSA data.
    Changes: None.
    Comments: Several commenters stated that the proposed regulations 
do not clearly show how debt is attributed in situations where students 
are enrolled in multiple GE programs simultaneously at the same or 
different credential levels.
    Discussion: Under Sec.  668.411(a), an institution is required to 
report a student's enrollment in each GE program even when the student 
was enrolled in more than one program, either at different times, at 
the same time, or for overlapping periods. The institution reports 
information about each enrollment (dates, tuition and fees, books, 
supplies, and equipment, amounts of private student loans and 
institutional financing, etc.) separately for each program. The 
Department uses the reported enrollment dates to attribute a student's 
loan amounts to the relevant GE program. In instances where a student 
was enrolled in more than one GE program during a loan period, we 
attribute a portion of the loan to each program in proportion to the 
number of days the student was enrolled in each program.

[[Page 64936]]

    In attributing loans, we exclude those loans, or portions of loans, 
that were made for a student's enrollment in a non-GE program (e.g., a 
degree program at a public or not-for-profit institution). In instances 
where a loan was made for a period that included enrollment in both a 
GE program and in a non-GE program, the loan will be attributed to the 
GE program under the assumption that the student would have taken out 
the loan if the student was enrolled only in the GE program.
    Changes: None.
    Comments: Some commenters stated that many students enter for-
profit schools after accumulating loan debt from traditional colleges, 
and that the added debt may severely affect the students' ability to 
repay their loans.
    Discussion: We agree that increasing amounts of debt, regardless of 
where that debt was incurred, will affect a student's ability to repay 
his or her loans. However, the D/E rates are calculated based only on 
the amount a student borrowed for enrollment in GE programs at the 
institution, and are not based on any debt accumulated at other 
institutions the student previously attended, except where the student 
incurred debt to attend a program offered by a commonly owned or 
controlled institution, and where disregarding the common ownership or 
control would allow manipulation of D/E rates, as provided under Sec.  
668.404(d)(3).
    Changes: None.
    Comments: One commenter suggested that the Department revise Sec.  
668.404(d)(1)(iii) to clarify that the amount of any obligation that a 
student owes the institution is the amount outstanding at the time the 
student completes the program. The commenter provided the following 
language: ``The amount outstanding, as of the date the student 
completes the program, on any credit extended by or on behalf of the 
institution for enrollment in the GE program that the student is 
obligated to repay after program completion, even if that obligation is 
excluded from the definition of a `private education loan,' in 34 CFR 
Sec.  601.2.''
    Other commenters opined that total loan debt should not include any 
funds a student owes to an institution unless those funds are owed 
pursuant to an executed promissory note.
    Discussion: We believe that any amount owed to the institution 
resulting from the student's attendance in the GE program should be 
included, regardless of whether it is evidenced by a promissory note or 
other agreement because the amount owed is the same as any other debt 
the student is responsible to repay. For this reason, we clarify that, 
in addition to an obligation stemming from extending credit, an 
obligation includes any debts or unpaid charges owed to the 
institution. In addition, we adopt the commenter's suggestion to 
specify that the amount included in determining the student's loan debt 
is the amount of credit extended (not from private education loans) by 
or on behalf of the institution, including any unpaid charges, that are 
outstanding at the time the student completed the program.
    Changes: We have revised the regulations to clarify, in Sec.  
668.404(d)(1)(iii), that loan debt includes any credit, including for 
unpaid charges, extended (other than private education loans) by or on 
behalf of an institution, that is owed to the institution for any GE 
program attended at the institution, and that the amount of this 
institutional credit includes only those amounts that are outstanding 
at the time the student completed the program.
    Comments: One commenter asked the Department to clarify if 
institutional debt would include amounts owed to the institution 
resulting from the institution's return of unearned title IV aid under 
the return to title IV aid regulations.
    Discussion: The situation described by the commenter results where 
a student enrolls at an institution, the student withdraws at a point 
where the institution returns the unearned portion of the student's 
title IV, HEA program funds and the student is required to pay the 
institution at least a portion of the charges that would have been paid 
by those unearned funds, and the student subsequently completes a GE 
program at the same institution before paying those charges from the 
prior enrollment. We confirm that the institutional debt for the 
program the student completes includes the student debt from the prior 
enrollment at the institution. We do not believe this series of events 
will happen often, and it is unlikely that it would significantly 
change the median loan debt calculated for a program.
    Changes: None.
    Comments: Some commenters opined that the regulations do not 
provide for an accurate assessment of debt burden because, in addition 
to title IV loans and private loans, students use other financing 
options, such as credit cards and home equity loans, to cover 
educational expenses. They argued that the Department should not ignore 
these other forms of credit because doing so would understate the debt 
burden of students.
    Discussion: While we agree that there may be instances where 
counting debt incurred through various financing options may provide a 
better assessment of total debt, the information needed to include that 
debt in calculating the D/E rates is generally not available and may 
not be useable if the debt is not tied directly to a student. For 
example, an institution would not typically know or inquire whether a 
student or the student's family obtained an equity loan or used a 
portion of that loan to pay for educational expenses. For a credit 
card, even when an institution knows that it was used to pay for 
educational expenses, the institution does not typically know or 
inquire whether the amount charged on the credit card was paid in full 
shortly thereafter or created a longer-term obligation similar to a 
student loan.
    Changes: None.
    Comments: Some commenters argued that the Department did not 
clarify how an institution might ``reasonably be aware of'' a student 
who has a private student loan and that, as a result, some borrowing 
will go unreported, perhaps intentionally. One of the commenters noted 
that Federal law does not currently require an institution to certify 
that a borrower has demonstrated need to receive a private student 
loan. As noted in a 2012 study conducted by the CFPB and the 
Department, according to the commenter, private student lenders have 
directly originated loans to students, sometimes without the school's 
knowledge. The commenters encouraged the Department to clarify the 
phrase ``reasonably aware'' to reduce the likelihood that institutions 
will engage in tactics to arrange credit from private lenders for 
students in an attempt to circumvent the requirements of the 
regulations.
    Similarly, other commenters argued that the ``reasonably aware'' 
provision gives too much discretion to institutions to report private 
loans. The commenters stated that private loans are an expensive form 
of financing that is used by students attending for-profit institutions 
at twice the rate as students attending non-profit institutions and 
that, in some cases, for-profit institutions use private loans to evade 
the 90/10 provisions in section 487(a)(24) of the HEA. For these 
reasons, the commenters suggested that the Department require 
institutions to affirmatively assess whether their students have 
private loans.
    Discussion: The HEOA requires private education lenders to obtain a 
private loan certification form from every borrower of such a loan 
before the lender may disburse the private education loan. Under 34 CFR 
601.11(d), an institution is required to

[[Page 64937]]

provide the self-certification form and the information needed to 
complete the form upon an enrolled or admitted student applicant's 
request. An institution must provide the private loan self-
certification form to the borrower even if the institution already 
certifies the loan directly to the private education lender as part of 
an existing process. An institution must also provide the self-
certification form to a private education loan borrower if the 
institution itself is the creditor. Once the private loan self-
certification form and the information needed to complete the form are 
disseminated by the institution, there is no requirement that the 
institution track the status of the borrower's private education loan.
    The Federal Reserve Board, in 12 CFR 226.48, built some flexibility 
into the process of obtaining the self-certification form for a private 
education lender. The private education lender may receive the form 
directly from the consumer, the private education lender may receive 
the form through the institution of higher education, or the lender may 
provide the form, and the information the consumer will require to 
complete the form, directly to the borrower. However, in all cases the 
information needed to complete the form, whether obtained by the 
borrower or by the private education lender, must come directly from 
the institution.
    Thus, even though an institution is not required to track the 
status of its student borrowers' private education loans, the 
institution will know about all the private education loans a student 
borrower receives, with the exception of direct-to-consumer private 
education loans, because as previously, the institution's financial aid 
office ``packages'' most private education loans in arranging financial 
aid for students. We consider the institution to be reasonably aware at 
the very least of private education loans that its own offices have 
arranged or helped facilitate, including by providing the certification 
form. The institution must report these loans. Direct-to-consumer 
private education loans are disbursed directly to the borrower, not to 
the school. An institution is not involved in a certification process 
for this type of loan. Nothing prevents an institution from asking 
students whether they obtained direct-to-consumer private loans, and we 
encourage institutions to do so. However, we are not persuaded that 
requiring institutions to affirmatively assess whether students obtain 
direct-to-consumer private education loans through additional inquiry, 
as suggested by some commenters, will be helpful or result in reporting 
of additional loans that would materially impact the median loan debt 
of a program.
    Changes: None.
    Comments: A few commenters argued that loan debt should include all 
loans held by each student, not just loans attributed to the relevant 
program. The commenters suggested that by including debt previously 
received for attendance at prior institutions, the metric would better 
take into account previous educational and job experience, factors not 
currently reflected in the D/E rates measure.
    Discussion: The Department is adopting the D/E rates measure as an 
accountability metric because we believe that comparing debt incurred 
for completing a GE program with earnings achieved after that training 
provides the most appropriate indication of whether students can manage 
the debt they incurred. We attribute loan debt to the highest 
credentialed program completed by a student for two reasons: Earnings 
most likely stem from the highest credentialed program and some or all 
of the coursework from a lower credentialed program may apply to the 
higher credential program. For these reasons, in cases where a student 
completes a lower credential program but previously enrolled in a 
higher credentialed program, we do not believe it is appropriate to 
include the loan debt from the higher credentialed program.
    Changes: None.
    Comments: One commenter noted that the reference in Sec.  
668.404(b)(1)(ii) to the reporting requirements relating to tuition and 
fees and books, equipment, and supplies is incorrect.
    Discussion: The commenter is correct.
    Changes: We have relocated and corrected the reference in Sec.  
668.404(b)(2) to the tuition and fees and books, equipment, and 
supplies reported under Sec.  668.411(a)(2)(iv) and (v).

Tuition and Fees

    Comments: A number of commenters agreed with the Department's 
proposal to cap the loan debt for a student at the amount assessed for 
tuition and fees but disagreed with the proposal in Sec.  
668.404(b)(1)(i) and (ii) to include books, supplies, and equipment as 
part of the cap. Some of the commenters stated that institutions 
include the costs of books, ``kits,'' and supplies as part of the 
tuition for many programs as a way to limit student out-of-pocket costs 
and, accordingly, did not believe they should be held accountable for 
those costs. A few of these commenters suggested that the Department 
exclude from the cap the costs of books, supplies, and equipment if an 
institution can show that it reduced the price of these items to the 
student through direct purchasing. Other commenters believed that since 
students may purchase the supplies they want, but not necessarily need, 
and because the prices for books, supplies, and equipment may vary 
greatly, the loan cap should include only tuition and fees.
    Some commenters supported the proposed tuition and fees and books, 
equipment, and supplies cap, opining that because the title IV, HEA 
programs permit students to borrow in excess of direct educational 
costs, calculating the loan debt without a cap would unfairly hold 
institutions accountable for portions of debt unrelated to the direct 
cost of the borrower's program. The commenters reasoned that inasmuch 
as institutions are not permitted to limit borrowing (other than on a 
case-by-case basis), it would be unfair to allow decisions by students 
to borrow above the cost of the program to affect a program's 
eligibility. Some of these commenters requested that the Department 
give institutions more tools or the authority to reduce over-borrowing 
if they are to be held accountable for debt above tuition and fees.
    On the other hand, some commenters objected to the cap. They 
asserted that limiting loan debt would invalidate the D/E rates as an 
accountability metric because a portion of a student's debt (debt 
incurred for living expenses and other indirect costs) would not be 
considered.
    A few commenters disagreed with the Department's position that 
tuition, fees, books, supplies, and equipment are the only costs over 
which an institution exercises direct control. These commenters argued 
that an institution has control over the cost of attendance elements 
that enable students to borrow for indirect expenses such as room and 
board.
    Other commenters opined that costs for books, supplies, and 
equipment are largely determined by students and that, even for 
students in the same program, costs may vary depending on whether 
students purchase new or used materials, rent materials, or borrow the 
materials. Given this variability, the commenters noted that it could 
be difficult for an institution to establish an appropriate amount for 
these items in a student's cost of attendance budget, and were 
concerned that less reputable institutions may misreport data for 
books, supplies, and equipment to lower the amount at which the 
Department would cap loan debt for a program. The commenters concluded 
that including

[[Page 64938]]

books, supplies, and equipment in the loan cap may hurt institutions 
that truthfully report information to the Department.
    Discussion: We believe that an institution has control over the 
costs of books, supplies, and equipment, either by including those 
costs in the amount it charges for tuition and fees, as noted by some 
of the commenters, or through a process where a student purchases those 
items from the institution. To account for instances where the student 
purchases, rents, or otherwise obtains books, supplies, and equipment 
from an entity other than the institution, Sec.  668.411(a)(2)(v) 
requires the institution to report the total amount of the allowances 
for those items that were used in the student's title IV Cost of 
Attendance (COA). As explained more fully in volume 3, chapter 2 of the 
FSA Handbook, section 472 of the HEA specifies the items or types of 
costs, like the costs for books and supplies, that are included in the 
COA, but the institution is responsible for determining the appropriate 
and reasonable amounts of those items.\136\ The COA is a longstanding 
statutory provision with which institutions have had to comply, so we 
do not agree that it would be difficult for institutions to establish 
reasonable allowances for COA items. In any event, to comply with the 
reporting requirements, an institution simply reports the total amount 
of the COA allowances for books, supplies, and equipment or the amount 
of charges assessed the student for obtaining or purchasing these items 
from the institution, whichever amount is higher. Under this approach, 
it does not matter where a student purchased books or supplies or how 
much they paid, or whether he or she needed or wanted the supplies. The 
institution controls the COA allowances and controls the cost of these 
items.
---------------------------------------------------------------------------

    \136\ Available at www.ifap.ed.gov/fsahandbook/attachments/1415FSAHbkVol3Ch2.pdf.
---------------------------------------------------------------------------

    Although we encourage institutions to reduce the costs of books and 
supplies, those actions have no bearing on the central premise of 
capping loan debt--that an institution is accountable under these 
regulations for the amount of debt a student incurs to pay for direct 
costs that the institution controls. In this regard, we limit the 
direct costs for items under the cap to those that are the most 
ubiquitous--books, supplies, and equipment. As noted in the comments, 
room and board is a COA item that could be included in the cap, but 
many GE program students enroll in distance education or online 
programs or attend programs at institutions that do not have or offer 
campus housing or meal plans.
    Although we agree that it would be appropriate for research and 
consumer purposes to recognize all educational loan debt incurred by 
students attending GE programs, we disagree with the comment that 
limiting loan debt under the cap would invalidate the D/E rates 
measure. In the context of an eligibility requirement related to 
program performance, we believe it is appropriate to hold an 
institution accountable for only those program charges over which it 
has control, and could exercise that control to comply with the 
thresholds under the D/E rates measure. However, students and 
prospective students should have a complete picture of program 
outcomes, including information about the total amount of loan debt 
incurred by a typical student who completed the program. Accordingly, 
the median loan debt for a program that is disclosed under Sec.  
668.412 is not limited to the amount assessed for tuition and fees and 
books, equipment, and supplies.
    With respect to the comment that the Department should give 
institutions more flexibility to control student borrowing, we do not 
have the authority to change rules regarding loan limits because these 
provisions are statutory. See section 454(a)(1)(C) of the HEA, 20 
U.S.C. 1087d(a)(1)(C).
    Finally, we do not believe that including books, supplies, and 
equipment in the loan cap would encourage an institution to misreport 
the COA allowances for these items to the Department. We note that 
institutions that submit reports to the Department are subject to 
penalty under Federal criminal law for making a false statement in such 
a report. See, e.g., 18 U.S.C. 1001, 20 U.S.C. 1097(a).
    Changes: None.
    Comments: Some commenters were concerned that capping loan debt may 
inappropriately benefit GE programs with low reported direct costs. For 
example, a GE program may appear to have better D/E rates if an 
institution keeps tuition and fees low by shifting costs, and loan debt 
related to those costs, to housing or indirect costs that are not 
included in calculating the D/E rates. Consequently, the commenters 
believed it was unfair for some GE programs to benefit from a cap 
because these programs could have the same total loan debt as GE 
programs where the cap would not apply. The commenters concluded that 
lower direct costs are not necessarily indicative of lower debt and may 
actually serve to hide the true balance of the loan debt, an outcome 
that would lead the public, students, and prospective students to draw 
erroneous conclusions about a program's D/E rates.
    Discussion: We do not agree there is a material risk that an 
institution would shift costs in the manner described by the commenters 
to take advantage of the cap, but we will know about any changes in 
program costs through the reporting under these regulations and may 
require an institution to explain and document those changes.
    Changes: None.
    Comments: A commenter stated that foreign veterinary schools do not 
control the amount of tuition assessed for the clinical year of 
instruction. The commenter noted that under 34 CFR 600.56(b)(2)(i), 
students of foreign veterinary schools that are neither public or non-
profit must complete their clinical training at veterinary schools in 
the United States. For the fourth or clinical year of study, the U.S. 
veterinary school, which is not subject to the GE regulations, charges 
the foreign school an amount for tuition that is typically the out-of-
state tuition rate. In the case cited by the commenter, approximately 
77 percent of the tuition amount the foreign veterinary school assesses 
its students is paid to the U.S. school. Because foreign veterinary 
schools have no control over the tuition charged by U.S. schools that 
its students are required to attend, the commenter suggests that the 
Department allow foreign veterinary schools to exclude from total 
direct costs the portion of tuition that is charged by U.S. schools.
    Discussion: We do not agree that it would be appropriate to ignore 
loan debt that students incur for completing coursework provided by 
other institutions. For foreign veterinary schools and home 
institutions that enter into written arrangements under 34 CFR 668.5 to 
provide education and training, the veterinary school, or the home 
institution considers that coursework in determining whether to confer 
degrees or credentials to those students in the same way as if they 
provided the coursework themselves and the students are responsible for 
the debt accumulated for that coursework. Furthermore, in arranging for 
other institutions to provide coursework, the veterinary school or the 
home institution may be able to negotiate the cost of that coursework, 
but at the very least accepts those costs. For these reasons, we view 
the veterinary school or home institution as the party responsible for 
the loan debt students incur for completing coursework at other 
institutions.
    Changes: None.

[[Page 64939]]

Amortization

    Comments: Several commenters supported the Department's proposal to 
amortize the median loan debt of students completing a GE program over 
10, 15, or 20 years based on the credential level of the program, as 
opposed to a fixed amortization period of 10 years for all programs. 
These commenters believed that this amortization schedule more fairly 
accounts for longer and higher credentialed programs where students 
take out greater amounts of debt, better reflects actual student 
repayment patterns, and appropriately mirrors available loan repayment 
plans.
    Some commenters supported the proposed amortization schedule based 
on credential level but suggested longer amortization periods than 
those proposed. For instance, some commenters recommended increasing 
the minimum amortization period from 10 years to 15 or 20 years.
    One commenter suggested that we extend the amortization period from 
10 years to 20 years because the commenter believed a 20[hyphen]year 
amortization schedule would more accurately reflect the actual time 
until full repayment for most borrowers. The commenter cited to the 
Department's analysis in the NPRM that showed that within 10 years of 
entering repayment, about 58 percent of undergraduates at 
two[hyphen]year institutions, 54 percent of undergraduates at 
four[hyphen]year institutions, and 47 percent of graduate students had 
fully repaid their loans; within 15 years of entering repayment, about 
74 percent of undergraduates at two[hyphen]year institutions, 76 
percent of undergraduates at four[hyphen]year institutions, and 72 
percent of graduate students had fully repaid their loans; and within 
20 years of entering repayment, between 81 and 83 percent of students, 
depending on the cohort year, fully repaid their loans. The commenter 
also contended that far more bachelor's degree programs would pass the 
D/E rates measure if we adopted a 20-year amortization period.
    Other commenters agreed with using 10 years for certificate or 
diploma programs, but argued for extending the amortization period to 
25 years for graduate, doctoral, and first professional degree 
programs. They asserted that students in graduate-level programs would 
likely have higher levels of debt that might take longer to repay. Some 
commenters were particularly concerned that some programs in high-debt, 
high-earnings fields would not be able to pass the D/E rates measure 
absent a longer amortization period. One commenter expressed concern 
that, even with a 20-year amortization period, medical programs, 
including those preparing doctors for military service and service in 
areas that have critical shortages of primary care physicians, would 
fail to pass the annual earnings rate despite successfully preparing 
their graduates for medical practice.
    Other commenters advocated using a single 10-year amortization 
period regardless of the credential level. These commenters argued that 
a 10-year amortization period would best reflect borrower behavior, 
observing that most borrowers repay their loans under a standard 10-
year repayment plan. The commenters referred to the Department's 
analysis in the NPRM, which they believed showed that 54 percent of 
borrowers who entered repayment between 1993 and 2002 had repaid their 
loans within 10 years, and about 65 percent had repaid their loans 
within 12 years, despite economic downturns during that period. In view 
of this analysis, the commenters believed that the proposed 15- and 20-
year amortization periods are too long and would allow excessive 
interest charges. These commenters also argued that longer repayment 
plans, like the income-based repayment plan, are intended to help 
struggling borrowers with unmanageable debts and should not become the 
expectation or standard for students repaying their loans. They 
asserted that the income-driven repayment plans result in considerably 
extending the repayment period, add interest cost to the borrower, and 
allow cancellation of amounts not paid at potential cost to taxpayers, 
the Government, and the borrower.
    Discussion: Under these regulations, the Department determines the 
annual loan payment for a program, in part, by applying one of three 
different amortization periods based on the credential level of the 
program. As noted by some of the commenters, the amortization periods 
account for the typical outcome that borrowers who enroll in higher-
credentialed programs (e.g., bachelor's and graduate degree programs) 
are likely to have more loan debt than borrowers who enroll in lower-
credentialed programs and, as a result, are more likely to take longer 
to repay their loans.
    Based on our analysis of data on the repayment behavior of 
borrowers across all sectors who entered repayment between 1980 and 
2011 that was provided in the NPRM, we continue to believe that 10 
years for diploma, certificate, and associate degree programs, 15 years 
for bachelor's and master's degree programs, and 20 years for doctoral 
and first professional degree programs are appropriate amortization 
periods. We restate the relevant portions of our analysis here.
    Of borrowers across all sectors who entered repayment between 1993 
and 2002, we found that within 10 years of entering repayment, the 
majority of undergraduate borrowers, about 58 percent of borrowers from 
two-year institutions and 54 percent of undergraduate borrowers from 
four-year institutions, had fully repaid their loans. In comparison, 
less than a majority of graduate student borrowers had fully repaid 
their loans within 10 years. Within 15 years of entering repayment, a 
majority of all borrowers regardless of credential level had fully 
repaid their loans: About 74 percent of borrowers from two-year 
institutions, 76 percent of undergraduate borrowers from four-year 
institutions, and 72 percent of graduate student borrowers.\137\
---------------------------------------------------------------------------

    \137\ Department of Education analysis of NSLDS data.
---------------------------------------------------------------------------

    For more recent cohorts, the majority of borrowers from two-year 
institutions continue to fully repay their loans within 10 years. For 
example, of undergraduate borrowers from two-year institutions who 
entered repayment in 2002, 55 percent had fully repaid their loans by 
2012. We believe this confirms that a 10-year amortization period is 
appropriate for diploma, certificate, and associate degree programs.
    In contrast, recent cohorts of undergraduate borrowers from four-
year institutions and graduate student borrowers are repaying their 
loans at slower rates than similar cohorts. Of borrowers who entered 
repayment in 2002, only 44 percent of undergraduate borrowers from 
four-year institutions and only 31 percent of graduate student 
borrowers had fully repaid their loans within 10 years. Even at this 
slower rate of repayment, given that 44 percent of undergraduate 
borrowers at four-year institutions fully repaid within 10 years, we 
believe it is reasonable to assume that the majority, or more than 50 
percent, of borrowers from this cohort will reach full repayment by the 
15-year mark. Accordingly, we believe that a 15-year amortization 
period is appropriate for bachelor's degree programs and additionally 
master's degree programs where students are likely to have less debt 
than longer graduate programs. Given the significantly slower repayment 
behavior of recent graduate student borrowers and the number of 
increased extended repayment periods available to borrowers, however, 
we do not expect the majority of these borrowers to fully repay their 
loans within 15 years as graduate student

[[Page 64940]]

borrowers have in the past. But even at this slower rate of repayment, 
we believe it is likely that the majority of graduate student borrowers 
from this cohort will complete their repayment within 20 years. As a 
result, we see no reason to apply an amortization period longer than 20 
years to doctoral and first professional degree programs.
    We agree with the commenters who argued that the Department has 
made income-driven repayment plans available to borrowers who have a 
partial financial hardship only to assist them in managing their debt--
and that programs should ideally lead to outcomes for students that 
enable them to manage their debt over the shortest period possible. As 
we noted in the preamble to the 2011 Prior Rule, an educational program 
generating large numbers of borrowers in financial distress raises 
troubling questions about the affordability of those debts. Moreover, 
the income-driven repayment plans offered by the Department do not 
provide for a set repayment schedule, as payment amounts are determined 
as a percentage of income. Accordingly, we have not relied on these 
plans for determining the amortization schedule used in calculating a 
program's annual loan payment for the purpose of the D/E rates measure.
    Changes: None.
    Comments: One commenter suggested that instead of amortizing the 
median loan debt over specified timeframes, we should use the average 
of the actual annual loan amounts of the cohort that is evaluated. The 
commenter argued that by providing income-driven repayment plans, the 
Department acknowledges that recent graduates may not be paid well but 
need a way to repay their loans. As these graduates gain work 
experience, their earnings will increase. The commenter suggested that 
using the actual average of the cohort would allow for programs that 
provide training for occupations that require experience before 
earnings growth and motivate institutions to work with graduates who 
would be better off in an income-driven repayment plan than defaulting 
on their loans.
    Discussion: We cannot adopt this suggestion because we do not have 
all the data needed to determine the actual annual loan amounts, 
particularly for students who received FFEL and Perkins Loans. But even 
if we had the data, adopting this suggestion would have the perverse 
effect of overstating the performance of a program where, absent 
adequate employment, many students who completed the program have to 
rely on the debt relief provided by income-driven repayment plans--an 
outcome that belies the purpose of these regulations.
    Changes: None.

Interest Rate

    Comments: Several commenters opposed the Department's proposal to 
apply an interest rate that is the average of the annual interest rate 
on Federal Direct Unsubsidized Loans over the six-year period prior to 
the end of the cohort period. Some commenters asserted that a six-year 
average rate would inappropriately place greater emphasis on the 
predictability of the rate than on capturing the actual rates on 
borrowers' loans. They argued that, particularly in the case of shorter 
programs, the six-year average interest rate might bear little 
resemblance to the actual interest rate that students received on their 
loans. One commenter stated that the average rate could obscure periods 
of high interest rates during which borrowers would still have to make 
loan payments. Referring to qualified mortgage rules that instruct 
lenders to assess an individual's ability to repay using the highest 
interest rate a loan could reach in a five-year period, the commenter 
recommended that we likewise calculate the annual loan payment based on 
the highest interest rate during the six-year period.
    Many commenters urged the Department to use an interest rate closer 
to the actual interest rate on borrowers' loans. Specifically, 
commenters recommended calculating each student's weighted average 
interest rate at the time of disbursement so that the interest rate 
applied for each program would be a weighted average of each student's 
actual interest rate. However, acknowledging the potential burden and 
complexity of this approach, some commenters alternatively suggested 
varying the time period for determining the average interest rate by 
the length of the program. Although they suggested different means of 
implementing this approach (e.g., averaging the interest rate for the 
years in which the students in the cohort period received loans, or 
using the interest rates associated with the median length of time it 
took for students to complete the program), the commenters argued that 
determining an average interest rate based on the length of a program 
would provide more accurate calculations than using a six-year average 
interest rate for all GE programs. In particular, they believed that 
this approach would avoid situations in which a six-year average 
interest rate would be applied to a one-year certificate program, 
potentially applying an interest rate that would not reflect students' 
repayment plans.
    Some commenters suggested modifying proposed Sec.  
668.404(b)(2)(ii) to add a separate interest rate for private education 
loans. These commenters argued that applying the average interest rate 
on Federal Direct Unsubsidized Loans to an amount that includes private 
loans would likely understate the amount of debt that a student 
incurred. They suggested that the Department could determine an 
appropriate interest rate to apply to private education loans by 
obtaining documentation of the actual interest rate for institutional 
loans and, for private education loans, surveying private student loan 
rates and using a rate based on that survey.
    One commenter supported the Department's proposal to use the 
average interest rate on Federal Direct Unsubsidized Loans during the 
six-year period prior to the end of the cohort period but suggested 
that the Department use the lower of the average or the current rate of 
interest on those loans. The commenter asserted that this approach 
would ensure that institutions are not penalized for economic factors 
they cannot control.
    Finally, one commenter offered that Federal student loan interest 
rates, a significant predictor and influencer of borrowing costs, are 
now pegged to market rates and, as a result, exposed to rate 
fluctuations. Accordingly, different cohorts of students amassing 
similar levels of debt will likely see vastly different costs 
associated with their student loans depending upon when those loans 
were originated. This, the commenter suggests, will affect default 
rates and debt-to-earnings measurements, even if program quality and 
outcomes remain constant.
    Discussion: We generally agree with the commenters that the 
interest rate used to calculate the annual loan payment should reflect 
as closely as possible the interest rates on the loans most commonly 
obtained by students. In particular, we agree that using the average 
interest rate over a six-year period for programs of all lengths might 
not accurately reflect the annual loan payment of students in shorter 
programs. However, we cannot adopt the suggestion made by some 
commenters to use the weighted average of the interest rates on loans 
at the time they were made or disbursed because we do not have the 
relevant information for every loan. However, we are revising Sec.  
668.404(b)(2)(ii) to account for program length and the interest rate 
applicable to undergraduate and graduate programs. Specifically, for 
programs that are typically two years or less in length we will use the 
average

[[Page 64941]]

interest rate over a shorter three-year ``look-back'' period, and use 
the longer six-year ``look-back'' period for programs over two years in 
length. In calculating the average interest rate for a graduate 
program, we will use the statutory interest rate on Federal Direct 
Unsubsidized loans applicable to graduate programs. Similarly, we will 
use the undergraduate interest rate on Federal Direct Unsubsidized 
loans for undergraduate programs. For example, for an 18-month 
certificate program, we will use the average of the rates for 
undergraduate loans that were in effect during the three-year period 
prior to the end of the cohort period.
    Finally, we do not see a need to establish separate interest rates 
for private education loans. The Department does not collect, and does 
not have ready access to, data on private loan interest rates. The 
Department could calculate a private loan interest rate only if a party 
with knowledge of the rate on a loan were to report that data. The 
institution may be well aware that a student received a private 
education loan, but would not be likely to know the interest rate on 
that loan, and could not therefore be expected to provide that data to 
the Department. The Department could not readily calculate a rate from 
other sources because lenders offer private loans at differing rates 
depending on the creditworthiness of the applicant (and often the 
cosigner).\138\ Although some lenders offer private loans for which 
interest rates are comparable to those on Federal Direct Loans, more 
commonly private loan interest rates are higher than rates on Federal 
loans; lenders often set rates based on LIBOR, but use differing 
margins to set those rates.\139\ Thus, we could not determine from 
available data the terms of private loans obtained by a cohort of 
borrowers who enrolled in a particular GE program.
---------------------------------------------------------------------------

    \138\ The best private student loans will have interest rates of 
LIBOR + 2.0% or PRIME--0.50% with no fees. Such loans will be 
competitive with the Federal PLUS Loan. Unfortunately, these rates 
often will be available only to borrowers with good credit who also 
have a creditworthy cosigner. It is unclear how many borrowers 
qualify for the best rates, although the top credit tier typically 
encompasses about 20 percent of borrowers. See Private Student 
Loans, Finaid.Org, available at www.finaid.org/loans/privatestudentloans.phtml.
    \139\ Id.
---------------------------------------------------------------------------

    The CFPB rule to which the commenter refers does not appear to be 
relevant to the issue of the interest rate that should be used to 
calculate loan debt. The CFPB rule defines a ``qualified mortgage'' 
that is presumed to meet the ability to repay requirements as one ``for 
which the `creditor' underwrites the loan, taking into account the 
monthly payment for mortgage-related obligations, using: The maximum 
interest rate that may apply during the first five years after the date 
on which the first regular periodic payment will be due.'' 12 CFR 
1026.43(e)(2)(iv). Interest rates during the repayment period on title 
IV, HEA loans (FFELP and Direct Loans) made on or after July 1, 2006 
have been fixed, rather than variable, and therefore the interest rate 
on a FFELP or Direct Loan made since 2006 remains fixed during the 
entire repayment term of the loan. 20 U.S.C. 1077A(i); 1087e(b)(7). 
Because these rates do not change, we see no need to adopt a rule that 
would cap interest rates for calculation of loan debt at a rate that 
would vary during the first five years of the repayment period.
    Changes: We have revised Sec.  668.404(b)(2) to provide that the 
Secretary will calculate the annual loan payment for a program using 
the average of the annual statutory interest rates on Federal Direct 
Unsubsidized Loans that apply to loans for undergraduate and graduate 
programs and that were in effect during a three- or six-year period 
prior to the end of the cohort period.
    Comments: One commenter expressed concern that independent, 
nonprofit, and for-profit institutions that do not charge interest as 
part of a student's payment plan, either during the time the student is 
attending the institution or later after the student completes the 
program, would be discouraged from continuing this practice because the 
debt burden used to calculate the D/E rates would be overestimated. The 
commenter suggested that the Department either allow institutions to 
separate debt on interest-bearing accounts from debt on non-interest 
bearing accounts so the total loan debt and annual payment amounts are 
more accurate, or provide that institutions may appeal the loan debt 
calculation.
    Discussion: The Department has crafted the D/E rates measure to 
assess programs based on the actual outcomes of students to the extent 
feasible. However, the Department has balanced this interest against 
the need for uniformity and consistency to minimize confusion and 
administrative burden. As there is no evidence that interest-free loans 
are a common practice, we do not believe the interest rate provisions 
of the regulations will significantly misstate debt burden if they do 
not specifically recognize interest-free institutional payment plans. 
Given the low chance of a materially unrepresentative result, 
simplicity and uniformity outweigh the commenter's concerns.
    Changes: None.
    Comments: Some commenters disagreed with the Department's proposal 
to apply the interest rate on Federal Direct Unsubsidized Loans, 
arguing that this approach would not account for whether students were 
undergraduate or graduate students, or for the percentage of students 
who received Subsidized Loans instead of Unsubsidized Loans. Some 
commenters also asserted that using the Unsubsidized Loan rate would 
artificially increase the annual loan payment amount used to calculate 
the D/E rates for a program.
    Discussion: We will use the interest rate on Federal Direct 
Unsubsidized Loans to calculate the annual debt payment for the D/E 
rates measure for several reasons. First, the majority of students in 
GE programs who borrow take out Unsubsidized Loans. Second, the rate is 
one that will be used to calculate debt service on private education 
loans received by GE students, the most favorable of which are made at 
rates, available to only a small group of borrowers, that are 
comparable to the rate on Direct Plus loans (currently 7.21 
percent).\140\ Third, the rate we choose will be used to calculate debt 
service not on the entire loan, but, in every instance in which the 
loan amount is ``capped'' at tuition fees, books, equipment, and 
supplies, on a lesser amount. This tends to offset the results of a 
mismatch between the Unsubsidized Loan rate and a lower applicable loan 
rate.
---------------------------------------------------------------------------

    \140\ Private Student Loans, Finaid.Org, available at 
www.finaid.org/loans/privatestudentloans.phtml.
---------------------------------------------------------------------------

    Changes: None.

Bureau of Labor Statistics (BLS) Data

    Comments: A number of commenters urged the Department to base the 
annual earnings component of the D/E rates on annualized earnings data 
from BLS, rather than on actual student earnings information from SSA. 
These commenters were concerned that the lack of access to SSA 
individual earnings data would hinder an institution's ability to 
manage the performance of its programs under the D/E rates measure, and 
therefore advocated for using a publically available source of earnings 
data, such as BLS.
    Other commenters who suggested using BLS data asserted that BLS 
data are more objective than income data from SSA because of the way 
that BLS aggregates and normalizes income information to smooth out 
anomalies.
    Discussion: As we stated in the NPRM, we believe that there are 
significant difficulties with the use of

[[Page 64942]]

BLS data as the basis for calculating annual earnings. First, as a 
national earnings data set that aggregates earnings information, BLS 
earnings data do not distinguish between graduates of excellent and 
low-performing programs offering similar credentials.
    Second, BLS earnings data do not relate directly to a program. 
Rather, the data relate to a Standard Occupational Classification (SOC) 
code or a family of SOC codes based on the work performed and, in some 
cases, on the skills, education, or training needed to perform the work 
at a competent level. An institution may identify related SOC codes by 
using the BLS CIP-to-SOC crosswalk that lists the various SOC codes 
associated with a program, or the institution may identify through its 
placement or employment records the SOC codes for which students who 
complete a program find employment.
    In either case, the BLS data may not reflect the academic content 
of the program, particularly for degree programs. Assuming the SOC 
codes can be properly identified, the institution could then attempt to 
associate the SOC codes to BLS earnings data. However, BLS provides 
earnings data at various percentiles (10, 25, 50, 75, and 90), and the 
percentile earnings do not relate in any way to the educational level 
or experience of the persons employed in the SOC code.
    Accordingly, it would be difficult for an institution to determine 
the appropriate earnings for a program's students, particularly for 
students who complete programs with the same CIP code but at different 
credential levels. For example, BLS data would not show a difference in 
earnings in the SOC codes associated with a certificate program and an 
associate degree program with the same CIP code.
    Moreover, because BLS percentiles simply reflect the distribution 
of earnings of individuals employed in a SOC code, selecting the 
appropriate percentile is somewhat arbitrary. For example, the 10th 
percentile does not reflect entry-level earnings any more than the 50th 
percentile reflects earnings of persons employed for 10 years. Even if 
the institution could reasonably associate the earnings for each SOC 
code to a program, the earnings vary, sometimes significantly, between 
the associated SOC codes, so the earnings would need to be averaged or 
somehow weighted to derive an amount that could be used in the 
denominator for the D/E rates.
    Finally, and perhaps most significantly, BLS earnings do not 
directly show the earnings of those students who complete a particular 
program at a particular institution. Making precisely such an 
assessment is essential to the GE outcome evaluation. Instead, BLS 
earnings reflect the earnings of workers in a particular occupation, 
without any relationship to what educational institutions those workers 
attended. While it is reasonable to use proxy earnings for research or 
consumer information purposes, we believe a direct measure of program 
performance must be used in determining whether a program remains 
eligible for title IV, HEA program funds. The aggregate earnings data 
we obtain from SSA will reflect the actual earnings of students who 
completed a program without the ambiguity and complexity inherent in 
using BLS data for a purpose outside of its intended scope.
    Recognizing these shortcomings, in the 2011 Prior Rule, the 
Department permitted the use of BLS data as a source of earnings 
information only for challenges to debt-to-earnings ratios calculated 
in the first three years of the Department's implementation of Sec.  
668.7(g). This was done to address the concerns of institutions that 
they would be receiving earnings information for the first time on 
students who had already completed programs. In order to confirm the 
accuracy of the data used in a BLS-based alternate earnings 
calculation, Sec.  668.7(g) of the 2011 Prior Rule also required an 
institution to submit, at the Department's request, extensive 
documentation, including employment and placement records.
    We believe that the reasons for previously permitting the use of 
BLS data for a limited period of time, despite its shortcomings, no 
longer apply. Most institutions have now had experience with SSA 
earnings data, through the 2011 GE informational rates and 2012 GE 
informational rates; thus, for many programs, institutions are no 
longer in the situation where they would be receiving earnings data for 
the first time under the regulations.
    Changes: None.

Debt Roll-Up

Undergraduate and Graduate Programs

    Comments: Some commenters supported proposed Sec.  668.404(d)(2), 
under which the Department would attribute all undergraduate loan debt 
to the highest undergraduate credential that a student completed, and 
all graduate loan debt to the highest graduate credential that a 
student completed, when calculating the D/E rates for a program. They 
believed that this would address concerns raised by the 2011 Prior Rule 
that an institution's graduate programs would be disadvantaged if a 
student pursued a graduate degree after completing an undergraduate 
program at the same institution. They explained that, under the 2011 
Prior Rule, all of a student's loan debt for an undergraduate program 
would have been attributed to the graduate program, which could have 
put the graduate program at a disadvantage and, as a result, might have 
deterred institutions from encouraging students to pursue further 
study. Although supportive of the Department's proposal, one commenter 
suggested that the Department should go further by distinguishing 
between loan debt incurred for master's and doctoral programs. The 
commenter argued that it is difficult to justify attributing debt from 
a shorter master's program to a longer doctoral program and that 
institutions would be deterred from encouraging students to pursue 
doctoral-level study.
    Another commenter believed that loan amounts should be attributed 
to a higher credentialed program only if the student was enrolled in a 
program in the same field. The commenter questioned the Department's 
authority to use debt from two unrelated programs and attribute it to 
only one of them. The commenter opined that in some cases, students 
might enroll in one institution to earn an associate degree in a 
particular field, and then subsequently enroll in a higher credentialed 
program in a different field and may have to take additional coursework 
to fulfill the requirements of the second degree program. The commenter 
was concerned that the outcomes for these students would skew the D/E 
rates calculation for the higher credentialed program, resulting in 
inaccurate information for the public about the cost of completing the 
program.
    Other commenters disagreed with the Department's proposal to 
attribute a student's loan debt to the highest credential subsequently 
completed by the student. These commenters believed that this approach 
would inflate and double-count loan debt of students who pursue 
multiple degrees at institutions because an institution would report 
and disclose debt at a lower credential level and then report the 
combined debt at a higher credential level. They were also concerned 
that attributing loan debt incurred for multiple programs to just the 
highest credentialed program would be confusing and misleading for 
prospective students and the public and would discourage students from 
enrolling in higher credentialed programs. The commenters recommended 
that the Department attribute loan debt and costs to each

[[Page 64943]]

completed program separately instead of combining them.
    Discussion: Although we appreciate the general support for our 
proposal to disaggregate the loan debt attributed to the highest 
credential completed at the undergraduate and graduate levels, we are 
not persuaded that further disaggregating loan debt between masters and 
doctoral-level programs is needed or warranted. As noted by some of the 
commenters, our proposal was intended to level the playing field 
between institutions that offer only graduate-level programs and 
institutions that offer both undergraduate and graduate programs. 
Without this distinction, the loan debt for students completing a 
program at a graduate program-only institution would be less than the 
loan debt for students who completed their undergraduate and graduate 
programs at the same institution because the student's undergraduate 
loan debt would be attributed to the graduate-level program in the 
latter scenario.
    Although we acknowledge that one student may take a different path 
than another student in achieving his or her educational objectives and 
that some coursework completed for a program may not be needed for, or 
transfer to, a higher-level program, we believe that the loan debt 
associated with all the coursework is part and parcel of the student's 
experience at the institution in completing the higher-level program. 
Moreover, since the student's earnings most likely stem from the 
highest credentialed program completed, we believe our approach will 
result in D/E rates that more closely tie the debt incurred by students 
for their training to the earnings that result from that training.
    We note that the commenters' description of how loan debt would be 
reported for students enrolled in a lower credentialed program who 
subsequently enroll in a higher credentialed program at the same 
institution is not entirely accurate. Though it is correct that loan 
debt from the lower credentialed program will be attributed to the 
completed higher credentialed program, the loan debt associated with 
that higher program prior to the amounts being ``rolled-up'' does not, 
as is suggested by the commenter, include loan debt from the lower 
credentialed program.
    Changes: None.
    Comments: One commenter asserted that students frequently withdraw 
from a higher credentialed program and subsequently complete a lower 
credentialed program at the same institution and was concerned that 
proposed Sec.  668.404(d)(2) would not adequately account for the total 
debt that a student has accumulated for both programs and must repay. 
Specifically, the commenter believed that a student's loan debt from a 
higher credentialed program that the student did not complete would not 
be included in the D/E rates calculation for either that program or in 
the calculation for the lower credentialed program that the student 
completed. The commenter recommended that institutions be required to 
report the total debt that a student incurs while continuously 
enrolled, as well as the debt incurred in each program, for a more 
accurate picture of how much debt students have accumulated and their 
ability to repay their loans. The commenter also argued that this 
approach would provide an incentive for institutions to monitor 
students who are not meeting the academic requirements for a higher 
credentialed program and to counsel them on alternatives such as 
completing a lower credentialed program before they have taken on too 
much debt.
    Discussion: The commenter is correct that the loan debt incurred 
for a higher credentialed program from which the student withdrew will 
not be attributed to a lower credentialed program that the student 
subsequently completed at the same institution. While we appreciate the 
commenter's concerns, as we noted previously in this section, the loan 
debt associated with the student's prior coursework at the institution 
is only counted if the student completes a higher-credentialed program 
because earnings most likely stem from that program. In this case, the 
only program completed is the lower credentialed program so only loan 
debt associated with that program is included in the D/E rates measure.
    Changes: None.
    Comments: One commenter requested that the Department clarify how 
loan debt incurred by a student for enrollment in a post-baccalaureate 
GE program, graduate certificate GE program, and graduate degree GE 
program would be attributed under proposed Sec.  668.404(d)(2)(ii) and 
(iii) and asked whether both of these provisions were needed.
    Discussion: First, we note that loan debt incurred for enrollment 
in a post-baccalaureate program would be attributed to the highest 
credentialed undergraduate GE program subsequently completed by the 
student at the institution, rather than to the highest graduate GE 
program. This treatment is consistent with the definition of 
``credential level'' in Sec.  668.402, which specifies that a post-
baccalaureate certificate is an undergraduate program. Second, we agree 
with the commenter that the provisions in Sec.  668.404(d)(2)(ii) and 
(iii) are redundant.
    Changes: We have removed Sec.  668.404(d)(2)(iii).

Common Ownership/Control

    Comments: Some commenters warned that including loan debt incurred 
by a student for enrollment in programs at institutions under common 
ownership or control only at the Department's discretion under proposed 
Sec.  668.404(d)(3) created a loophole. They believed that bad actors 
would exploit this loophole to manipulate the D/E rates for their 
programs by setting up affiliated institutions and encouraging students 
to transfer from one to the other. They were concerned that the 
Department would be unable or unwilling to apply loan debt incurred at 
an affiliated institution without specific criteria as to what would 
trigger a decision to include loan debt incurred at an affiliated 
institution in the D/E rates calculation for a particular program. To 
address this risk, these commenters recommended that the Department 
always include in a program's D/E rates calculation loan debt that a 
student incurred for enrollment in a program of the same credential 
level and CIP code at another institution under common ownership or 
control, as proposed in the NPRM for gainful employment published in 
2010. Short of this recommendation, they suggested that, at a minimum, 
the Department clarify the circumstances in which the Department would 
exercise its discretion in proposed Sec.  668.404(d)(3) to attribute 
loan debt from other institutions under common ownership or control.
    Other commenters acknowledged the Department's concern that some 
bad actors might try to manipulate the D/E rates calculations for their 
GE programs by encouraging students to transfer to affiliated 
institutions, but they did not believe that the Department should 
always attribute loan debt incurred at another institution under common 
ownership or control to the D/E rates calculation for the program. They 
suggested that institutions should not be held responsible for a 
student's individual choice to move to an affiliated institution to 
pursue a more advanced degree simply because the institutions share a 
corporate ownership structure. They recommended that the Department 
specify that it would only attribute debt incurred at an institution 
under common ownership or control if the two institutions do not have

[[Page 64944]]

separate accreditation or admission standards.
    One commenter similarly requested clarification about the 
circumstances in which the Department would include loan debt incurred 
at another institution, but also suggested that the provision allowing 
the Department to include loan debt incurred at an institution under 
common ownership or control was unnecessary, given the proposed changes 
in Sec.  668.404(d)(2). They believed that requiring institutions to 
attribute loan debt to the highest credentialed program completed by 
the student provides adequate information on the outcomes of students 
at each institution.
    Some commenters argued that the Department should never include 
loan debt that a student incurred at another institution, even if the 
institutions are under common ownership and control. One of these 
commenters argued that this provision would unfairly target for-profit 
institutions, noting that some public institutions, while not owned by 
the same corporate entity, are coordinated through a single State 
coordinating board or system tasked with developing system-wide 
policies. The commenter believed that the Department had not provided 
sufficient justification for treating proprietary institutions under 
common ownership or control differently from State systems with, in 
their view, parallel governance structures. Further, the commenter 
noted that institutions under common ownership or control might have 
different institutional missions and academic programs, and that it 
would therefore not be fair to attribute loan debt incurred for a 
program at one institution to a program at another.
    Other commenters believed that it would be unfair to combine loan 
debt from institutions under common ownership or control, arguing that 
it could skew a program's D/E rates. They were concerned that, in cases 
in which two students complete the same credential at the same 
institution, and one student goes on to complete a higher credential at 
an affiliated institution but the other completes a similar program at 
an unaffiliated institution, the D/E rates for the programs would not 
provide prospective students with a clear picture of the debt former 
students incurred to attend.
    Discussion: We acknowledge the concerns of commenters who urged the 
Department to always include loan debt incurred at an affiliated 
institution in the D/E rates calculation for a particular program. We 
clarified in the NPRM that because this provision is included to ensure 
that institutions do not manipulate their D/E rates, it should only be 
applied in cases where there is evidence of such behavior. In such 
cases, the Secretary has the discretion to make adjustments. We believe 
this authority is adequate both to deter the type of abuse warned of by 
the commenters and act on instances of such abuse where necessary.
    We remind those commenters who suggested that the Department should 
never include loan debt incurred at another institution, even if the 
institutions are under common control, that, except for loan debt 
associated with education and training provided by another institution 
under a written arrangement between institutions as discussed in 
``Tuition and Fees'' in this section, we generally would not include 
loan debt from other institutions students previously attended, 
including institutions under common ownership or control.
    We do not agree that this provision unfairly targets for-profit 
institutions subject to common ownership or control by not treating 
public institutions operating under the aegis of a State board or 
system in the same way. First, in the normal course of calculating D/E 
rates, programs at both types of institutions will be treated the same 
and the debts would not be combined. The debts would only be combined 
at institutions under common ownership and control in what we expect to 
be rare instances of the type of abuse described in this section. 
Second, since loan debt is ``rolled-up'' to the highest credentialed 
program completed by the student, any student who transferred into a 
degree program at a public institution would be enrolling in a program 
that is not a GE program, and therefore not subject to these 
regulations. The potential abuse is unlikely to arise when student debt 
from a certificate program at one institution would be rolled up to a 
certificate program that a student completed at another institution 
under the same ownership and control.
    Changes: None.

Exclusions

    Comments: Several commenters expressed concerns about the 
provisions in Sec.  668.404(e) under which the Department would exclude 
certain categories of students from the D/E rates calculation. 
Commenters argued that, because the Department would exclude students 
whose loans were in deferment, or who attended an institution, for as 
little as one day during the calendar year, institutions would not be 
held accountable for the outcomes of a significant number of students. 
Some commenters suggested that the Department should not exclude these 
students unless their loans were in a military-related deferment status 
for 60 consecutive days or they attended an eligible institution on at 
least a half-time basis for 60 consecutive days. The commenters cited 
as a basis for the 60 days the provisions for returning title IV, HEA 
program funds under Sec.  668.22 and reasoned that 60 percent of a 
three- to four-month term is about 60 days. In addition, they noted 
that to qualify for an in-school deferment, a student must be enrolled 
on at least a half-time basis and asserted that this provision provides 
a reasonable basis for excluding from the D/E rates calculation only 
students enrolled at least half-time.
    Some commenters argued that students whose loans are in a military-
related deferment status should not be excluded because these 
individuals made a valid career choice. The commenters also argued that 
because those students have military-based earnings, excluding them 
could have a significant impact on the earnings for the D/E rates 
calculations, as well as on the number of students included in the 
cohort. The commenters said that if the Department retains the military 
deferment exclusion, all individuals in military service should be 
excluded, based on appropriate evidence, not just those who applied for 
a deferment.
    Some commenters supported the proposed exclusions, stating there is 
no evidence that supports establishing a time period or minimum number 
of days after which earnings should be excluded and that attempting to 
do so would be arbitrary and overly complex.
    Discussion: While we appreciate the commenters' recommendation that 
a student must attend an institution or have a loan in a military-
deferment status for minimum number of days in the earnings year before 
these exclusions would apply, we do not believe there is a sound basis 
for designating any particular number of minimum days. Accordingly, we 
will apply the exclusions if a student was in either status for even 
one day out of the year.
    We do not agree that the regulations regarding the return of title 
IV, HEA program funds provide a basis to set 60 days as the minimum. 
Students with military deferments or who are attending an institution 
during the earnings year are excluded from the D/E rates calculations 
because they could have less earnings than if they had chosen to work 
in the occupation for which they received training. The 60 percent 
standard in the regulations

[[Page 64945]]

regarding the return of title IV, HEA program funds is unrelated to 
this rationale and, as a result, not applicable. With regard to the 
suggestion that a student must be enrolled on at least a half-time 
basis, we continue to believe that it is inappropriate to hold programs 
accountable for the earnings of students who pursue additional 
education because, regardless of course load, those students could have 
less earnings than if they chose to work in the occupation for they 
received training.
    As previously discussed, the earnings of a student in the military 
could be less than if the student had chosen to work in the occupation 
for which they received training. Further, a student's decision to 
enlist in the military is likely unrelated to whether a program 
prepares students for gainful employment. Accordingly, it would be 
unfair to assess a program's performance based on the outcomes of such 
students. We believe that this interest in fairness outweighs any 
potential impact on the mean and median earnings calculations and 
number of students in the cohort period.
    The military deferment exclusion would apply only to those 
individuals who have actually received a deferment. To the extent that 
borrowers serving in the military request such deferments, they are 
asking for assistance in the form of a period during which repayment of 
principal and interest is temporarily delayed. Borrowers who qualify 
for a military deferment, but do not request one, have made the 
determination that their income is sufficient to permit continued 
repayment of student loan debt while they are serving in the military. 
The Department confirms whether a borrower is enlisted in the military 
as part of the deferment approval process. Relying on this 
determination will be much more efficient and accurate than making 
individual determinations as to military status solely for the purposes 
of these regulations.
    Changes: None.
    Comments: Some commenters suggested that the Department exclude 
students who become temporarily disabled during the earnings year, 
opining that any earnings used for these students would distort the D/E 
rates. Other commenters suggested that a student with a loan deferment 
for a graduate fellowship or for economic hardship related to the 
student's Peace Corps service at any point during the calendar year for 
which the Secretary obtains earnings information should be excluded 
from the D/E rates calculation. The commenters reasoned that graduate 
fellowships and Peace Corps service are competitive opportunities, and 
that only individuals who received a quality education would have been 
accepted. They concluded that a GE program's D/E rates should not be 
affected by students who are accepted into these programs because their 
low wages would not be indicative of the quality of the program.
    Discussion: As a general matter, we believe the additional 
exclusions mentioned by the commenters are rare and would not 
materially affect the D/E rates, so it would not be cost effective to 
establish reporting streams for gathering and verifying the information 
needed to apply these exclusions. We note that there are currently no 
deferments for students in the Peace Corp or who are temporarily 
disabled, but students with graduate fellowships may be excluded if 
they are attending an institution during the earnings year.
    Changes: None.
    Comments: Some commenters argued that students who are not employed 
for a portion of the earnings year should be excluded from the D/E 
rates calculation.
    Discussion: We disagree that we should exclude from the D/E rates 
calculation students who are not employed for a portion of the earnings 
year. As discussed under ``Sec.  668.405 Issuing and Challenging D/E 
Rates,'' if graduates are unemployed during the earnings year, it is 
reasonable to attribute this outcome to the performance of the program, 
rather than to individual student choices.
    Changes: None.
    Comments: One commenter suggested that institutions should be 
provided access to Department databases to obtain the information 
necessary to determine whether students who complete a program satisfy 
any of the exclusion criteria.
    Discussion: If a student has attended a particular institution, 
that institution already has access to NSLDS information for the 
student. In addition, the data provided to institutions with the list 
of students who completed the program will have information on which 
students were excluded from the calculation and which exclusions were 
applied. If an institution has evidence that the data in NSLDS are 
incorrect, it may challenge that information under the procedures in 
Sec. Sec.  668.405 and 668.413.
    Changes: None.

N-Size

    Comments: Several commenters recommended that the Department use a 
minimum n-size of 10 students, instead of 30, when calculating the D/E 
rates. The commenters argued that an n-size of 30 is unnecessarily 
large in view of the Department's analysis in the NPRM showing that an 
n-size of 10 adequately provides validity, and that there would be only 
a small chance that a program would erroneously be considered to not 
pass the D/E rates measure. One of these commenters expressed concern 
that increasing the n-size from 10 to 30 would leave unprotected many 
students enrolled in GE programs and did not believe this was 
sufficiently emphasized in the NPRM. Specifically, the commenter 
pointed to analysis in the NPRM showing that, using an n-size of 30, 
more than one million students would enroll in GE programs that would 
not be evaluated under any of the proposed accountability metrics.
    Another commenter similarly urged the Department to select the 
smallest n-size needed for student privacy and statistical validity, 
and design the final regulations so that programs that capture the vast 
majority of career education program enrollment are assessed under the 
accountability metrics. The commenter was concerned in particular that 
the provision in the NPRM to disaggregate undergraduate certificates 
into three credential levels based on their length would result in many 
programs falling below the minimum n-size of 30 and therefore not being 
evaluated under these regulations.
    One commenter contended that the Department's statistical analysis 
showed that the probability of a program that is near failing actually 
losing eligibility under the regulations is 1.4 percent. The commenter 
argued that, because this probability was only for programs on the 
margin, the chance that a randomly chosen program could lose 
eligibility when it was actually passing approached zero. The commenter 
believed that an n-size of 30 would be a weaker standard and that the 
data demonstrated accuracy of the metrics at an n-size of 10. As a 
result, the commenter concluded that there is little justification for 
an n-size of 30 and allowing hundreds of failing programs to remain 
eligible for title IV, HEA program funds.
    Other commenters also believed that the larger n-size would allow 
some failing programs to pass the accountability metrics. One of these 
commenters cited the Department's analysis, which stated that using an 
n-size of 10 will cover 75 percent of all students enrolled in GE 
programs while using an n-size of 30 would only cover 60 percent of 
students enrolled in GE programs. The commenter said that by moving to 
a larger n-size, the

[[Page 64946]]

Department estimates that over 300 programs that would fail the D/E 
rates measure would no longer be held accountable and that an 
additional 439 programs in the ``zone'' would not be subject to the D/E 
rates measure. The commenter concluded that the larger n-size creates a 
loophole that will allow hundreds of failing programs to continue to 
receive title IV, HEA program funds. Other commenters similarly 
concluded that an n-size of 30 creates a loophole where institutions 
would have the ability to adjust their program size to evade the 
regulations.
    On the other hand, several commenters supported the Department's 
proposal to use a minimum n-size of 30. These commenters stated that 
the substantial majority of students in GE programs would be captured 
using this n-size. These commenters believed that an n-size of 10 is 
too small and not statistically significant, and that with an n-size of 
10, the results of a small number of students would sway outcomes from 
year to year and outcomes would be more sensitive to economic 
fluctuations. The commenters asserted that when compared with outcomes 
under an n-size of 10, outcomes under an n-size of 30 will always have 
a lower standard error and are therefore likely to lead to more 
accurate results. The commenters argued that a larger sample size will 
have less variability and yield more reliable results than a smaller 
one taken from the same population. One commenter referred to Roscoe, 
J.T., Fundamental Research Statistics for the Behavioral Sciences, 
1975, which, according to the commenter, cites as a rule of thumb that 
sample sizes larger than 30 and less than 500 are appropriate for most 
research. The commenter suggested that the Department's analysis showed 
that the average probability that a passing program would be 
mischaracterized as a zone program in a single year drops from 6.7 
percent to 2.7 percent when the n-size changes from 10 to 30.
    Another commenter argued that a minimum n-size of 10 increases the 
potential that a particular student in a cohort could be identified, 
putting student privacy at risk. Other commenters also asserted that an 
n-size of 10 might result in the disclosure of individually 
identifiable information, especially at the extremes of high and low 
earners.
    One commenter believed that volatility resulting from too small of 
a sample size would create uncertainty that would chill efforts to 
launch new programs.
    Discussion: We believe that an n-size of 30 strikes an appropriate 
balance between accurately measuring D/E rates for each program and 
applying the accountability metric to as many gainful employment 
programs as possible. Although a number of commenters supported our 
proposal to use an n-size of 30, in general we do not agree with their 
reasoning for doing so.
    We disagree that mitigating the impact of economic fluctuations on 
D/E rates provides a direct rationale for choosing a higher minimum n-
size. The Department has not found any evidence that D/E rates for 
smaller programs are more sensitive to economic fluctuations than 
larger programs. N-size affects the variability of D/E rates from year 
to year due to statistically random differences in the D/E rates of 
individual students. The greater the n-size, the less these year-to-
year differences will affect measures of central tendency, such as 
those used to calculate the D/E rates. As discussed in ``Section 
668.403 Gainful Employment Program Framework,'' we believe the impact 
of economic fluctuations on program performance is mitigated because 
programs must fall in the zone for four consecutive years before 
becoming ineligible for title IV, HEA program funds. We also include 
multiple years of debt and earnings data in our D/E rates calculation 
to smooth out fluctuations in the economic business cycle, along with 
fluctuations in the local labor market.
    We also disagree that a minimum n-size of 30 is preferable to an n-
size of 10 in order to minimize year-to-year fluctuations, per se. A 
program's D/E rates may change from year to year due to changes in 
educational quality provided to students, prices charged by the 
institution, or other factors. These fluctuations are likely to occur 
regardless of n-size and we view them as accurate indications of 
changes in programmatic performance under the D/E rates measure.
    We further disagree that a minimum n-size of 30 is necessary to 
protect the privacy of students. Based on NCES standards, an n-size of 
10 is sufficient to protect the privacy of students on measures of 
central tendency such as the D/E rates measure.
    Finally, we disagree that our data analysis indicates that a D/E 
rates measure with a minimum n-size of 10 is statistically unreliable. 
Our analysis indicates that the probability of mischaracterizing a 
program as zone or failing due to statistical imprecision when the n-
size is 10 is 6.7 percent. By most generally accepted statistical 
standards, this probability of mischaracterization is modest. For this 
reason that we believe a minimum n-size of 10 produces D/E rates, and 
additionally median loan debt and mean and median earnings 
calculations, sufficiently precise for disclosure.
    As discussed in the NPRM, we believe a minimum n-size of 30 is a 
more appropriate threshold for the D/E rates measure when it is used as 
an accountability metric--not because it would be invalid at a minimum 
n-size of 10, but because even slight statistical imprecision could 
lead to mischaracterizing a program as zone or failing which would 
precipitate substantial negative consequences, such as requiring 
programs to warn students they could lose eligibility for title IV, HEA 
program funds. Given these consequences, we believe it is more 
appropriate to set the minimum n-size at 30 for accountability 
determinations.
    So, even though an n-size of 10 would provide a sufficiently 
precise measure of D/E rates, our analysis shows an n-size of 30 is 
more appropriate because it reduces the possibility of 
mischaracterizing a program as zone or failing in a single year. It 
also reduces the possibility of a program becoming ineligible as a 
result of multiple mischaracterizations over time.
    As provided in the NPRM, if the minimum number of students 
completing a program necessary to calculate the program's D/E rates is 
set at 30, the expected or average probability that a passing program 
would be mischaracterized as a zone program in a single year is no more 
than 2.7 percent. Because this is an average across all programs with 
passing D/E rates, the probability is lower the farther a program is 
from the passing threshold and higher for programs with D/E rates 
closer to the passing threshold. At an n-size of 10, the probability 
that a passing program would be mischaracterized as a zone program in a 
single year would be no more than 6.7 percent.
    Although the difference in the precision of the D/E rates with n-
sizes of 10 and 30, respectively, may seem modest, there are 
substantial benefits in reducing the probability of mischaracterization 
of being in the zone from 6.7 percent to 2.7 percent. While a program 
will not lose eligibility if it is mischaracterized in the zone for a 
single year, it will face some negative consequences because the 
institution could lose eligibility for title IV, HEA program funds 
within four years. Further, the program's D/E rates will be published 
by the Department and potentially subject to disclosure by the 
institution.
    Additionally, there are benefits to ensuring that the probability 
of a

[[Page 64947]]

passing program being mischaracterized as a failing program in a single 
year is close to zero. At an n-size of 10, the probability is as high 
as 0.7 percent, while at an n-size of 30 it is close to 0 percent. By 
setting the n-size at 30, it is a virtual certainty that passing 
programs will not mischaracterized as failing the D/E rates measure due 
to statistical imprecision. In this case, reducing imprecision is 
particularly important because programs would be required to warn 
students they could lose eligibility as soon as the next year for which 
D/E rates are calculated.
    In addition to reducing the probability of single-year 
mischaracterizations, it is appropriate to set an n-size of 30 to 
reduce the probability of a passing program losing eligibility due to 
statistical imprecision and anomalies. Because the consequences are 
substantial, it is important we set the minimum n-size at 30 in order 
to reduce the probability of statistical mischaracterization to near 
zero. As stated in the NPRM, because no program would be found 
ineligible after just a single year, it is important to look at the 
statistical precision analysis across multiple years. These 
probabilities drop significantly for both an n-size of 30 and 10 when 
looking across the four years that a program could be in the zone 
before being determined ineligible. The average probability of a 
passing program becoming ineligible as a result of being 
mischaracterized as a zone program for four consecutive years at an n-
size of 30 is close to 0 percent. At an n-size of 10, the average 
probability is as high as 1.4 percent. Although we are unable to 
provide precise probabilities for the scenario in which a program fails 
the D/E rates measure in two out of three years due to limitations in 
our data, our analysis indicates the probability of a passing program 
becoming ineligible due to failing the D/E rates measure two out of 
three years could be as high as 0.7 percent with a minimum n-size of 
10.\141\ In contrast, the probability of mischaracterization due to 
failing the D/E rates measure in two out of three years is close to 
zero percent with a minimum n-size of 30.
---------------------------------------------------------------------------

    \141\ We are unable to provide more precise probabilities for 
the scenario of a program that fails the D/E rates measure in two 
out of three years. Because some students are common to consecutive 
two-year cohort periods for the D/E rates calculations, we cannot 
rely on the assumption that each year's D/E rates are statistically 
independent from the previous and subsequent year's D/E rates. 
Without the assumption of independence between years, there is no 
widely accepted method for calculating the probability of a program 
failing the D/E rates measure in two out of three years.
---------------------------------------------------------------------------

    Although setting a minimum n-size of 30 reduces the percentage of 
programs that are evaluated by the D/E rates measure, which may result 
in more programs with high D/E rates remaining eligible than with a 
minimum n-size of 10, we believe the consequences of mischaracterizing 
programs due to statistical imprecision outweighs this concern.
    We also do not believe that the possibility of increased ``churn'' 
due to programs attempting to decrease the number of students who 
complete a program to below 30 outweighs the benefits of greater 
statistical precision. First, if the minimum n-size is 10, it is 
unclear that we would reduce the possibility of ``churn.'' Programs, 
particularly programs near an n-size of 10, could still attempt to 
lower the number of students completing the program to avoid being 
evaluated. Second, we have included several provisions in the 
regulations to discourage programs from increasing non-completion among 
students. As discussed in ``Sec.  668.403 Gainful Employment Program 
Framework,'' among the items institutions may be required to disclose 
are completion rates and pCDR, which will provide prospective students 
with information to avoid enrollment in high ``churn'' programs.
    Changes: None.
    Comments: One commenter noted it is difficult to evaluate the 
impact of the n-size provision of the regulations because the 
Department changed how it defines a program by proposing to break out 
undergraduate certificates into three credential levels based on 
program length.
    Discussion: As noted previously, we are no longer classifying 
certificate programs based on program length.
    Changes: None.

Transition Period

    Comments: A number of commenters expressed concern that the 
proposed transition period would not provide sufficient time for 
programs to improve after the regulations go into effect. Specifically, 
commenters questioned whether an institution would be able to improve a 
program's D/E rates in the years following an initial failure, because 
the students included in calculating the D/E rates for the first 
several years will have already graduated from the program. These 
commenters asserted that, as a result, it will be too late for 
institutions to improve program performance through changing the 
program's admissions standards or improving financial literacy 
training, debt counseling, and job placement services. One of these 
commenters contended that the data that will be used to calculate D/E 
rates in 2015 is already fixed and cannot be affected by any current 
program improvement efforts.
    Another commenter asserted that the Department's proposal to 
consider only the debt of students graduating in the current award year 
during the transition period would not adequately address the challenge 
faced by programs longer than one year because, regardless of any 
recent reduction in program cost, students' debt loads would initially 
be affected by debt undertaken to support earlier, potentially more 
costly, years in the program. Consequently, institutions would find it 
very difficult to improve program outcomes for longer programs during 
the transition period.
    One commenter suggested that the Department defer the effective 
date of the regulations and revise the transition period so that 
institutions could affect the borrowing levels for all students in a 
cohort period throughout their period of enrollment before the program 
would be evaluated under the D/E rates.
    One commenter contended that SSA earnings data would not be 
released until 2016 when the first D/E rates are issued. This commenter 
suggested eliminating the transition period in favor of four years of 
informational rates. Another commenter suggested there should be two 
years of informational rates before sanctions begin.
    Some commenters proposed limiting the impact of the regulations 
during the transition period by reinstituting a cap on the number of 
programs that could become ineligible in the early years of 
implementation in order to give failing programs another year to 
improve. Several commenters recommended including the five percent cap 
on ineligible programs that was included in the 2011 Prior Rule.
    Some commenters stated that the proposed transition period was 
better than the five percent cap in the 2011 Prior Rule, but were 
skeptical that institutions would use the transition period to make 
changes to poorly performing programs. Instead, they argued that 
institutions will give scholarships or tuition discounts to students 
completing programs, which would result in improved D/E rates but not 
lower tuition for all students.
    Discussion: In view of the comments that the proposed four-year 
transition period did not provide sufficient time for programs to 
improve, we are extending the transition period. As illustrated in the 
following chart, the transition period is now five years for programs 
that are one year or less, six years for programs that are between one

[[Page 64948]]

and two years, and seven years for programs that are longer than two 
years.

--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Award year for which the D/E rates are              2014-2015    2015-2016    2016-2017    2017-2018    2018-2019    2019-2020    2020-2021    2021-2022
 calculated.....................................
Two-year cohort.................................  2010-2011 &  2011-2012 &  2012-2013 &  2013-2014 &  2014-2015 &  2015-2016 &  2016-2017 &  2017-2018 &
                                                    2011-2012    2012-2013    2013-2014    2014-2015    2015-2016    2016-2017    2017-2018    2018-2019
Transition year.................................            1            2            3            4            5            6            7            8
Programs less than one year.....................    2014-2015    2015-2016    2016-2017    2017-2018    2018-2019  2015-2016 &  ...........  ...........
                                                                                                                     2016-2017
Programs between one and two years..............    2014-2015    2015-2016    2016-2017    2017-2018    2018-2019    2019-2020  2016-2017 &  ...........
                                                                                                                                  2017-2018
Programs more than two years....................    2014-2015    2015-2016    2016-2017    2017-2018    2018-2019    2019-2020    2020-2021  2017-2018 &
                                                                                                                                               2018-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For a GE program that is failing or in the zone for any award year 
during the transition period, in addition to calculating the regular D/
E rates the Department will calculate alternate, or transitional, D/E 
rates using the median loan debt of the students who completed the 
program during the most recently completed award year instead of the 
median loan debt for the two-year cohort. For example, as shown in the 
chart, in calculating the transitional D/E rates for the 2014-2015 
award year, we will use the median loan debt of the students who 
completed the program during the 2014-2015 award year instead of the 
median loan debt of the students who completed the program in award 
years 2010-2011 and 2011-2012. For programs that are less than one 
year, we will calculate transitional D/E rates for five award years--
2014-2015 through 2018-2019. After the transitional D/E rates are 
calculated for those award years, the transition period expires and the 
Department uses only the median loan debt of the students in the cohort 
period to calculate the D/E rates for subsequent award years. The first 
D/E rates the Department will calculate after the transition period 
will be for award year 2019-2020. As shown in the chart, the two-year 
cohort period for that award year includes the students who completed 
the program during the 2015-2016 and 2016-2017 award years. So, for 
programs that are less than one year in length, the five-year 
transition period ensures that most of the students in the two-year 
cohort period began those programs after these final regulations are 
published. We applied the same logic in determining the transition 
periods for programs that are between one and two years, and for 
programs that are over two years long. Consequently, institutions will 
be able to make immediate reductions in the loan debt of students 
enrolled in its GE programs, and those reductions will be reflected in 
the transitional D/E rates.
    We note that the transitional D/E rates would operate in 
conjunction with the zone to allow institutions to make improvements to 
their programs in the initial years after the regulations go into 
effect in order to pass the D/E rates measure. That is, an institution 
with a program in the zone will have four years to lower loan debt in 
an effort to achieve passing results for that program. For a failing 
program, an institution that lowers loan debt sufficiently at the 
outset of the transition period could move the program into the zone 
and thereby avoid losing eligibility. The institution would then have 
additional transition and zone years to continue to improve the 
program. Moreover, because the Department will provide the regular D/E 
rates to institutions during the transition period, institutions will 
be able to gauge the amount of the loan reduction needed for their 
programs to pass the D/E rates measure once the transition period 
concludes.
    The transition period runs from the first year for which we issue 
D/E rates under these regulations. The length of the transition period 
is determined by the length of the program and the number of years we 
have issued D/E rates under this subpart--not the number of years that 
we have issued D/E rates for the particular GE program. We may not 
issue D/E rates for a particular GE program for a particular year for 
several reasons, such as insufficient n-size, but each year we issue 
any D/E rates for the regulations is included in any transition period 
whether or not we issued D/E rates for a specific program in a given 
year.
    We believe that extending the number of years that the transition 
period will remain in effect is not only responsive to concerns raised 
by the commenters about the time that institutions need to improve 
program performance but that doing so will result in tangible benefits 
for students.
    We believe that this option better serves the purposes of the 
regulations than the provision in the 2011 Prior Rule setting a cap on 
the number of programs that could be determined ineligible. The cap 
afforded institutions an opportunity to avoid a loss of eligibility 
without taking any action to improve their programs. The transition 
period provisions in these regulations provide institutions an 
incentive to improve student outcomes as well as an opportunity to 
avoid ineligibility.
    We do not agree that delaying implementation of the regulations or 
providing informational rates for a set period of time before imposing 
consequences will be as effective as the revised transition period. The 
purpose of the transition period is to provide institutions with an 
incentive to make improvements in their programs so that students will 
see improved outcomes. Delaying implementation or only providing 
informational rates the first few years the regulations are in effect 
would likely create a disincentive for programs to make improvements, 
which in turn would negatively affect students.
    With the changes we are making in these final regulations, we 
believe that institutions will have a significant incentive to make 
improvements. It is possible that an institution may also seek to 
improve its D/E rates by giving scholarships or tuition discounts to 
students completing the program. A scholarship or tuition discount 
benefits the student by reducing debt burden,

[[Page 64949]]

and therefore we would not discourage an institution from offering that 
type of benefit to its students.
    Changes: We have revised the regulations in Sec.  668.404(g) to 
provide that the transition period is five award years for a program 
that is one year or less in length; six award years for a program that 
is between one and two years in length; and seven award years for a 
program that is more than two years in length.

90/10 Rule

    Comments: Several commenters argued that the proposed definition of 
``gainful employment,'' as reflected in the D/E rates measure, 
conflicts with the 90/10 provisions in section 487(a)(24) of the HEA, 
under which for-profit institutions must derive at least 10 percent of 
their revenue from sources other than the title IV, HEA programs.
    Some of these commenters opined that the regulations would limit 
the ability of for-profit institutions to increase tuition since 
increases in tuition correlate strongly with increases in Federal and 
private student loan debt. The commenters stated that increasing 
tuition beyond the total amount of Federal student aid available to 
students is the principal means available to for-profit institutions 
for complying with the 90/10 provisions. Consequently, the commenters 
reasoned that it would be extremely difficult for institutions to 
comply with both the GE regulations and the 90/10 provisions, 
particularly for institutions that are at or near the 90 percent limit, 
that enroll predominately students who are eligible for Pell Grants, or 
that are located in States where grant aid is not available to for-
profit institutions. One of these commenters asked the Department to 
refrain from publishing any final regulations addressing student debt 
until the Department works with Congress to modify the 90/10 provisions 
to address this conflict.
    Other commenters contended that the proposed regulations are 
contrary to the 90/10 provisions because as tuition decreases, the 
chances increase that institutions will not be able to comply with the 
90/10 provisions because the percentage of tuition that students pay 
with title IV, HEA program funds will remain constant or increase. Some 
commenters concluded that as institutions attempt to balance the 
requirements of these regulations with their 90/10 obligations, 
opportunities for students who rely heavily on title IV, HEA program 
funds will be curtailed, particularly because the Department interprets 
the HEA to prohibit institutions from limiting the amount students may 
borrow on an across-the-board or categorical basis.
    Other commenters argued that if one of the objectives of these 
regulations is to reduce tuition (and by implication, student loan 
debt), this objective conflicts directly with the 90/10 provisions, 
which often lead to tuition increases resulting from mathematical 
expediency. The commenters stated that because institutions are 
prohibited from capping the amount students may borrow, but are 
effectively given incentives to maintain tuition at amounts higher than 
the Federal loan limits, these regulations would place institutions at 
risk of violating the 90/10 provisions.
    Similarly, other commenters stated that for-profit institutions are 
often prevented from reducing tuition because they must satisfy the 90/
10 provisions and because they are prohibited from reducing borrowing 
limits for students in certain programs. The commenters suggested that 
the Department use its Experimental Sites authority as a way to develop 
a better approach for making programs more affordable. Specifically, 
the commenters proposed that institutions participating in an approved 
experiment could be exempt from the 90/10 provisions in order to reduce 
the cost of a program to a level aligned with the cost of delivering 
that program and the expected wages of program graduates. The 
commenters offered that under this approach, an institution could be 
required to submit a comprehensive enrollment management and student 
success plan and annual tuition increases would be indexed to annual 
rates of inflation. Or, at a minimum, the commenters suggested that the 
Department exempt institutions that would otherwise fail the 90/10 
revenue requirement by lowering tuition amounts to pass the D/E rates 
measure. In addition, the commenters offered other suggestions, such as 
exempting from the 90/10 provisions institutions that serve a majority 
of students who are eligible for Pell Grants or, instead of imposing 
sanctions on programs that fail the D/E rates measure, using the D/E 
rates calculations to set borrowing limits in advance to prevent 
students from taking on too much loan debt.
    Another commenter believed that if the 90/10 provisions were 
eliminated, there would be no need for the D/E rates measure. The 
commenter opined that the 90/10 provisions place constraints on market 
forces that, absent these provisions, would lead to reductions in 
tuition at for-profit institutions, shorten vocational training, reduce 
student indebtedness, and eliminate the need for funding above the 
Federal limits.
    Discussion: The 90/10 provisions are statutory and beyond the scope 
of these regulations. However, we are not persuaded that the 90/10 
provisions conflict with the D/E rates measure. In a report published 
in October 2010,\142\ GAO did not find any relationship between an 
institution's tuition rate and its likelihood of having a very high 90/
10 rate. GAO's regression analysis of 2008 data indicated that schools 
that were (1) large, (2) specialized in healthcare, or (3) did not 
grant academic degrees were more likely to have 90/10 rates above 85 
percent when controlling for other characteristics. Other 
characteristics associated with higher than average 90/10 rates 
included (1) high proportions of low-income students, (2) offering 
distance education, (3) having a publicly traded parent company, and 
(4) being part of a corporate chain. GAO defined ``very high'' as a 
rate between 85 and 90 percent, and about 15 percent of the for-profit 
institutions were in this range. GAO found that, in general, there was 
no correlation between an institution's tuition rate and its average 
90/10 rate. In one exception, GAO found that institutions with tuition 
rates that did not exceed the 2008-2009 Pell Grant and Stafford Loan 
award limits (the award amounts were for first-year dependent 
undergraduates) had slightly higher average 90/10 rates than other 
institutions, at 68 percent versus 66 percent.
---------------------------------------------------------------------------

    \142\ United States Government Accountability Office, ``For 
Profit Schools: Large Schools and Schools that Specialize in 
Healthcare Are More Likely to Rely Heavily on Federal Student Aid,'' 
October 2010, available at www.gao.gov/new.items/d114.pdf.
---------------------------------------------------------------------------

    The Department's most recent data on 90/10, submitted to Congress 
in September 2014,\143\ show that only 27 of 1948 institutions had 
ratios over 90 percent, and that about 21 percent had ratios in the 
very high range of 85 to 90 percent. The GAO report and the 
Department's data suggest that most institutions could reduce tuition 
costs without the consequences envisioned by the commenters.
---------------------------------------------------------------------------

    \143\ Available at http://federalstudentaid.ed.gov/datacenter/proprietary.html.
---------------------------------------------------------------------------

    Several other factors also suggest that any tension between the 90/
10 provisions and the GE regulations can be managed by most 
institutions. First, some of the 90/10 provisions that are not directly 
tied to the title IV, HEA program funds received to pay institutional 
charges for eligible programs, such as allowing an institution to count 
income from programs that are not eligible for title IV, HEA program 
funds, count revenue

[[Page 64950]]

from activities that are necessary for the education and training of 
students, or count as revenue payments made by students on 
institutional loans, make it easier for institutions to comply with the 
90/10 provisions. Second, institutions have opportunities to recruit 
students that have all or a portion of their costs paid from other 
sources. In addition, as a result of the changes to the HEA in 2008, an 
institution may fail the 90/10 revenue requirement for one year without 
losing eligibility, and the institution can retain its eligibility so 
long as it does not fail the 90/10 revenue requirement for two 
consecutive years. Furthermore, institutions that have students who 
receive title IV, HEA program funds to pay for non-tuition costs, such 
as living expenses, are already in the situation described by the 
commenters in which the amount of title IV, HEA program funds may 
exceed institutional costs. These institutions are presumably managing 
their 90/10 ratios using a combination of other resources, and this 
result would also be consistent with the GAO report.
    We appreciate the suggestions made by some of the commenters that 
we use our authority under Experimental Sites to exempt from the 90/10 
provisions institutions that would make programs more affordable. At 
this time, however, we are not prepared to establish experiments that 
could test whether exemptions from the 90/10 provisions would lead to 
reductions in program costs but will take the suggestion under 
consideration.
    Changes: None.
    Comments: Some commenters stated that it is unfair that the 90/10 
requirements ostensibly encourage institutions to recruit students who 
can pay cash but the D/E rates measure would not take into account cash 
payments made by those students.
    Discussion: We do not agree that the D/E rates measure disregards 
out-of-pocket payments made by students. Students who pay for some 
tuition costs out of pocket may have lower amounts of debt, which may 
be reflected in the calculation of median loan debt for the D/E rates 
measure.
    Changes: None.
    Comments: Some commenters believed that allowing G.I. Bill and 
military tuition assistance to be counted as non-Federal revenue 
creates a loophole that some for-profit institutions exploit to comply 
with the 90/10 requirements by using deceptive and aggressive marketing 
practices to enroll veterans and service members. The commenters stated 
that the GE regulations would help to protect veterans and service 
members by eliminating poorly performing programs that would otherwise 
waste veterans' military benefits and put them further into debt.
    Discussion: Section 487(a)(24) of the HEA directs that only ``funds 
provided under this title [title IV] of the HEA'' are included in the 
90 percent limit. 20 U.S.C. 1094(a)(24). Other Federal assistance is 
not included in that term. We agree that these regulations are designed 
and are expected to protect all students, including veterans and 
service members, from poorly performing programs that lead to 
unmanageable debt.
    Changes: None.

Effect of the Affordable Care Act

    Comments: Some commenters believed that the Affordable Care Act has 
caused some employers to limit new employees to less than 30 hours of 
work per week to avoid having to provide health insurance benefits. 
These commenters were concerned that, as a result, institutions with 
programs in fields where most employees are paid by the hour would be 
unfairly penalized for these unintended consequences of the law because 
students who completed their program might be unable to find full-time 
positions.
    Discussion: Employers often change their hiring practices and wages 
paid to account for changes in the workforce and market demand for 
certain jobs and occupations. In these circumstances, we expect that 
institutions will make the changes needed for their programs to pass 
the D/E rates measure.
    Changes: None.

Section 668.405 Issuing and Challenging D/E Rates

    Comments: Several commenters asked the Department to clarify, and 
specify in the regulations, what would constitute a ``match'' with the 
SSA earnings data and how ``zero earnings'' are treated for the purpose 
of calculating the D/E rates.
    Discussion: Using the information that an institution reports to 
the Secretary under Sec.  668.411, the Department will create a list of 
students who completed a GE program during the cohort period. For every 
GE program, the list identifies each student by name, Social Security 
Number (SSN), date of birth, and the program the student completed 
during the cohort period. After providing an opportunity for the 
institution to make any corrections to the list of students, or 
information about those students, the Department submits the list to 
SSA. SSA first compares the SSN, name, and date of birth of each 
individual on the list with corresponding data in its SSN database, 
Numident. SSA uses an Enumeration Verification System to compare the 
SSN, name, and date of birth as listed by the Department for each 
individual on its list against those same data elements recorded in 
Numident for SSN recipients. A match occurs when the name, SSN, and 
date of birth of a student as stated on the Department's list is the 
same as a name, SSN, and date of birth recorded in Numident for an 
individual for whom an SSN was applied. SSA then tallies the number of 
individuals whose Department-supplied identifying data matches the data 
in Numident. The system also identifies SSNs for which a death has been 
recorded, which will be considered to be ``unverified SSNs'' for 
purposes of this calculation. Unverified SSNs will be excluded from the 
group of matched individuals, or ``verified SSNs,'' and therefore no 
earnings match will be conducted for those SSNs. If the number of 
verified SSNs is fewer than 10, SSA will not conduct any match against 
its earnings records, and will notify the Department. As noted in the 
NPRM, the incidence of non-matches has proven to be very small, less 
than two percent, and we expect that experience to continue.
    If the number of verified SSNs is 10 or more, SSA will then compare 
those verified SSNs with earnings records in its Master Earnings File 
(MEF). The MEF, as explained later in this section, is an SSA database 
that includes earnings reported by employers to SSA, and also by self-
employed individuals to the Internal Revenue Service (IRS), which are 
in turn relayed to SSA. SSA then totals the earnings reported for these 
SSNs and reports to the Department the mean and median earnings for 
that group of students, the number of verified individuals and the 
number of unverified individuals in the group, the number of instances 
of zero earnings for the group, and the earnings year for which data is 
provided. SSA does not provide to the Department any individual 
earnings data or the identity of students who were or were not matched. 
Where SSA identifies zero earnings recorded for the earnings year for a 
verified individual, SSA includes that value in aggregate earnings data 
from which it calculates the mean and median earnings that it provide 
to the Department, and we use those mean and median earnings to 
calculate the earnings for a program. As reflected in changes to Sec.  
668.404(e), we do not issue D/E rates for a program if the number of 
verified matches is fewer than 30. If the number of verified matches is 
fewer than 30 but at least 10, we provide the

[[Page 64951]]

mean and medium earnings data to the institution for disclosure 
purposes under Sec.  668.412.
    This exchange of information with SSA and the process by which SSA 
matches the list of students with its records is conducted pursuant to 
one or more agreements with SSA. The agreements contain extensive 
descriptions of the activities required of the two agencies, and those 
terms may be modified as the agencies determine that changes may be 
desirable to implement the standards in these regulations. The 
Department engages in a variety of data matches with other agencies, 
including SSA, and does not include in pertinent regulations either the 
agreements under which these matches are conducted, or the operational 
details included in those agreements, and is not doing so here. The 
agreements are available to any requesting individual under the Freedom 
of Information Act, and commenters have already obtained and commented 
on their terms in the course of providing comments on these 
regulations.
    Changes: We have revised Sec.  668.405(e) to clarify that the 
Secretary does not calculate D/E rates if the SSA earnings data 
returned to the Department includes reports for records of earnings on 
fewer than 30 students.
    Comments: Several commenters criticized the Department's reliance 
on SSA earnings data in calculating the earnings of students who 
complete a GE program on several grounds. The commenters contended that 
SSA data are not a reliable source for earnings because the SSA 
database from which earnings data will be derived--the MEF--does not 
contain earnings of those State and local government employees who are 
employed by entities that do not have coverage agreements with SSA.
    Discussion: We think there may be some confusion regarding the data 
contained in the SSA MEF and used by SSA to compute the aggregate mean 
and median earnings data provided to the Department and used by the 
Department to calculate D/E rates, and in particular the reporting and 
retention of earnings of public employees. As explained by SSA: \144\
---------------------------------------------------------------------------

    \144\ Introduction To State And Local Coverage And Section 218, 
available at www.ssa.gov/section218training/basic_course_4.htm#8.

    The Consolidated Omnibus Budget Reconciliation Act of 1985 
(COBRA) imposed mandatory Medicare-only coverage on State and Local 
employees. All employees, with certain exceptions, hired after March 
31 1986, are covered for Medicare under section 210(p) of the Act 
(Medicare Qualified Government Employment). Employees covered for 
Social Security under a Section 218 Agreement have Medicare coverage 
as a part of Social Security, therefore they are excluded from 
mandatory Medicare. However, COBRA 85 also contained a provision 
allowing States to obtain Medicare-only coverage for employees hired 
before April 1, 1986 who are not covered under an Agreement. 
Authority for Medicare-only tax administration was placed in the 
---------------------------------------------------------------------------
Code [26 U.S.C. 3121(u)(2)(C)] as the responsibility of IRS.

    Regardless of whether State and local government employees 
participate in a State retirement system or are covered or not covered 
by Section 218, all earnings of public employees are included in SSA's 
MEF and included in the aggregate earnings data set provided to the 
Department. In addition, earnings from military members are included in 
the MEF.
    Changes: None.
    Comments: Commenters contended that the earnings in the MEF are 
understated because the amount recorded in the MEF is capped at a set 
figure ($113,700 in 2013), and that earnings accurately reported but 
exceeding that amount are disregarded and not included in the aggregate 
earnings data set provided to the Department by SSA.
    Discussion: The commenter is incorrect. Total earnings are included 
in MEF records without limitation to capped earnings. As explained in 
greater detail below, SSA uses total earnings for the matched 
individuals to create the aggregate data set provided to the 
Department.
    Changes: None.
    Comments: Commenters contended that other earnings are not reported 
to SSA and retained in the MEF, including deferred compensation. 
Commenters claimed that aggregate earnings does not include earnings 
contributed to dependent care or health savings accounts, and therefore 
aggregate earnings data reported by SSA to the Department understate 
the earnings of students who completed programs. Commenters also 
asserted that reported earnings would not include such compensation as 
deductions for deferred earnings and 401(k) plans and similarly 
understate earnings. Commenters stated that an individual's SSA 
earnings do not include sources of income such as lottery winnings, 
child support payments, or spousal income.
    Discussion: Other earnings of the wage earner, such as deferred 
compensation, must be reported, are included in the MEF, and are used 
to create the aggregate earnings data set provided by SSA to the 
Department. Not all earnings are included as earnings reported to SSA. 
However, reported earnings include those earnings reported under the 
following codes on the W2 form:

    Box D: Elective deferrals to a section 401(k) cash or deferred 
arrangement plan (including a SIMPLE 401(k) arrangement);
    Box E: Elective deferrals under a section 403(b) salary 
reduction agreement;
    Box F: Elective deferrals under a section 408(k)(6) salary 
reduction SEP;
    Box G: Elective deferrals and employer contributions (including 
nonelective deferrals) to a section 457(b) deferred compensation 
plan;
    Box H: Elective deferrals to a section 501(c)(18)(D) tax-exempt 
organization or organization plan; and
    Box W: Employer contributions (including employee contributions 
through a cafeteria plan) to an employee's health savings account 
(HSA).\145\
---------------------------------------------------------------------------

    \145\ Office of Data Exchange and Policy Publications, SSA; see 
2014 General Instructions for Forms W-2 and W-3, Department of 
Treasury, Internal Revenue Service, December 17, 2013, available at 
www.irs.gov/pub/irs-pdf/iw2w3.pdf.

    Institutions that contend that the omission of earnings not 
included in those that must be reported to IRS and SSA significantly 
and adversely affects their D/E rate can make use of alternate earnings 
appeals to capture that earnings data. The commenters are correct that 
lottery winnings, child support, and spousal income are not included in 
the aggregate earnings calculation prepared by SSA for the Department. 
Funds from those sources do not constitute evidence of earnings of the 
individual recipient, and their exclusion from aggregate earnings is 
appropriate.
    Changes: None.
    Comments: A commenter contended that our process for gathering 
earnings data disregards actual earnings, unless the wage earner has 
earnings subject to the Federal Insurance Contribution Act (FICA). The 
commenter cites a response from SSA to an inquiry posed by the 
commenter, in which SSA advised that SSA would record earnings for an 
individual only if those earnings, or other earnings reported for the 
same individual, were subject to FICA. The commenter contended that 
aggregate earnings data provided to us by SSA would therefore 
erroneously treat that individual as having no earnings at all. Because 
the commenter contended that earnings of public employees in States 
that do not have section 218 agreements with SSA are not subject to 
FICA, and are excluded from the MEF, the commenter contended that this 
results in zero earnings in MEF records of many public employees, and 
incorrect wage data being provided in the aggregate

[[Page 64952]]

earnings data SSA provides to the Department.
    Discussion: As previously explained, all public employers are now 
subject to Medicare, and their earnings are now reported to SSA, 
included in SSA's MEF, and included by SSA in calculating the aggregate 
earnings data provided to the Department.
    Instances in which an individual may have zero amounts in one or 
more fields reported to IRS, SSA, or both are handled as follows:

Self-Employment Data

    IRS sends SSA Self-Employment data. IRS does not send Self 
Employment records with all zero money fields. SSA posts the 
information that is received from IRS to the MEF.
    The only time the Social Security Self-Employment Income field is 
zero on the file received from IRS is when the taxpayer has W-2 
earnings at the Social Security maximum. In this case the Total Net 
Earnings from Self-Employment is reported in the Self-Employment 
Medicare Income field on the file received from IRS.

W-2 Data

    If a form W-2 has a nonzero value in any of the following money 
fields (and the employee name matches SSA's records for the SSN) SSA 
posts the nonzero amount(s) to the MEF:

Box 1--Wages, tips, other compensation
Box 3--Social Security Wages
Box 5--Medicare wages and tips
Box 7--Social Security tips
Box 11--Nonqualified plans
Box 12 code D--Elective deferrals to a section 401(k) cash or 
deferred arrangement
Box 12 code E--Elective deferrals under a section 403(b) salary 
reduction arrangement
Box 12 code F--Elective deferrals under a section 408(k)(6) salary 
reduction SEP
Box 12 code G--Elective deferrals and employer contributions 
(including non-elective deferrals) to a section 457(b) deferred 
compensation plan
Box 12 code H--Elective deferrals to a section 501(c)(18)(D) tax-
exempt organization plan
Box 12 code W--Employer contributions to your Health Savings Account

    If a W-2 has zeroes in all of the above money fields SSA still 
processes the W-2 for IRS purposes, but does not post the W-2 to the 
MEF.
    In creating the file to send for the Dept. of Education Data 
Exchange:
    (1) If any of the following W-2 Boxes are greater than zero:

 Box 3 (Social Security wages)
 Box 5 (Medicare wages and tips)
 Box 7 (Social Security tips),

the data exchange summary amount includes the greater of the following:

 The sum of Box 3 (Social Security wages) and Box 7 (Social 
Security tips), or
 Box 5 (Medicare wages and tips).


    (2) If:

 Boxes 3, 5, and 7 are all zero, and
 Box 1 (Wages, tips and other compensation) is greater than 
zero,

the data exchange summary amount includes Box 1 (Wages, tips and other 
compensation).
    (3) In addition to the above, the data exchange summary amount also 
includes:
 W-2 Box 11 (Nonqualified plans) and
 W-2 Box 12 codes:

    [cir] D (Elective deferrals to a section 401(k) cash or deferred 
arrangement)
    [cir] E (Elective deferrals under a section 403(b) salary reduction 
arrangement)
    [cir] F (Elective deferrals under a section 408(k)(6) salary 
reduction SEP)
    [cir] G (Elective deferrals and employer contributions (including 
non-elective deferrals) to a section 457(b) deferred compensation plan)
    [cir] H (Elective deferrals to a section 501(c)(18)(D) tax-exempt 
organization plan)
    [cir] W (Employer contributions to your Health Savings Account)

     For SE the data exchange summary amount includes the 
amount of Self-Employment income as determined by IRS.
     Earnings adjustments that were created from a variety of 
IRS and SSA sources.\146\
---------------------------------------------------------------------------

    \146\ Office of Data Exchange and Policy Publications, SSA.
---------------------------------------------------------------------------

    Changes: None.
    Comments: One commenter challenged the sufficiency of the SSA MEF 
data on the ground that many professionals--such as graduates of 
medical and veterinary schools and perhaps other professional 
programs--work through subchapter S corporations which do not report 
earnings through Schedule SE. The commenters stated that the earnings 
of these individuals would not be included in the MEF. A commenter was 
concerned that such professionals receive distributions as well as 
payments labeled compensation, and income for such individuals as 
captured in SSA data would not reflect the amount earned that was 
characterized as distributions rather than as salaries.
    Discussion: According to IRS guidance, a payment made by a 
subchapter S corporation for the performance of services is generally 
considered wages. This is the case regardless of whether the person 
receiving the payment for the performance of services is an officer or 
shareholder of a subchapter S corporation.\147\ Accordingly, these 
payments are required to be reported by the subchapter S corporation 
employer on a Form W-2 filed with the SSA and, therefore, are included 
in SSA's MEF.
---------------------------------------------------------------------------

    \147\ Internal Revenue Service, Wage Compensation for S 
Corporation Officers, FS-2008-25, August 2008, available at 
www.irs.gov/uac/Wage-Compensation-for-S-Corporation-Officers.
---------------------------------------------------------------------------

    Changes: None.
    Comments: One commenter stated that SSA data do not include 
earnings information for graduates who secure employment between the 
end of the calendar year for which earnings are measured and the start 
of the next award year, nor do the data include a methodology for 
annualizing earnings of borrowers who secure employment toward the end 
of the calendar year for which earnings are being measured.
    Discussion: In order to measure earnings, one must select a time 
period for which earnings are counted. Any earnings measurement period, 
therefore, must include some earnings and exclude others. The objection 
posed by the commenter is not solved by modifying the earnings 
measurement period, because any modification would necessarily exclude 
some other earnings. If students who complete a program have no 
earnings for some part of the earnings measurement year selected, we 
see no reason why that period of unemployment should be disregarded in 
gathering the earnings data used to assess programs under the D/E rates 
measure. This exercise is not only impracticable, but we believe 
contrary to the objective of the assessment, which is to take into 
account periods of unemployment in assessing the outcomes for a GE 
program. Annualizing earnings--attributing to a student earnings that 
the individual did not actually receive or otherwise ignoring periods 
of unemployment--would contravene the Department's goal to assess the 
actual outcomes of students who complete a GE program.
    Changes: None.
    Comments: A commenter objected that Sec.  668.405(c) improperly 
imposed on the institution the burden of identifying those students 
completing a program who can be excluded under Sec.  688.404(e), 
although the institution would have limited information available to 
contest their inclusion.
    Discussion: The objection misstates the process the Department will 
follow. Section 668.405(b)(1)(ii) states that the

[[Page 64953]]

Department compiles and sends to the institution the list of students 
who completed a program during the cohort period to be assessed, and 
indicates on that list those students whom the Department considers 
likely to qualify for exclusion. The institution is free to contend 
that any of those individuals should be removed for any reason, 
including qualifying for exclusion under Sec.  668.404(e); that an 
individual designated to be excluded from the list should be included; 
and that an individual not on the list should be included. The 
institution has access to NSLDS to gather information relevant to the 
challenges, and can use information gathered directly from students 
completing the program and its own records to support a challenge. We 
note that the assessment occurs at the end of an institutional cohort 
default rate period, during which an institution is expected to 
maintain sufficient contact with all of its former students so that it 
can assist those who may not be meeting their loan repayment 
obligations. Using those contacts to gather relevant information on 
those who may qualify for exclusion poses little added burden on the 
institution.
    Changes: None.
    Comments: Some commenters contended that using SSA earnings data 
contravenes the stated objective of the regulations because SSA 
earnings data capture all earnings regardless of whether the earnings 
were in an occupation related to the training provided by the program.
    Discussion: While we appreciate the commenter's interest in 
understanding whether the earnings of students who have completed a 
program are linked with the training provided by their respective 
programs, the Department has no way of obtaining this information 
because SSA cannot disclose the kind of individual tax return data that 
would identify even the employer who reported the earnings, much less 
the occupation for which the wages were paid. The regulations are built 
on the inference that earnings in the period measured are reasonably 
considered to be the product of the quality of the GE program that the 
wage earner completed. The training is presumed to prepare an 
individual for gainful employment in a specific occupation, but it is 
not unreasonable to attribute gainful employment achieved in a 
different occupation so shortly after completion of a GE program to be 
the product of that training. Although there is no practical way to 
directly connect a particular GE program with earnings achieved 
relatively soon after completion, the inference that the earnings are 
the outcome of the training is sufficiently compelling that we do not 
consider further efforts, even if data were available, to be warranted.
    Changes: None.
    Comments: Commenters also criticized the Department's proposal to 
use SSA data because SSA assigns (``imputes'') zero earnings to all 
those individuals for whom it does not receive an earnings report that 
correctly identifies the wage earner and correctly lists the 
individual's SSN. The commenters said that earnings reported for these 
individuals are placed in a suspense file. The commenters cited various 
reports critiquing the adequacy of efforts to eliminate these mistakes 
and stated that the scale of these errors suggests that a significant 
amount of actual earnings would be disregarded because of mistakes by 
employers on earnings reports.
    Discussion: We acknowledge that some earnings are reported but 
cannot be associated with individuals whose accounts are included in 
the MEF database, but do not consider the magnitude of the omitted 
earnings to vitiate the general accuracy of the earnings data contained 
in the MEF.\148\ The HHS OIG report to which the commenter refers 
regarding these mismatches cites the employment of unauthorized non-
citizens as a major cause of mismatches.\149\ Unauthorized non-citizens 
are not eligible for Federal student financial assistance, and the 
Department routinely scrutinizes applicants' immigration status to 
reduce the likelihood that such individuals will receive title IV, HEA 
program funds. See 20 U.S.C. 1091(g). Institutions themselves are in a 
position to identify instances in which unauthorized non-citizens may 
seek aid. While we recognize that mismatching of earnings occurs, we 
believe that these restrictions on student eligibility reduce the 
likelihood that mismatches will affect the accuracy of the MEF earnings 
data on the population of students who have enrolled in GE programs and 
whose earnings data are provided to the Department by SSA.
---------------------------------------------------------------------------

    \148\ ``Approximately 90 percent of the wage reports received by 
SSA each year are posted to the MEF without difficulty. After the 
computerized routines are applied, approximately 96 percent of wage 
items are successfully posted to the MEF (GAO 2005).'' Anya Olsen 
and Russell Hudson. ``Social Security Administration's Master 
Earnings File: Background Information.'' Social Security Bulletin, 
Vol. 69, No. 3, 2009, www.ssa.gov/policy/docs/ssb/v69n3/v69n3p29.html.
    \149\ ``In previous reports, SSA acknowledged that unauthorized 
noncitizens' intentional misuse of SSNs has been a major contributor 
to the ESF's growth.'' Employers Who Report Wages with Significant 
Errors in the Employee Name and SSN (A-08-12-13036), Office of 
Inspector General, Department of Health and Human Services, at 4.
---------------------------------------------------------------------------

    In addition, we believe that the frequency and amount of mismatched 
earnings are decreasing. SSA moves reported earnings into the suspense 
file when the individual's name and SSN combination do not match 
against SSA's Numident file. The suspense file does grow over the 
years; however, SSA performs numerous reinstate processes throughout 
the tax year that matches previously unmatched records to record the 
earnings on the proper record. These efforts have resulted in a 
substantial decrease in the outstanding amounts in the suspense file 
over the most recent five years for which complete data are available 
from SSA, as indicated by the following chart.\150\
---------------------------------------------------------------------------

    \150\ Source: internal programming statistics, SSA, Office of 
Deputy Commissioner for Systems; see also Johnson, M., Growth of the 
Social Security Earnings Suspense File Points to the Rising 
Potential Cost of Unauthorized Work To Social Security, The Senior 
Citizens League, Feb. 2013, table 2, available at http://seniorsleague.org/2013/growth-of-the-social-security-earnings-suspense-file-points-to-the-rising-potential-cost-of-unauthorized-work-to-social-security-2/.

------------------------------------------------------------------------
                                                              Number of
                                         Earnings suspense    mismatched
                                               file          W-2 reports
------------------------------------------------------------------------
2007                                     $90,696,742,837.94   10,842,269
2008                                      87,571,814,470.22    9,580,201
2009                                      73,380,014,667.81    7,811,295
2010                                      70,650,921,709.94    7,356,265
2011                                      70,122,804,272.37    7,128,598
------------------------------------------------------------------------

    Changes: None.
    Comments: Commenters criticized what they described as an 
assumption of ``zero earnings'' by SSA for individuals included in the 
MEF, and contended that this practice suggests that the aggregate 
earnings data provided by SSA to the Department is not accurate. 
Commenters further noted that available data indicate that the 
percentage of zero earnings reported in the 2011 and 2012 GE 
informational rates showed what the commenters considered to be an 
unacceptably high percentage of instances of reports of zero earnings, 
ranging from nine percent for earnings data obtained in July 2013 to as 
much as 12.5 percent for earnings data obtained in December 2013.
    Discussion: There is only one situation in which SSA assumes that 
an individual has zero earnings. For wage earners with earnings 
reported for employment type ``Household,'' the so-called ``nanny tax'' 
edit in employer balancing changes to zero the amounts of earnings for 
Social Security and Medicare covered earnings that fall below the 
yearly covered minimum amount. If the earnings reported by the

[[Page 64954]]

employer for such an individual is successfully processed, SSA posts 
the earnings to the MEF as zero. SSA plans to discontinue this practice 
next year and will reject the report and have the employer make the 
correction. These amounts are so low (for 2014, this amount affects 
only annual earnings less than $1,900) that it is implausible to 
contend that these assumptions affect the accuracy of the aggregate 
earnings data provided by SSA to the Department.\151\
---------------------------------------------------------------------------

    \151\ Household Employer's Tax Guide, IRS Publication 926, 
available at www.irs.gov/publications/p926/ar02.html#en_US_2014_publink100086732.
---------------------------------------------------------------------------

    The Department has secured aggregate earnings data from SSA in five 
instances, as shown in the table below.\152\
---------------------------------------------------------------------------

    \152\ Source: ED records from response files received from SSA 
as refined based on additional SSA explanations of its exclusion 
from verified individuals of those verified individuals whose 
records show an indication that the wage earner died. Where an 
exchange consisted of multiple component data sets, each has been 
listed separately and then totaled. Data on all but the first of 
these exchanges was provided to the commenter pursuant to a FOIA 
request.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Date received  Number ED sent    Number SSA    Number SSA did    Number with
                                               from SSA         to SSA         verified       not verify       earnings       Number with Zero earnings
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 GE informational rates--includes non-          3/5/12         811,718         797,070          14,708         699,024  98,046 [12.3% of verified].
 Title IV.
2012 GE informational rates for reg neg            7/18/13         255,168         252,328           2,845         232,006  20,317 [7.96% of verified].
 Title IV only.
2012 GE post reg neg--Title IV only.......         8/14/13         923,399         917,912           8,487         798,952  115,960 [12.6% of verified].
For College Scorecard--Title IV only               9/13/13         900,419         892,796           7,623         809,204  83,592
 derived from ED data on borrowers in FY                           901,719         894,260           7,459         819,542  74,718
 2007 iCDR cohort for selected                                     902,380         892,840           9,540         787,223  105,617
 institutions of higher education.                                 921,749         909,613          12,136         772,574  137,039.
                                                           ---------------------------------------------------------------------------------------------
    Totals................................                       3,626,267       3,589,509          36,758       3,188,543  400,966 [11.1% of verified].
--------------------------------------------------------------------------------------------------------------------------------------------------------
For College Scorecard--Title IV only              12/13/13         969,145         954,728          14,417         857,539  97,189
 derived from ED data on borrowers in FY                           985,742         970,742          15,000         865,060  105,682
 2008 iCDR cohort for selected                                     490,305         480,421           9,884         411,917  68,504.
 institutions of higher education.
                                                           ---------------------------------------------------------------------------------------------
    Totals................................                       2,445,192       2,405,891          39,301       2,134,516  271,375 [11.3% of verified].
                                                           ---------------------------------------------------------------------------------------------
        Grand Totals......................                       8,061,744       7,959,705         102,099       7,053,041  906,664 [11.4% of verified].
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The commenter asserts that on average, the percentage of verified 
(matched) individuals who were reported as having zero earnings was 12 
percent; in fact, the average was 11.4 percent. We note that the 
universes of individuals on which SSA provided aggregate earnings data 
were different: the GE earnings data was obtained for individuals who 
completed a GE program; the Scorecard data was obtained on all FFEL and 
Direct Loan borrowers who entered repayment in fiscal years 2007 and 
2008, respectively, regardless of the institution or type of program in 
which they had enrolled, and therefore including borrowers who had been 
enrolled in GE programs and those who had been enrolled in other 
programs. Nevertheless, the incidence of zero earnings is similar for 
both groups.
    We note that the 2011 GE informational rates were based on earnings 
for calendar year 2010; the annual unemployment rate for calendar year 
2010 was 9.6 percent.\153\ Those counted as ``unemployed'' in the 
published rate do not account for all those who are in fact not 
employed and earned no reported income; BLS includes as unemployed only 
those who ``do not have a job, have actively looked for work in the 
prior 4 weeks, and are currently available for work.'' \154\ Those not 
included in this group can reasonably be expected to include those 
students included in a program's D/E rates calculation who not only do 
not have a job, but have ceased actively looking for work in the prior 
month. For this group of students, the SSA data showed zero earnings 
for 8 percent of the verified individuals included in the rate 
calculation. Unemployment rates for 2010 for two age groups likely to 
include most students were higher: For the group ages 20-24, the annual 
unemployment rate for 2010 was 18.8 percent, and for the group ages 25-
34, the annual unemployment rate for 2010 was 10.8 percent.\155\ As at 
least one commenter observed, these results are consistent with high 
unemployment rates.\156\
---------------------------------------------------------------------------

    \153\ BLS, Databases, Tables & Calculators by Subject, available 
at http://data.bls.gov/timeseries/LNU04000000?years_option=all_years&periods_option=specific_periods&periods=Annual+Data.
    \154\ BLS, Labor Force Statistics from the Current Population 
Survey, Frequently Asked Questions, available at www.bls.gov/cps/faq.htm#Ques5.
    \155\ NCES, Unemployment rates of persons 16 to 64 years old, by 
age group and educational attainment: Selected years, 1975 through 
2013 (derived from BLS, Office of Employment and Unemployment 
Statistics, unpublished annual average data from the Current 
Population Survey (CPS), selected years, 1975 through 2013), 
available at http://nces.ed.gov/programs/digest/d13/tables/dt13_501.80.asp.
    For the purposes of this report:
    The unemployment rate is the percentage of persons in the 
civilian labor force who are not working and who made specific 
efforts to find employment sometime during the prior 4 weeks. The 
civilian labor force consists of all civilians who are employed or 
seeking employment.
    \156\ Mark Kantrowitz, Student Aid Policy Analysis--Analysis of 
FY2011 Gainful Employment Data, July 13, 2012, available at 
www.finaid.org/educators/20120713gainfulemploymentdata.pdf.
---------------------------------------------------------------------------

    The 2012 GE informational rates the Department disseminated after 
the negotiation sessions were based on students' earnings in calendar 
year 2011, for which the annual unemployment rate was 8.9 percent, and 
the annual unemployment rate was

[[Page 64955]]

18.1 percent for individuals in the 20-24 age group and 10 percent for 
individuals in the 25-34 age group. The SSA data for this group of 
students in GE programs included a 12.6 percent incidence of zero 
earnings.
    In light of the unemployment rates reported for 2010 and 2011, and 
particularly the rates for the two age groups that likely include the 
great majority of students completing a GE program, the incidence of 
zero earnings in the SSA records is neither unexpected nor of such a 
magnitude with regard to the number of wage earners as to demonstrate 
that the SSA MEF database is unreliable as a data source for 
determining D/E rates.\157\
---------------------------------------------------------------------------

    \157\ The duration of unemployment for those unemployed during 
2010 and 2011 grew as well: 15.3 percent of those unemployed who 
found work during 2010, and 13.8 percent of the unemployed who found 
work during 2011, had been unemployed for 27 to 52 weeks [; in 
addition, of those unemployed who found work during 2010, 11 percent 
had been unemployed for a year or more, and of those reemployed 
during 2011, 12.9 percent had been unemployed for a year or more. 
Ilg, Randy E., and Theodossiou, Eleni, Job search of the unemployed 
by duration of unemployment, Monthly Labor Review, March 2012, 
available at www.bls.gov/opub/mlr/2012/03/art3full.pdf.
---------------------------------------------------------------------------

    Changes: None.
    Comments: Commenters asserted that by considering all zero earnings 
data to evidence no earnings for an individual, the Department treats 
each such individual as having no earnings during that year, although 
the individual may in fact have significant but misreported earnings. 
The commenters cited as a significant example of such earnings 
omissions the earnings of public employees whom the commenters consider 
as good examples of individuals with significant earnings, but whose 
SSA earnings would show zero earnings. The commenters criticized this 
as producing a bias that understates earnings. The commenters contended 
that the D/E rates should be adjusted, based on assumptions that the 
missing earnings are actually distributed throughout a program's cohort 
of earners. The commenters asserted that if earnings of failing GE 
programs were to be adjusted on that assumption, 19 percent of programs 
that failed the annual earnings rate would pass that threshold, and 9 
percent of programs that failed the discretionary income rate would 
pass that threshold.
    Discussion: As explained earlier, the commenter's assertion that 
the earnings of public employees are often, even typically, not 
reported to SSA is not correct. The earnings of public employees are 
reported to SSA, public employees are not ``deemed'' by SSA to have 
``zero earnings,'' and SSA includes actual earnings reported for public 
employees in the aggregate earnings data SSA provides to the 
Department. Accordingly, it is not reasonable to conclude that public 
employees with actual earnings account for any appreciable number of 
``zero earnings'' records.
    The commenters argue that in those instances in which actual 
earnings are missing from the MEF, those missing wages include earnings 
in amounts spread throughout the cohort of students who completed a 
program. Thus, the commenters contend, our practice that considers all 
instances of ``zero earnings'' to be evidence that the individual in 
fact had no earnings during that year causes the earnings for the 
cohort to be significantly understated. Some ``zero earnings'' records 
result from misreported earnings or unreported earnings. However, other 
individuals will in fact have zero earnings, and the contention that 
the missing earnings belong to individuals with significant earnings 
appears to rest in large part on the misconception that earnings of 
public employees are not included in MEF, and thus appear as ``zero 
earnings.''
    We recognize that misreported and underreported earnings can have 
some effect on the earnings data we use, but those same issues would 
affect any alternative data source that might be available. The 
commenters suggest no practicable alternative that would eliminate 
these issues and provide more reliable data sufficient to accomplish 
our objective here--determining earnings of individuals who completed a 
particular GE program offered by a particular institution. We note that 
an institution that believes that incidents of mismatches significantly 
and adversely affect SSA aggregate earnings data for the students 
completing a program may appeal its zone or failing D/E rates by 
submitting an alternate earnings appeal based on State earnings 
database records or a survey.
    Changes: None.
    Comments: Commenters contended that the Department's earnings 
assessment process is flawed with regard to information on self-
employed individuals because the source of data on their earnings is 
the individual, who may fail to report or significantly underreport 
earnings, or who may have relatively significant business expenses that 
offset even substantial income. According to the commenters, barbering, 
cosmetology, food service, and Web design are examples of occupations 
in which significant numbers of individuals are self-employed and tend 
to underreport earnings, particularly earnings from tips, which a 
commenter states account for about half of earnings in service 
occupations such as cosmetology. Another commenter believed that 
employers may often fail to report payments to independent contractors 
whom they have retained for relatively short periods, which would 
further depress the amount of earnings shown for the contractors in SSA 
records. One commenter provided an alternate analysis that imputes 
certain values derived from the CPS conducted by the Census Bureau on 
behalf of BLS. The commenter proposed to adjust the calculation of D/E 
rates to take into account what the commenter considered bias in the 
income data reported to SSA for workers in several occupations that the 
CPS shows involve both significant tip income and a high percentage of 
income from self-employment. The commenter contended that these 
adjustments would significantly augment the SSA aggregate earnings 
reported for these occupations, increasing the median earnings by 19 
percent and the mean earnings by 24 percent.
    Discussion: We do not agree that our reliance on reported earnings 
is flawed because of its treatment of self-employment earnings and 
tips, or that the suggested methods for remedying the claimed flaws 
would be effective in achieving the goals of these regulations, for 
several reasons. We acknowledge that some self-employed individuals may 
fail to report, or underreport, their earnings. However, section 6017 
requires self-employed individuals to file a return if the individual 
earns $400 or more for the taxable year. 26 U.S.C. 6017. Underreporting 
subjects the individual to penalty or criminal prosecution. See, e.g., 
26 U.S.C. 6662, 7201 et seq.
    Some self-employed individuals have significant income but 
substantial and offsetting business expenses, such as travel expenses 
and insurance, but our acceptance of net reported earnings for these 
individuals is not unreasonable. These individuals must use available 
earnings to pay their personal expenses including repaying their 
student loan debt. The fact that an individual used some revenue to pay 
business expenses does not support an inference that the individual had 
those same funds actually available to pay student loan debt.
    With respect to the earnings of workers who regularly receive tips 
for their services, section 6107 of the Code requires individuals to 
report to IRS their tip earnings for any month in which those tips 
exceeded $20, and

[[Page 64956]]

individuals who fail to do so are subject to penalties. 26 U.S.C. 6107, 
6652(b).\158\
---------------------------------------------------------------------------

    \158\ IRS Guidance, Reporting Tip Income-Restaurant Tax Tips, 
available at www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Reporting-Tip-Income-Restaurant-Tax-Tips (``Tips your 
employees receive from customers are generally subject to 
withholding. Employees are required to claim all tip income 
received. This includes tips you paid over to the employee for 
charge customers and tips the employee received directly from 
customers . . . Employees must report tip income on Form 4070, 
Employee's Report of Tips to Employer, (PDF) or on a similar 
statement. This report is due on the 10th day of the month after the 
month the tips are received . . . No report is required from an 
employee for months when tips are less than $20.'').
---------------------------------------------------------------------------

    As to the concern that some businesses may fail to report payments 
to contractors, the individual contractor remains responsible for 
reporting those payments as with other self-employment earnings, 
whether or not the payments were reported by the party that engaged the 
individual.
    Imputing some percentage of added earnings to account for 
underreported tips and other compensation could only be done by 
generalizations drawn from some source of data on earnings, but none 
has been suggested that would permit doing so in a way that would 
distinguish between programs.
    To assess the bias that the commenter asserted arises from what the 
commenter calls ``imputing'' zero earnings to individuals with no 
reported earnings in the MEF, the commenter relies on earnings data 
from the CPS, which is derived from surveys of households. The survey 
samples data on a selection of all households, and relies on earnings 
data as provided by the individuals included in the survey. As the 
commenter noted, there are no data in the CPS that allow one to 
associate a particular respondent with a particular GE program.
    Unlike the approach taken in these regulations, which captures all 
earnings of the cohort of students completing a program and credits 
those earnings to the program completed by the wage earners, the 
analysis proposed by the commenter does the reverse: It extrapolates 
from earnings reported by those survey recipients who identify their 
occupation as one that appears related to GE programs of that general 
type, and then projects an increase in aggregate earnings for all GE 
programs in the category of programs that appears to include that 
occupation. In fact, even if the respondents were all currently 
employed in occupations for which a category of GE programs trains 
students, the respondents' earnings will almost certainly have no 
connection with a particular GE programs we are assessing. Because any 
inference drawn from CPS respondents' earnings could only benefit a 
whole category of programs--improving the D/E rates for every program 
in that category--using such inferences would mask poorer performing 
programs and thwart a major purpose of the GE assessment.
    In addition, by the time the survey is conducted, the respondent 
can be expected to identify his or her current or most recent job, 
which may be different than the occupation for which training was 
received years before in a GE program. Thus, to draw a usable inference 
about D/E earnings from data gathered in the CPS one must connect a 
particular GE program now being offered and evaluated with earnings and 
occupations disclosed by the CPS respondents years, even decades, into 
their careers, during which they may have worked in different kinds of 
occupations.
    For these reasons, we do not agree with the commenters' assertion 
that aggregate earnings data provided by SSA from MEF are unreliable 
with respect to workers in occupations that involve significant tip 
income or a high percentage of income from self-employment. More 
importantly, the critique fails to demonstrate either that a different 
and more reliable source of earnings data is available and should 
reasonably be used instead of the SSA data, or that adjustments must be 
made based on CPS data. Moreover, the regulations allow an institution 
to submit an alternate earnings appeal using State databases or a 
survey.
    Changes: None.
    Comments: For the various reasons stated in the comments summarized 
here, commenters contended that the SSA MEF data is not the ``most 
reliable data available'' for the Department to use in calculating D/E 
rates for GE programs, and does not ``produce figures that can be 
considered sufficiently accurate.'' They asserted that the Department 
has not met its obligation to use the ``best available data'' to 
calculate the D/E rates.
    Discussion: The commenter's argument that the Department failed to 
use the ``most reliable data available'' is based on cases in which 
parties claimed that an agency chose to rely on incomplete or outdated 
data at the time it made a determination, rather than more accurate 
data available to the agency at that time. In the relevant cases, the 
court considered whether the agency reasonably relied on the data 
available to the agency at the time of determination.\159\ An agency 
may not disregard data actually available to it, as where, for example, 
data are available from a component of the same agency as the component 
of that agency that makes the determination. The data required to 
calculate the earnings component of the D/E rates is not available 
within components of the Department.
---------------------------------------------------------------------------

    \159\ See Baystate Medical Center v. Leavitt, 545 F.Supp.2d 20 
(D.D.C. 2008), on which the commenter chiefly relies, describes the 
``repeated recognition in case law that the agency must use `the 
most reliable data available' to produce figures that can be 
considered sufficiently `accurate.' '' Baystate, 545 F.Supp.2d at 41 
(citation omitted). The accuracy of the determination ``cannot be 
weighed in a vacuum, but instead must be evaluated by reference to 
the data that was available to the agency at the relevant time.'' 
Id. An agency that used the most reliable data available in making a 
determination need not ``recalculate'' based on ``subsequently 
corrected data'' or where, for instance, ``the data failed to 
account for part-time workers.'' Id. (internal citations omitted).
---------------------------------------------------------------------------

    Similarly, an agency may not ignore or fail to seek data actually 
held by an agency with which it has a ``close working relationship.'' 
See Baystate, 545 F.Supp.2d at 44-45. SSA and the Department have a 
close working relationship, and the Department has, in fact, sought and 
obtained the relevant data available from SSA. The commenter does not 
identify any source other than SSA for the aggregate earnings data 
needed to calculate D/E rates. Rather, the commenter focuses on the 
lack of better data from SSA. We have confirmed with SSA that it does 
not have better data available to share with the Department, and, 
therefore, the Department uses the best data available from SSA to 
calculate earnings. Accordingly, the Department has satisfied the 
requirement to use the most reliable data available.
    The case law establishing the requirement that an agency use the 
best available data does not require that the data be free from errors. 
The case law ``amply supports the proposition that the best available 
data standard leaves room for error, so long as more data did not exist 
at the time of the agency decision.'' Baystate, 545 F.Supp.2d at 49. As 
discussed, the commenter does not identify, and the Department is not 
aware of, any other source of earnings data available to the Department 
to calculate D/E rates for a GE program. As we recognize that there are 
shortcomings in the D/E rates data-gathering process, we provide for a 
process under Sec.  668.405(c) for institutional corrections to the 
information submitted to SSA, and, to address any perceived flaws in 
the SSA aggregate earnings data, in Sec.  668.406, we provide 
institutions an opportunity to appeal their final D/E rates using 
alternate earnings data obtained from a

[[Page 64957]]

student survey or State-sponsored data system. For these reasons, by 
using aggregate earnings data provided by SSA from its MEF, the 
Department has satisfied the requirement to use the best available 
data.
    Changes: None.
    Comments: Several commenters contended that the Department's use of 
SSA aggregate earnings data to determine the D/E rates violates the 
institution's due process rights because the regulations prohibit the 
institution from examining and challenging the earnings data the SSA 
uses to calculate the mean and median earnings. The commenters argued 
that the regulations deprive the institution of the right to be 
apprised of the factual material on which the Department relies so that 
the institution may rebut it. Commenters further contended that appeal 
opportunities available under the regulations are not adequate, and 
that the regulations impermissibly place burdens of proof on the 
institution in exercising challenges available under the regulations.
    Discussion: As previously explained, SSA is barred from disclosing 
the kind of personal data that would identify the wage earners and from 
disclosing their reported earnings because section 6103(a) of the 
Internal Revenue Code (Code) bars a Federal agency from disclosing tax 
return information to any third party except as expressly permitted by 
the Code. 26 U.S.C. 6103(a). Return information includes taxpayer 
identity and source or amount of income. 26 U.S.C. 6103(b)(2)(A). No 
provision of the Code authorizes SSA to disclose return information to 
the Department for the purpose of calculating earnings, and therefore 
we cannot obtain this information from SSA (or IRS itself).
    We disagree that the limits imposed by law on SSA's release of tax 
return information on the students comprising a GE cohort deprives the 
institution of a due process right. One commenter's contention that the 
failure to make return information available violates the institution's 
right to meaningful disclosure of the data on which the Department 
relies is not supported by the case law. Indeed, the case law to which 
the commenter refers simply states that an agency must provide a party 
with--

    [E]nough information to understand the reasons for the agency's 
action. . . . Claimants cannot know whether a challenge to an 
agency's action is warranted, much less formulate an effective 
challenge, if they are not provided with sufficient information to 
understand the basis for the agency's action.

    Kapps v. Wing, 404 F.3d 105, 123-24 (2d Cir. 2005) (emphasis 
added). Similarly another commenter cites to Bowman Transp., Inc. v. 
Arkansas-Best Freight Sys., Inc., 419 U.S. 281 (1974) to support a 
claim that failure to provide the completers' tax return data denies 
the institution a right to due process, but the Court there held that--

    A party is entitled, of course, to know the issues on which 
decision will turn and to be apprised of the factual material on 
which the agency relies for decision so that he may rebut it. 
Indeed, the Due Process Clause forbids an agency to use evidence in 
a way that forecloses an opportunity to offer a contrary 
presentation.

    Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 
at 289, fn.4. The procedure we use here apprises the institution of the 
factual material on which we base our determination, and more 
importantly in no way forecloses an opportunity to offer a ``contrary 
presentation.''
    The regulations establishing the procedure we use to calculate a 
program's D/E rates provide not merely an opportunity to challenge the 
accuracy of the list of students who completed the program and the 
debts attributed to the cohort, but also two separate kinds of 
``contrary presentations'' regarding earnings themselves--a survey of 
students who completed the program and their earnings, and data on 
their earnings from State databases. An institution may make either or 
both such presentations. Under the Mathews v. Eldridge test, an agency 
must provide procedures that are ``tailored, in light of the decision 
to be made, to `the capacities and circumstances of those who are to be 
heard,' . . . to insure that they are given a meaningful opportunity to 
present their case.'' Mathews v. Eldridge, 424 U.S. 319, 349 (1976) 
(citations omitted). The circumstances in which the Department 
determines D/E rates include several facts that bear on the fairness of 
the opportunity given the institution to contest the determination. 
First, SSA is legally barred by section 6103 of the Code from providing 
the Department or the institution with individualized data on the 
members of the program cohort. Second, SSA MEF data is the only source 
of data readily and generally available on a nationwide basis to obtain 
the earnings on these cohorts of individuals. Third, parties who report 
to SSA the data maintained in the MEF do so under penalty of law. 
Fourth, millions of taxpayers, as well as the government, rely on the 
SSA MEF data as an authoritative source of data that controls annually 
hundreds of billions of dollars in Federal payments and taxpayer 
entitlement to future benefits.\160\ Fifth, the entities directly 
affected by the determinations--businesses that offer career training 
programs, many of which derive most of their revenue from the title IV, 
HEA programs--are sophisticated parties. Lastly, institutions are free 
to present, and have us consider, alternative proofs of earnings. As 
previously discussed in the context of the requirement to provide the 
``best available data,'' the agency's determination ``cannot be weighed 
in a vacuum, but must be evaluated by reference to the data available 
to the agency at the relevant time.'' Baystate, 545 F.Supp.2d at 41. 
Under these circumstances, the regulations provide institutions 
sufficient opportunity to understand the evidence on which the 
Department determines D/E rates and a meaningful opportunity to contest 
and be heard on a challenge to that determination. No more is 
required.\161\ And, although State earnings databases may not be 
readily available to some institutions because of their location or the 
characteristics of the data collected and stored in the database, an 
institution has the option of conducting a survey of its students and 
presenting their earnings in an alternate earnings appeal.
---------------------------------------------------------------------------

    \160\ See: SSA, Annual benefits paid from the OASI Trust Fund, 
by type of benefit, calendar years 1937-2013, available at 
www.ssa.gov/oact/STATS/table4a5.html; The Board of Trustees, Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds, 2014 Annual Report, available at www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads/tr2014.pdf.
    \161\ The commenters do not challenge the regulations by 
contending that they could be read to bar a challenge based on 
actual return information were the institution able to secure such 
information by, for example, obtaining copies of IRS earnings 
records with the consent of each of the students in the cohort. This 
option would be highly impractical, however, and therefore we did 
not consider it to be viable for purposes of these regulations. We 
also are unaware of any comments that suggested that we adopt such 
an option.
---------------------------------------------------------------------------

    Changes: None.
    Comments: A commenter contended that the Department's practice of 
treating a ``zero earnings'' instance in SSA's MEF data as no earnings 
for the individual is improper, contrary to the practice of other 
Federal and State agencies, and in violation of acceptable statistical 
methods. According to the commenter, the U.S. Census Bureau, BLS, the 
Federal Economic Statistical Advisory Committee, and the Bureau of 
Justice Statistics all replace zero values with imputed values derived, 
for example, from demographically similar persons for whom data are 
available.
    Specifically, the commenter cited the following examples in which 
agencies

[[Page 64958]]

impute positive values where data are missing:
    The United States Census Bureau (The Federal Economic Statistical 
Advisory Committee) uses the following imputation methods: \162\
---------------------------------------------------------------------------

    \162\ www.census.gov/cps/methodology/unreported.html
---------------------------------------------------------------------------

     Relational imputation: Infers the missing value from other 
characteristics on the person's record or within the household (i.e., 
if other members of household report race, then census will infer race 
based on household data).
     Longitudinal edits: Data entered based on previous entries 
(from past reporting periods) from the same individual or household.
     Hot Deck edits: A record with similar characteristics 
(race, age, sex, etc.) is a hot deck. Uses data from hot deck entries 
to impute missing values.
    BLS \163\ and the Department of Education, National Center for 
Education Statistics \164\ also use hot deck imputation (or a similar 
method based on demographics).
---------------------------------------------------------------------------

    \163\ www.bls.gov/news.release/ocwage.tn.htm
    \164\ http://nces.ed.gov/statprog/2002/glossary.asp#cross-sectional
---------------------------------------------------------------------------

    The Bureau of Justice Statistics uses the median value of an item 
reported in a previous survey by other agencies in the same sample 
cell.
    Similarly, the commenter noted that State child support enforcement 
agencies typically impute earnings values when calculating the amount 
of child support required from a parent for whom no earnings data are 
available. The commenter stated that the Department's failure to impute 
earnings values in instances in which SSA data show no earnings can be 
expected to result in underestimation of mean and median earnings.
    Discussion: The Department recognizes that other agencies, and the 
Department itself, may in some circumstances impute values for missing 
data in various calculations. Surveys conducted to discern and evaluate 
economic and demographic characteristics of broad populations can and 
are regularly made without the need for complete values for each 
individual data element included in the survey or analysis. In these 
assessments, the objective is determining characteristics of broad 
groups of entities or individuals. These surveys or studies typically 
involve universes comprising a great number of entities or individuals, 
about which the survey conductor has a considerable amount of current 
and older data available both from the entity for which data are 
missing and from others in the universe. Where such data are available, 
the survey conductor can identify both entities that sufficiently 
resemble the entity for which data are missing, and what data were 
actually provided by that entity in the past, to allow the surveyor to 
impute values from the known to the unknown. Where sufficient data 
exist, the agency can control the effect of imputing values by limiting 
the extent to which values will be imputed. Whether the imputation 
provides precisely accurate values for those values missing in the data 
is irrelevant to the accuracy of the overall assessment. In calculating 
D/E rates for a particular program, the opposite is the case; measuring 
the earnings of a particular cohort of graduates of a GE program 
offered by a particular institution requires that the Department use 
data that allow it to differentiate among the outcomes of identical GE 
programs offered by separate institutions.\165\
---------------------------------------------------------------------------

    \165\ For example, BLS uses these data to produce the 
occupational earnings analysis that the Department does not now 
consider to be a sufficiently precise measure to justify its 
continued use as a source of earnings for the purpose of calculating 
D/E rates, for the reasons already explained.
---------------------------------------------------------------------------

    Imputation of income in the context of establishing child support 
obligations is a completely different enterprise: income is imputed to 
a non-custodial parent only in an individual judicial or administrative 
proceeding in which the non-custodial parent is a defendant, and has 
failed to produce earnings evidence or is either unemployed or 
considered to be underemployed.\166\ Imputed income is used when the 
court believes the parent's testimony regarding reported income is 
false; the evidence of the parent's income and the parent's actual 
income does not meet his or her demonstrated earnings; or a decrease in 
income is voluntary. At a minimum, income is imputed to equal the 
amount earned from a full-time job earning minimum wage.\167\ The 
objective of the child support determination process is to ensure that 
the defendant parent is contributing to the support of the child, and 
not shirking that responsibility by failing to find employment or 
failing to maximize earnings. Thus, the parent is expected to find 
appropriate employment to meet this obligation, and can object by 
demonstrating a ``good faith reason'' why he or she cannot do so.\168\ 
In each instance, income is imputed only on a particularized assessment 
of the individual and his or her circumstances.
---------------------------------------------------------------------------

    \166\ ``The establishment of orders for child support 
enforcement cases . . . occurs through either judicial or 
administrative processes. . . . In 30 States, imputation is 
practiced if the non-custodial parent fails to provide relevant 
information or is currently unemployed or underemployed. Five States 
impute income only if the non-custodial parent fails to provide 
relevant information such as pay stubs, income tax returns or 
financial affidavits. Thirteen States impute income only if the non-
custodial parent is unemployed or underemployed.
    Most of the 48 States that impute income consider a combination 
of factors in determining the amount of income to be imputed to the 
non-custodial parent. Thirty-five States base imputed awards on the 
premise that the non-custodial parent should be able to work a 
minimum wage job for 40 hours per week. Fifteen of the States 
consider the area wage rate and 10 of the States look at the area 
employment rate to determine imputed income. Seventeen States 
consider the non-custodial parent's level of education while 14 
account for disabilities hindering full employment. Thirty-five 
States evaluate the non-custodial parent's skills and experience and 
thirty-one base imputations on most recent employment, where 
information is available.''
    Office of Inspector General, Department of Health and Human 
Services (2000), State policies used to establish child support 
orders for low-income non-custodial parents, at 5, 15. Available at 
https://oig.hhs.gov/oei/reports/oei-05-99-00391.pdf https://oig.hhs.gov/oei/reports/oei-05-99-00391.pdf.
    \167\ National Conference of State Legislatures, Child Support 
Digest (Volume 1, Number 3) www.ncsl.org/research/military-and-veterans-affairs/child-support-digest-volume-1-number-3.aspx.
    \168\ In order to impute income to a parent who has demonstrated 
an inability to pay the specified amount, courts must determine that 
the party is voluntarily unemployed or underemployed. States allow 
for exceptions to the general rule regarding voluntary income 
decreases if the party can demonstrate that the decrease was based 
on a ``good faith reason'' (e.g., taking a lower paying job that has 
greater long-term job security and potential for future earnings). 
National Conference of State Legislatures, Child Support 101.2: 
Establishing and modifying support orders, available at 
www.NCSL.Org/research/human-services/enforcement-establishing-and-
modifying-orders.aspx.
---------------------------------------------------------------------------

    Because of these differences in procedure and objective, child 
support practice offers no useful model for imputing earnings to those 
graduates of a GE program whose MEF records show no reported earnings. 
The objective of calculating the mean and median earnings for graduates 
of a GE program--to assess the actual outcomes of that program for a 
specific group of students who completed the program--is very 
different. The assessment assumes that those graduates enrolled and 
persisted in order to acquire the skills needed to find gainful 
employment, and had no reason--such as a desire to minimize a child 
support obligation--to decline gainful employment that they could 
otherwise achieve using the skills acquired in a GE program. Because 
the Department receives no data that would identify an individual whose 
MEF record shows no reported earnings, the Department is not able to 
determine whether an individual was making full use of the skills for 
which the individual enrolled in a GE program to acquire.

[[Page 64959]]

    Changes: None.
    Comments: One commenter objected to the language in Sec.  
668.405(c)(1) that provides that the Secretary presumes that the list 
of students who completed a program and the identity information for 
those students is correct. The commenter was concerned that, through 
this presumption, the Department would limit its ability to reject an 
inaccurate or falsified list of students. For example, this commenter 
explained, an institution could falsely report that fewer than 30 
students completed a program so as to avoid a D/E rates calculation 
under the n-size provisions of the regulations. The commenter 
recommended modifying Sec.  668.405(c)(1) to state ``the Secretary may 
presume'' that the list is correct, in order to clarify that the 
presumption is at the Secretary's discretion.
    Discussion: Because the list of students who completed a program is 
created by the Department from data reported by the institution, we 
presume that it is correct. We do not agree that this presumption is a 
limitation on the Department. Rather, it confirms that the burden of 
proof to demonstrate that the list is incorrect resides with the 
institution. The list is created using data originally reported to the 
Department by the institution.
    We note that institutions that submit reports to the Department are 
subject to penalty under Federal criminal law for making a false 
statement in such a report. See, e.g., 18 U.S.C. 1001, 20 U.S.C. 
1097(a). Because the Department can take enforcement action under these 
statutes, the Department need not, and typically does not, include in 
procedural regulations explicit provisions explaining that the 
Department can take enforcement action when we determine that an 
institution has submitted untruthful statements.
    Changes: None.
    Comments: Many commenters objected to the proposal that earnings 
data could be obtained from SSA ``or another Federal agency'' because 
it was not transparent as to which other agency the Department may rely 
on to provide earnings data. The commenters objected to not being able 
to provide informed comment during the rulemaking process on the data 
source. The commenters also questioned the quality of the data that the 
Department would receive from another Federal agency.
    Discussion: This clause was included in the proposed regulations so 
that, if a future change in law or policy precluded SSA from releasing 
earnings data, the Department would have the option to obtain this 
information from another Federal agency. However, in response to the 
commenters' concerns, we will designate any new source of earnings data 
through a change in regulations through the rulemaking process so that 
the public has an opportunity to understand any proposed change and 
offer comments.
    Changes: The clause ``or another Federal agency'' has been removed 
from Sec. Sec.  668.404(c)(1), 668.405(a)(3), 668.405(d), 
668.413(b)(8)(i)(C), and 668.413(b)(9)(i)(C).
    Comments: One commenter urged the Department to create a mechanism 
for institutions to monitor and evaluate the student data used to 
calculate the D/E rates on a continuous basis so that they can make 
operational adjustments to ensure that programs pass the D/E rates 
measure.
    Discussion: There are several factors that preclude institutions 
from using real-time data to estimate the D/E rates for a GE program on 
a continuous basis. First, the Department may only request mean and 
median earnings for a cohort of students from SSA once per year. As a 
result, we would not be able to provide institutions with updated 
earnings information at multiple points during the year. Second, any 
estimate of the amount of debt a student will have incurred upon 
completion of a GE program would involve too many assumptions to make 
the estimate meaningful. For example, any estimate would have to make 
assumptions regarding how many loan disbursements a student received 
and whether and when the student completed the program. Further, the 
estimate would have to make assumptions as to whether a student would 
be excluded from the calculation for any of the reasons listed in Sec.  
668.404(e).
    Changes: None.

Section 668.406 D/E Rates Alternate Earnings Appeals

    Comments: We received a number of comments requesting clarification 
regarding the cohort of students on whom an alternate earnings appeal 
would be based. Although the proposed regulations provided that an 
appeal would be based on the annual earnings of the students who 
completed the program during the same cohort period that the Secretary 
used to calculate the final D/E rates, commenters suggested that we 
specify the calendar year for that period. One commenter suggested that 
we specify that the cohort period is the calendar year that ended 
during the award year for which D/E rates were calculated. Another 
commenter recommended that, where the most recently available earnings 
data from SSA are not from the most recent calendar year, institutions 
should be permitted to use alternate earnings data from the most recent 
calendar year.
    Some commenters asked that we specify that the students whose 
earnings are under consideration are the same students on the final 
list submitted to SSA under Sec.  668.405(d). In that regard, a number 
of commenters suggested that institutions should be able to apply the 
exclusions in Sec.  668.404(e), in determining the students in the 
cohort period.
    One commenter asked the Department to permit institutions to modify 
the cohort of students to increase the availability of an alternate 
earnings appeal. Other commenters asked the Department to permit 
institutions to expand the cohort period if necessary to meet the 
survey standards or the corresponding requirements of an appeal based 
on earnings information in State-sponsored data systems.
    Discussion: We believe the regulations sufficiently describe the 
relevant period for which earnings information is required in an 
alternate earnings appeal. As discussed in ``Section 668.404 
Calculating D/E Rates,'' because D/E rates are calculated for the award 
year, rather than the calendar year, and because of the timeline 
associated with obtaining earnings data from SSA, we state that the 
earnings examined for an alternate earnings appeal must be from the 
same calendar year for which the Department obtained earnings from SSA 
under Sec.  668.405(c). The purpose of the appeal is to demonstrate 
that, using alternate earnings for the same cohort of students, the 
program would have passed the D/E rates measure. Accordingly, it would 
not be appropriate to use data from a year that is different from the 
one used in calculating the D/E rates. In ``Section 668.404 Calculating 
D/E Rates,'' we provide an example that illustrates how the period will 
be determined.
    Under this approach, because an institution will know in advance 
the cohort of students and calendar year for earnings that will be 
considered as a part of an appeal, the institution can begin collecting 
alternate earnings data well before draft D/E rates are issued in the 
event that the institution believes its final D/E rates will be failing 
or in the zone and plans to appeal those D/E rates.
    We agree that institutions should be able to exclude students who 
could be excluded under Sec.  668.404(e) in their alternate earnings 
appeal. We recognize that in order to maximize the time that an 
institution has to conduct a survey or database search, the institution 
may elect to begin its survey or search well

[[Page 64960]]

before the list of students is submitted to SSA, and the exclusions 
from the list under Sec.  668.404(e), are finalized.
    We also agree that there may be instances where a minor adjustment 
to the cohort period may make available an alternate earnings appeal 
that would not otherwise meet the requirements of the regulations. For 
example, for an appeal based on earnings information in State-sponsored 
data systems, the information may not be collected or organized in a 
manner identical to the way in which earnings data are collected and 
organized by SSA, and a minor adjustment to the cohort period may be 
necessary to meet the matching requirements. In this regard, we note 
that an institution would not be permitted, however, to present 
annualized, rather than annual, earnings data in an alternate earnings 
appeal, even if that is how the data are maintained in a State-
sponsored data system.
    In accordance with instructions on the survey form, an institution 
may exclude from its survey students that are subsequently excluded 
from the SSA list. For a State data system search, the institution may 
exclude students that are subsequently excluded as long as it satisfies 
the requirements under Sec.  668.406(d)(2). Under those requirements 
the institution must obtain earnings data for more than 50 percent of 
the students in the cohort, after exclusions, and that number of 
students must be 30 or more.
    Changes: We have revised the provisions of Sec.  668.406(c)(1) and 
(d)(1) in the final regulations (Sec.  668.406(a)(3)(i) and (a)(4)(i) 
in the proposed regulations), and added Sec.  668.406(b)(3), to permit 
institutions to exclude students who are excluded from the D/E rates 
calculation under Sec.  668.404(e). If the institution chooses to use 
an alternate earnings survey, the institution may, in accordance with 
the instructions on the survey form, exclude students that are excluded 
from the D/E rates calculation. If the institution obtains annual 
earnings data from one or more State-sponsored data systems, it may, in 
accordance with Sec.  668.406(d)(2), exclude from the list of students 
submitted to the administrator of the State-administered data system 
students that are excluded from the D/E rates calculation. We have also 
included in Sec.  668.406(d)(2) that an institution may exclude these 
students with respect to its appeal based on data from a State-
sponsored data system.
    We have also provided in Sec.  668.406(b)(3) that an institution 
may base an alternate earnings appeal on the alternate earnings data 
for students who completed the program during a cohort period different 
from, but comparable to, the cohort period that the Secretary used to 
calculate the final D/E rates.
    Comments: We received comments in support of permitting 
institutions in an alternate earnings appeal to include the earnings of 
individuals who did not receive title IV, HEA program funds for 
enrollment in the program and, also, a comment opposing the inclusion 
of those individuals. Those commenters in support argued that the 
earnings of students who receive title IV, HEA program funds for 
enrollment in a program are not representative of the earnings of all 
their program graduates and therefore the earnings of all individuals 
who complete a program should be considered on appeal. On the other 
hand, one commenter recommended that the basis for an alternate 
earnings appeal be limited to the earnings of students who received 
title IV, HEA program funds for enrollment to align the regulations 
with the district court's decision in APSCU v. Duncan.
    Discussion: We agree with the commenter who recommended that the 
basis for an alternate earnings appeal be limited to the earnings of 
students who received title IV, HEA program funds for enrollment in the 
program. We believe this approach better serves the purpose of the 
alternate earnings appeal--to allow institutions, which are not 
permitted to challenge the accuracy of the SSA data used in the 
calculation of the D/E rates, to demonstrate that any difference 
between the mean or median annual earnings the Secretary obtained from 
SSA and the mean or median annual earnings from an institutional survey 
or State-sponsored data system warrants revision of the final D/E 
rates. The purpose of the appeal is to permit institutions to present 
evidence that the earnings data used to calculate the D/E rates may not 
capture the earnings outcomes of the students on whom the D/E rates 
were based, rather than to present evidence of the earnings of a 
different set of individuals who completed the program. As the 
commenter noted, the approach we take here, which considers only 
outcomes for individuals receiving title IV, HEA program funds, also 
aligns the regulations with the court's interpretation of relevant law 
in APSCU v. Duncan that the Department could not create a student 
record system based on all individuals enrolled in a GE program, both 
those who received title IV, HEA program funds and those who did not. 
See APSCU v. Duncan, 930 F. Supp. 2d at 221. Further, because the 
primary purpose of the D/E rates measure is to determine whether a 
program should continue to be eligible for title IV, HEA program funds, 
we believe we can make a sufficient assessment of whether a program 
prepares students for gainful employment based only on the outcomes of 
students who receive title IV, HEA program funds, including in 
connection with an alternate earnings appeal of a program's D/E rates. 
By limiting the alternate earnings appeal to an assessment of outcomes 
of only students who receive title IV, HEA program funds, the 
Department can monitor the Federal investment in GE programs. See the 
NPRM and our discussion in this document in ``Sec.  668.401 Scope and 
Purpose'' for a more detailed discussion regarding the definition of 
``student'' in these regulations as an individual who receives title 
IV, HEA program funds for enrollment in a program.
    Changes: None.
    Comments: A number of commenters urged the Department to permit 
appeals based on current BLS earnings data, either as a standing appeal 
option or as an option only during the transition period.
    Discussion: We do not believe that BLS data reflect program-level 
student outcomes, which are the focus of the accountability framework 
in the regulations. The average or percentile earnings gathered and 
reported by BLS for an occupation include all earnings gathered by BLS 
in its survey, but do not show the specific earnings of the individuals 
who completed a particular GE program at an institution and, therefore, 
would not provide useful information about whether the program prepared 
students for gainful employment in that occupation. Accordingly, we 
decline to include an option for alternate earnings appeals that rely 
on BLS data.
    Changes: None.
    Comments: One commenter recommended that an institution should be 
required to deliver any student warnings and should be subject to any 
other consequences under Sec.  668.410 based on a program's final D/E 
rates while an appeal is pending. The commenter expressed concern that 
suspending any such requirements and consequences until resolution of 
an appeal, as we provide in Sec.  668.406(a)(5)(ii) of the proposed 
regulations (Sec.  668.406(e)(2) of the final regulations), would 
prevent students from receiving information that may be critical to 
their educational decision making. The commenter also proposed that an 
appeal, if successful, should not change a program's results--that is,

[[Page 64961]]

failing or in the zone--under the D/E rates measure, but should only 
preserve a program's eligibility for title IV, HEA program funds for 
another year.
    Discussion: Although we agree that it is important for students and 
prospective students to receive important information about a GE 
program's student outcomes in a timely manner, we continue to believe 
that it is not appropriate to sanction an institution on the basis of 
D/E rates that are under administrative appeal. The purpose of the 
administrative appeal is to allow an institution to demonstrate that, 
based on alternate earnings data, a program's final D/E rates, 
calculated using SSA earnings data, warrant revision. To make the 
administrative appeal meaningful, we do not believe that institutions 
should be subject to the consequences of failing or zone D/E rates 
during the limited appeal period. We also believe it could potentially 
be confusing and harmful to students and prospective students to 
receive student warnings from an institution that is ultimately 
successful in its administrative appeal. We note that, under Sec.  
668.405(g)(3) and Sec.  668.406(e)(2) of the final regulations, the 
Secretary may publish final D/E rates once they are issued pursuant to 
a notice of determination, with an annotation if those rates are under 
administrative appeal. Accordingly, we expect that final D/E rates will 
be available to inform the decision making of students and prospective 
students, even during an administrative appeal.
    In addition, we believe that a successful appeal should result in a 
change in a program's final D/E rates. The purpose of the alternate 
earnings appeal process is to allow institutions to demonstrate that 
any difference between the mean or median annual earnings the Secretary 
obtained from SSA and the mean or median annual earnings from a survey 
or State-sponsored database warrants revision of the D/E rates. If an 
institution is able to demonstrate that, with alternate earnings data, 
a program would have passed the D/E rates measure, the program should 
have all benefits of a passing program under the regulations.
    Changes: None.
    Comments: Two commenters asked the Department to provide 
institutions a period longer than three business days after the 
issuance of a program's final D/E rates to give notice of intent to 
file an alternate earnings appeal. One commenter proposed a period of 
15 days after issuance of the final D/E rates. The commenters believed 
that the time provided in the proposed regulations is not sufficient to 
complete review of a program's D/E rates.
    Discussion: Section 668.406(a)(5)(i)(A) of the proposed regulations 
provided that, to pursue an alternate earnings appeal, an institution 
would notify the Secretary of its intent to submit an appeal no earlier 
than the date the Secretary provides the institution with the GE 
program's draft D/E rates and no later than three business days after 
the Secretary issues the program's final D/E rates. In other words, 
although an appeal is made based on a program's final D/E rates, an 
institution can give notice of its intent to submit an appeal as soon 
as it receives draft D/E rates. Under Sec.  668.405, a program's final 
D/E rates are not issued until the later of the expiration of a 45-day 
period in which an institution may challenge the accuracy of the loan 
debt information the Secretary used to calculate the median loan debt 
for the program and the date on which any such challenge is resolved. 
Accordingly, under the proposed regulations, the window during which an 
institution may submit notice of its intent to submit an alternate 
earnings appeal would not be, as suggested by the commenters, limited 
to the three-day period after the issuance of the final D/E rates. 
Rather, an institution would have, at a minimum, the 48-day period 
after draft D/E rates are issued. We believe that draft D/E rates 
provide an institution with sufficient information to determine whether 
to submit an alternate earnings appeal. We also believe that a 48-day 
minimum period to give notice of intent to submit an appeal adequately 
balances the Department's interests in ensuring that a program's final 
D/E rates are available to prospective students and students at the 
earliest date possible and providing institutions with a meaningful 
opportunity to appeal. Nonetheless, we appreciate that some 
institutions may not be able to give notice of intent to appeal until 
final D/E rates have been issued. To provide institutions with adequate 
time to decide whether to pursue an alternate earnings appeal, and if 
so, to communicate that intention, while still ensuring that the 
Department can promptly disclose the program's final D/E rates to the 
public, we are revising the regulations to provide that, as in the 2011 
Prior Rule, an institution has until 14 days after final D/E rates have 
been issued to notify the Department of its intent to submit an appeal.
    Changes: We have revised the provision in Sec.  668.406(e)(1)(i) of 
the final regulations (Sec.  668.406(a)(5)(i)(a) of the proposed 
regulations), to require an institution to notify the Secretary of its 
intent to submit an alternate earnings appeal no later than 14 days 
after the Secretary issues the notice of determination.
    Comments: Two commenters asked the Department to give institutions 
a period longer than 60 days after the issuance of a program's final D/
E rates to submit the documentation required for an alternate earnings 
appeal. One of the commenters proposed 120 days. The commenters 
believed that the time provided is not sufficient to meet the 
requirements of an appeal.
    Discussion: Under Sec.  668.405, a program's final D/E rates are 
not issued until the later of the expiration of a 45-day period after 
draft D/E rates are issued, during which an institution may challenge 
the accuracy of the loan debt information used to calculate the median 
loan debt for the program, and the date on which any such challenge is 
resolved. The period available to an institution to take all steps 
required to submit an alternate earnings appeal is not, as suggested by 
some of the commenters, limited to the 60-day period after the issuance 
of the final D/E rates. As we note previously, draft D/E rates should 
provide an institution with sufficient information to determine whether 
it intends to submit an alternate earnings appeal. Consequently, an 
institution has, at a minimum, the 45-day period after draft D/E rates 
are issued, together with the 60 days after issuance of final D/E 
rates, or 105 days in total to submit the documentation required for an 
alternate earnings appeal.
    An institution also has the option to begin its alternate earnings 
survey or collection of data from State-sponsored data systems well 
before the Secretary provides the institution with its draft D/E rates. 
For example, assume that the first award year for which D/E rates could 
be issued is award year 2014-2015. Those rates would be based on the 
outcomes of students who completed a GE program in award years 2010-
2011 and 2011-2012 for a two-year cohort period, and 2008-2009, 2009-
2010, 2010-2011, and 2011-2012 for a four-year cohort period. SSA would 
provide to the Department data on the students' earnings for calendar 
year 2014 in early 2016, approximately 13 months after the end of 
calendar year 2014. Those earnings data would be used to calculate the 
D/E rates for award year 2014-2015, and draft rates would be issued 
shortly after the final earnings data are obtained from SSA. Under our 
anticipated timeline, an institution that receives draft D/E rates that 
are in the zone or

[[Page 64962]]

failing for award year 2014-2015 would receive those draft rates early 
in 2016. An institution that wished to conduct a survey to support a 
potential alternate earnings appeal of its D/E rates for award year 
2014-2015 would base its appeal on student earnings during calendar 
year 2014. Students who completed the GE program would know by early 
2015 how much they earned in 2014, and could be surveyed, as early as 
the beginning of 2015--more than a full year before the Department 
would issue final D/E rates for award year 2014-2015.
    We believe the regulations provide sufficient time to permit an 
institution to conduct an earnings survey or collect State earnings 
data and submit an alternate earnings appeal. To permit more time would 
further delay the receipt by students and prospective students of 
critical information about program outcomes and unnecessarily increase 
the risk that more students would invest their time and money, and 
their limited eligibility for title IV, HEA program funds, in a program 
that does not meet the minimum standards of the regulations.
    Changes: None.
    Comments: None.
    Discussion: Section 668.406(a)(3)(i) of the proposed regulations 
provided that NCES will develop a valid survey instrument targeted at 
the universe of applicable students who complete a program. We have 
determined that a pilot-tested universe survey, rather than a field-
tested sample survey, as provided in the proposed regulations, is the 
appropriate vehicle to understand the appropriateness of the survey 
items and the order in which they are presented. While a field test 
implies a large-scale, nationally representative survey that is the 
precursor to a full-scale survey administration, and evaluates the 
operational aspects of a data collection as well as the survey items 
themselves, a pilot test is smaller and is more geared towards 
evaluating the survey items, rather than the operational procedures, as 
is more appropriate for these purposes.
    Although institutions are not required to use the exact Earnings 
Survey Form provided by NCES, we believe that institutions should use 
the same survey items and should present them in the same order as 
presented in the Earnings Survey Form to ensure that the pilot-tested 
survey items are effectively implemented. We note that, as we stated in 
the NPRM, the NCES Earnings Survey Form will be made available for 
public comment before it is implemented in connection with the approval 
process under the Paperwork Reduction Act of 1995.
    Changes: We have revised the provision in Sec.  668.406(c)(1) of 
the final regulations (Sec.  668.406(a)(3)(i) of the proposed 
regulations), to specify that the Earnings Survey Form will include a 
pilot-tested universe survey and provide that, although an institution 
is not required to use the Earnings Survey Form, in conducting a survey 
it must adhere to the survey standards and present to the survey 
respondent in the same order and same manner the same survey items 
included in the Earnings Survey Form.
    Comments: Several commenters noted that they were unable to 
evaluate whether the standards for alternate earnings appeals based on 
survey data are appropriate because the NCES Earnings Survey Form that 
will include the standards will not be released until a later date. 
These commenters also questioned the fairness and expense of requiring 
institutions to submit an independent auditor's report with the survey 
results. Another commenter suggested that a survey-based alternate 
earnings appeal would be too costly for small institutions.
    On the other hand, one commenter argued that less rigorous survey 
standards would not be appropriate and recommended that the Department 
institute additional measures to ensure that institutions do not 
improperly influence survey results. Specifically, the commenter 
suggested that the Department conduct audits of surveys to determine if 
there was improper influence and require an institution's chief 
executive officer to include in the required certification a statement 
that no actions were taken to manipulate the survey results.
    Discussion: We appreciate the commenters' concerns and expect that 
the survey standards developed by NCES will balance the need for 
reliable data with our intent to provide a meaningful opportunity for 
appeal that is economically feasible even for smaller institutions. As 
we stated in the NPRM, the NCES Earnings Survey Form, including the 
survey standards, will be made available for public comment before it 
is implemented as a part of the approval process under the Paperwork 
Reduction Act of 1995. At such time, the public will be able to comment 
on the standards and any associated burden.
    NCES fulfills a congressional mandate to collect, collate, analyze, 
and report complete statistics on the condition of American education 
and develops statistical guidelines and standards that ensure proper 
fieldwork and reporting guidelines are followed. NCES standards are 
established through an independent process so that outside 
organizations can rely on these guidelines. Although the standards have 
not been developed for public review and comment at this time, we are 
confident that NCES will provide a sufficient methodology under which 
accurate earnings can be reported and used in calculations for appeals.
    To ensure that surveys are conducted in accordance with the 
standards set for the NCES Earnings Form, we are requiring that 
institutions submit in connection with a survey-based appeal an 
attestation engagement report prepared by an independent auditor, 
certifying that the survey was conducted in accordance with those 
standards. We note that independent auditor certification is required 
by section 435(a)(5) of the HEA in a similar context--the presentation 
of evidence that an institution is achieving academic or placement 
success for low-income students as proof that an institution's failing 
iCDR should not result in loss of title IV, HEA program eligibility. 20 
U.S.C. 1085(a)(5). Given NCES' experience in developing survey 
standards and this independent auditor requirement, we do not think 
additional audit or certification requirements are necessary.
    Although use of the Earnings Survey Form is not required, we 
believe use of the form will streamline the process for both the 
institution and the party preparing the attestation engagement report.
    Changes: None.
    Comments: Several commenters expressed support for the option to 
base an alternate earnings appeal on earnings data obtained from State-
sponsored databases, noting that this option would increase the 
likelihood that an institution may successfully appeal a program's D/E 
rates. One commenter suggested that this option was particularly useful 
for programs that prepare students for employment in industries where 
earnings are often underreported. However, another commenter questioned 
why the Department would include this appeal option given the flaws 
cited in the NPRM with this approach, such as the potential 
inaccessibility and incompleteness of these databases.
    Discussion: As one commenter noted, and as described in more detail 
in the NPRM, we believe that there are limitations of State earnings 
data, notably relating to accessibility and the lack of uniformity in 
data collected on a State-by-State basis. However, as other commenters 
noted, the alternate

[[Page 64963]]

earnings appeal using State earnings data provides institutions with a 
second appeal option. This option may be useful to those institutions 
that already have, or may subsequently implement, processes and 
procedures to access State earnings data. Further, we believe that the 
matching requirements of the State earnings appeal option will make it 
more likely that the earnings data on which the appeal is based are 
reliable and representative of student outcomes.
    Changes: None.
    Comments: We received a number of comments both in support of, and 
opposed to, our proposal to allow an institution to submit, for a 
program that is failing or in the zone under the D/E rates measure, a 
mitigating circumstances showing regarding the level of borrowing in 
the program. As proposed in the NPRM, an institution would show that 
less than 50 percent of all individuals who completed the program 
during the cohort period, both those individuals who received title IV, 
HEA program funds and those who did not, incurred any loan debt for 
enrollment in the program. A GE program that could make this showing 
successfully would be deemed to pass the D/E rates measure.
    Commenters who supported the showing of mitigating circumstances 
argued that programs for which fewer than 50 percent of individuals 
enrolled in the program incur debt pose low risk to students and 
taxpayers. Further, these commenters urged the Department to go beyond 
a showing of mitigating circumstances and exempt such programs from 
evaluation under the accountability metrics altogether. A subset of 
these commenters proposed other requirements that a program would have 
to meet to qualify for an up-front exemption based on borrowing levels, 
for example, requiring that tuition and fees are set below the maximum 
Pell Grant amount. The commenters argued that an up-front exemption for 
``low risk'' programs would lessen the burden on institutions and the 
Department. These commenters stated that low-cost, open-access 
institutions serve high numbers of low-income students and generally 
have the fewest resources to meet new administratively burdensome 
regulations. Without up-front relief for these programs, the commenters 
suggested that many of these institutions would elect to close programs 
or cease to participate in the title IV, HEA loan programs.
    Other commenters opposed the proposed showing of mitigating 
circumstances based on borrowing levels. These commenters argued that 
such a showing, or the related exemption proposed by commenters, would 
inappropriately favor public institutions. These commenters suggested 
that, although GE programs offered by public institutions may have 
lower rates of borrowing, such programs are not necessarily lower cost. 
Rather, these commenters argued, public institutions, unlike for-profit 
institutions, benefit from State and local subsidies and do not pay 
taxes. In this regard, one commenter noted that the showing of 
mitigating circumstances would result in inequitable treatment among 
public institutions in different States, where there is varying 
eligibility for State tuition assistance grants. Another commenter 
argued that cost--as reflected in a low borrowing rate--should not be 
the only determinative factor of program quality, as it would permit 
programs with low completion rates, for example, to remain eligible for 
title IV, HEA program funds. Other commenters contended that, 
particularly when only a fraction of programs offered by public 
institutions would fail the accountability metrics, it would be unjust 
to include individuals who did not receive title IV, HEA program funds 
for enrollment in a program in a showing of mitigating circumstances 
based on borrowing levels when the Department otherwise evaluates GE 
programs based solely on the outcomes of students who receive title IV, 
HEA program funds. Some commenters noted that to do so would be at odds 
with the legal framework established by the Department in order to 
align the regulations with the court's interpretation of relevant law 
in APSCU v. Duncan, 930 F. Supp. 2d at 221, regarding student record 
systems.
    Discussion: As we discuss in detail in ``Section 668.401 Scope and 
Purpose,'' in our discussion of the definition of ``student,'' we do 
not believe the commenters who supported a ``low borrowing'' appeal 
presented a sufficient justification for us to depart from the purpose 
of the regulations--to evaluate the outcomes of students receiving 
title IV, HEA program funds and a program's continuing eligibility to 
receive title IV, HEA program funds based solely on those outcomes--
even for the limited purpose of demonstrating that a program is ``low 
risk.''
    We agree with the commenters who suggested that a program for which 
fewer than 50 percent of individuals borrow is not necessarily low risk 
to students and taxpayers. Because the proposed showing of mitigating 
circumstances would be available to large programs with many students, 
and therefore there may be significant title IV, HEA program funds 
borrowed for a program, it is not clear that the program poses less 
risk simply because those students, when considered together with 
individuals who do not receive title IV, HEA program funds, compose no 
more than 49 percent of all students. We also note that, if a program 
is indeed ``low cost'' or does not have a significant number of 
borrowers, it is very likely that the program will pass the D/E rates 
measure.
    For these reasons, we do not believe there is adequate 
justification to depart from the accountability framework established 
in the proposed regulations, by permitting consideration of the 
outcomes of individuals other than students who receive title IV, HEA 
program funds for enrollment in a program in determining whether a 
program has passed the D/E rates measure. For the same reasons, we do 
not think there is justification to make an even greater departure from 
the regulatory framework to allow for an upfront exemption from the 
accountability framework based on borrowing levels.
    We appreciate the commenters' concerns about administrative burden. 
As we discuss in more detail in ``Section 668.401 Scope and Purpose,'' 
in preparing these regulations, we have been mindful of the importance 
of minimizing administrative burden while also serving the important 
interests behind these regulations.
    Changes: We have eliminated from Sec.  668.406 the provisions 
relating to showings of mitigating circumstances.

Section 668.407 [Reserved] (Formerly Sec.  668.407 Calculating pCDR)

Section 668.408 [Reserved] (Formerly Sec.  668.408 Issuing and 
Calculating pCDR)

Subpart R

    Comments: Some commenters argued that the pCDR measure should take 
into account only individuals who received title IV, HEA program funds 
because the focus of the regulations is assessing the likelihood that a 
program will lead to gainful employment for those students. Others 
objected to limiting the pCDR measure to these students, other than in 
a challenge or appeal based on a program's participation rate index or 
economically disadvantaged student population, because, according to 
the commenters, this would produce distorted assessments of program 
outcomes. These commenters argued that many of the students who receive 
title IV, HEA program funds are both first-time borrowers and first-
generation postsecondary students, who have

[[Page 64964]]

historically been more likely to default than other borrowers.
    Discussion: As discussed in ``Section 668.403 Gainful Employment 
Program Framework,'' we have eliminated the pCDR measure as an 
accountability metric. However, we have retained program cohort default 
rate as a possible item on the disclosure template. Accordingly, we do 
not address the commenters' concerns in the context of program 
eligibility. We discuss comments regarding program cohort default rates 
as a disclosure item in ``Sec.  668.412 Disclosure Requirements for GE 
Programs'' and ``Sec.  668.413 Calculating, Issuing, and Challenging 
Completion Rates, Withdrawal Rates, Repayment Rates, Median Loan Debt, 
Median Earnings, and Program Cohort Default Rates.'' Finally, as 
discussed in more detail in ``Section 668.401 Scope and Purpose'' and 
``Section 668.412 Disclosure Requirements for GE Programs,'' the 
information that institutions must disclose about their programs will 
be based only on the outcomes of students who received title IV, HEA 
program funds so that students and prospective students who are 
eligible for title IV, HEA program funds can learn about the outcomes 
of other students like themselves. We believe that this information 
will be more useful to these students in deciding where to invest their 
resources, including, for certain types of title IV, HEA program funds, 
the limited funds that they may be eligible for, rather than 
information that is based partly on the outcomes of dissimilar 
students.
    Changes: We have revised the regulations to remove pCDR as a 
measure for determining program eligibility. We have removed the 
proposed provisions of Sec. Sec.  668.407 and 668.408 and reserved 
those sections.

Section 668.409 Final Determination of D/E Rates Measure

    Comments: One commenter requested that we synchronize the timing of 
the D/E rates measure and pCDR measure calculations, notices of 
determination, and student warning requirements to reduce the 
complexity of compliance. The commenter proposed that the Secretary 
issue a single notice of determination that would include a program's 
results under both measures.
    Discussion: As discussed in ``Section 668.403 Gainful Employment 
Program Framework,'' we have eliminated the pCDR measure as an 
accountability metric but retained program cohort default rates as a 
possible item on the disclosure template. Accordingly, there is no 
reason to synchronize the D/E rates and program cohort default rates 
calculations because institutions will receive notices of determination 
under Sec.  668.409 with respect to the D/E rates measure only and 
there will be no student warning requirements tied to pCDR. The 
Secretary will notify institutions of the draft and official program 
cohort default rates of their programs, along with related information, 
under the procedures in Sec.  668.413.
    Changes: We have revised Sec.  668.409 to eliminate references to 
the pCDR measure.
    Comments: One commenter recommended that a notice of determination 
be issued no later than one year after the Department obtains the data 
necessary to determine a program's results under the D/E rates measure. 
The commenter stated that such a requirement would allow sufficient 
time for challenges and appeals.
    Discussion: The Department will issue a notice of determination 
under Sec.  668.409 when final D/E rates are determined under 
Sec. Sec.  668.404 and 668.405 and, if a program's D/E rates are 
recalculated after a successful alternate earnings appeal, under Sec.  
668.406. It is not clear whether the commenter intended for the one-
year time limit to apply to a notice of determination of final D/E 
rates or recalculated D/E rates. In either case, although we appreciate 
the concern, we do not believe that a time limit is necessary as the 
Department will work to issue notices of determination as quickly as 
possible but in some cases, resolution of an appeal may take longer 
than one year.
    Changes: None.

Section 668.410 Consequences of the D/E Rates Measure

    Comments: Commenters recommended that we eliminate the student 
warning requirement. They suggested that, if an institution is required 
to give the student a warning about a program, it would be difficult or 
impossible to recruit new students and current students would be 
encouraged to transfer into other programs or withdraw from their 
program. The commenters argued that, as a result, the student warning 
requirement effectively undermines the Department's stated policy of 
permitting programs time and opportunity to improve. Another commenter 
proposed eliminating the student warning requirement on the grounds 
that, as a result of the warnings, States would be burdened with 
``unwarranted'' consumer complaints against institutions from students 
concerned that their program is about to lose title IV, HEA program 
eligibility.
    On the other hand, some commenters supported the proposed student 
warning requirements.
    Discussion: A student enrolled in a program that loses its title 
IV, HEA program eligibility because of its D/E rates faces potentially 
serious consequences. If the program loses eligibility before the 
student completes the program, the student may need to transfer to an 
eligible program at the same or another institution to continue to 
receive title IV, HEA program funds. Even if the program does not lose 
eligibility before the student completes the program, the student is, 
nonetheless, enrolled in a program that is failing or consistently 
resulting in poor student outcomes and could be amassing unmanageable 
levels of debt. Accordingly, we believe it is essential that students 
be warned about a program's potential loss of eligibility based on its 
D/E rates. The student warning will provide currently enrolled students 
with important information about program outcomes and the potential 
effect of those outcomes on the program's future eligibility for title 
IV, HEA program funds. This information will also help prospective 
students make informed decisions about where to pursue their 
postsecondary education. Some students who receive a warning may decide 
to transfer to another program or choose not to enroll in such a 
program. Other students may decide to continue or enroll even after 
being made aware of the program's poor performance. In either scenario 
students will have received the information needed to make an informed 
decision. We believe that ensuring that students have this information 
is necessary, even if it may be more difficult for programs that must 
issue student warnings to attract and retain students. Institutions may 
mitigate the impact of the warnings on student enrollment by offering 
meaningful assurances and alternatives to the students who enroll in, 
or remain enrolled in, a program subject to the student warning 
requirements.
    As a result of the student warning requirements, we expect fewer 
students will make complaints with State consumer agencies about being 
misled and enrolling in a program that subsequently loses eligibility. 
We also believe any additional burden that might be imposed on State 
agencies due to an increased number of complaints is outweighed by the 
benefits of providing the warnings.
    Changes: None.
    Comments: One commenter recommended that we use data regarding GE 
program performance previously collected by the Department

[[Page 64965]]

in connection with the 2011 Prior Rule to identify high-risk programs 
and require those programs to issue student warnings and make other 
disclosures, effective upon the implementation of the regulations.
    Discussion: Although we appreciate the commenter's interest in 
providing students with timely information, it is not feasible to 
implement the commenter's proposal. In the interest of fairness and due 
process, we have provided for a challenge and appeals process in the 
regulations. The 2012 GE informational D/E rates are estimated results 
intended to inform this rulemaking that were not subject to 
institutional challenges or appeals. As a result, using these results 
for accountability purposes would present fairness and due process 
concerns. In addition, we would be unable to uniformly apply the 
commenter's proposal because the Department does not have data for 
programs that were established after institutions reported information 
under the 2011 Prior Rule or for those programs that were in existence 
at that time but for which data were not reported because institutions 
lacked records for older cohorts, as may be the case with some medical 
and dental programs.
    Changes: None.
    Comments: One commenter suggested that an institution should not be 
required to deliver student warnings as a result of a failing program 
cohort default rate until the resolution of all related appeals.
    Discussion: As discussed in ``Section 668.403 Gainful Employment 
Program Framework,'' we have eliminated the program cohort default rate 
measure as an accountability metric. Accordingly, the student warning 
requirements will apply only to programs that may lose eligibility 
based on their D/E rates for the following award year.
    Changes: None.
    Comments: Some commenters recommended that institutions be required 
to issue student warnings whenever a program fails or is in the zone 
under the D/E rates measure rather than just in the year before a 
program could become ineligible for title IV, HEA program funds, as 
provided in the proposed regulations. These commenters reasoned that 
students and prospective students should be alerted to poor program 
performance as early as possible.
    Other commenters, however, agreed with the Department's proposal to 
require student warnings only if a program could become ineligible 
based upon its next set of final D/E rates. They argued that it would 
be unfair to require student warnings based on only a single year's 
results.
    One commenter asserted that it takes a long time to build or 
rebuild a quality academic program because an institution must develop 
and maintain courses and curricula and find and retain qualified 
faculty. According to the commenter, requiring the student warning 
after one failing or zone result under the D/E rates measure would 
curtail enrollments, making it difficult to maintain program 
infrastructure and offerings and resulting in fewer GE programs 
available to students.
    Discussion: We agree with the commenters who argued that students 
and prospective students should receive a warning when a program may 
lose eligibility in the following award year based on its D/E rates, 
rather than at any time the program is not passing under the D/E rates 
measure. We recognize that requiring an institution to provide the 
student warning after a program receives D/E rates that are in the zone 
for the first or second year may adversely affect the institution's 
ability to improve the program's performance. We also appreciate that a 
program's D/E rates may be atypical in any given year, and deferring 
the warning until the program receives a failing rate or a third 
consecutive zone rate increases the likelihood that the warning is 
warranted. Until such time as the warning is required, information 
about the program's performance under the D/E rates measure will, 
nonetheless, be available to students and prospective students. The 
Department will publish the final D/E rates, and a program's disclosure 
template may include the annual earnings rates, as well as a host of 
other critical indicators of program performance.
    We recognize that some students who receive a warning about a 
program may decide to transfer to another program or choose not to 
enroll in the program. Other students may decide to continue or enroll 
even after being made aware of the program's poor performance. In 
either event, students will have the information necessary to make an 
informed decision. Further, as discussed in ``Section 668.403 Gainful 
Employment Framework,'' while some programs will be unable to improve, 
we believe that many will and that institutions with passing programs 
will expand them or establish new programs. Accordingly, we expect that 
most students who decide not to enroll or continue in a program will 
have other viable options to continue their education.
    We are making a number of revisions to the proposed text of the 
student warning. In order to reduce complexity, we are revising Sec.  
668.410(a) to provide for a single uniform warning for both enrolled 
and prospective students rather than, as was the case in the proposed 
regulations, warnings with varying language depending on whether the 
student is currently enrolled or a prospective student. We are also 
revising the text of the single warning to make it more broadly 
applicable, easier to understand, and limited to statements of fact.
    First, we are revising the text of the warning to reflect that 
students to whom the warning is provided may complete their program 
before a loss of eligibility occurs. Second, we are revising the text 
to clarify that such a loss of eligibility by the program would affect 
only those students enrolled at the time a loss of eligibility occurs. 
Third, because a program loses eligibility if it fails in two out of 
three consecutive years, we are revising the text of the warning to 
reflect that a program that has failed the D/E rates measure in one 
year but passed the D/E rates measure in the following year still faces 
loss of eligibility based on its D/E rates for the next award year.
    To convey a program's status under the accountability framework to 
students and prospective students effectively, we are revising the text 
of the warning so that it is accurate for both current and prospective 
students, yet succinct and simply worded. We avoid, for example, any 
explanation as to why a program with D/E rates that are passing in the 
current year could nevertheless lose eligibility based on rates that 
are failing in the next year, or why a program that has received no 
failing D/E rates could lose eligibility based on rates for the next 
year that are in the zone for the fourth consecutive year. We therefore 
are revising the text of the warning to describe the current status of 
the program in a manner that is accurate in all circumstances in which 
the warning is required: that the program ``has not passed'' the 
standards (without identifying whether the statement refers to the 
current year or the immediately preceding year or years) and that loss 
of student aid eligibility may occur ``if the program does not pass the 
standards in the future.'' Finally, we are revising the text to simply 
describe the kind of data on which the D/E rates measure is based.
    Changes: We have revised Sec.  668.410(a) to replace the separate 
warnings for enrolled students and for prospective students with a 
single warning for both groups. We have revised the text of the warning 
to reflect this change and to make the warning more broadly applicable, 
easier to

[[Page 64966]]

understand, and limited to statements of fact.
    Comments: One commenter contended that, for shorter programs, even 
if a program becomes ineligible for title IV, HEA program funds in the 
next year, a student may be able to complete the program without any 
effect on the student's ability to continue receiving financial aid. 
The commenter recommended that in these circumstances, institutions 
should not be required to give a student warning or should be permitted 
to revise the content of the warning.
    Discussion: We agree that at the time that a student receives the 
student warnings, loss of access to title IV, HEA program funds will be 
only a possibility rather than a certain result. Accordingly, as 
discussed above, we have revised the text of the student warnings to 
state that if the program does not pass Department standards in the 
future, ``students who are then enrolled may'' lose access to title IV, 
HEA program funds to pay for the program.
    Changes: As previously discussed, we have revised Sec.  668.410(a) 
to clarify in the student warning that loss of eligibility may occur in 
the future, and students then enrolled may lose access to title IV, HEA 
program funds.
    Comments: One commenter asserted that the student warnings in the 
proposed regulations incorrectly state that programs provide Federal 
financial aid, when it is the Department that provides title IV, HEA 
program funds.
    Discussion: The commenter is correct that title IV, HEA program 
funds are not provided by a program.
    Changes: We have revised the text of the student warning in Sec.  
668.410(a) to clarify that title IV, HEA program funds are provided by 
the Department.
    Comments: One commenter recommended that, with respect to warnings 
to enrolled students, institutions should be required to specify the 
options that will be available if the program loses its eligibility for 
title IV, HEA program funds.
    Discussion: The proposed regulations required that the warning to 
enrolled students must:
     Describe the options available to students to continue 
their education at the institution, or at another institution, in the 
event that the program loses eligibility for title IV, HEA program 
funds; and
     Indicate whether the institution will allow students to 
transfer to another program at the institution; continue to provide 
instruction in the program to allow students to complete the program; 
and refund the tuition, fees, and other required charges paid to the 
institution by, or on behalf of, students for enrollment in the 
program.
    We are revising the regulations to require the warning to enrolled 
students to include additional details. First, the institution must 
provide academic and financial information about transfer options 
available within the institution itself. Because there are often 
limitations on the transfer of credits from one program to another, 
institutions must also indicate which course credits would transfer to 
another program at the institution and whether the students could 
transfer credits earned in the program to another institution. Finally, 
we are requiring that all student warnings refer students and 
prospective students to the Department's College Navigator or other 
Federal resource for information about similar programs. With this 
change, we have eliminated the obligation under proposed Sec.  
668.410(a)(1)(ii) that the institution research, and advise the 
student, whether similar programs might be available at other 
institutions for a student who wishes to complete a program elsewhere.
    Changes: We have revised Sec.  668.410(a) to require institutions 
to provide students with information about their available financial 
and academic options at the institution, which course credits will 
transfer to another program at the institution, and whether program 
credits may be transferred to another institution. For these programs 
we also have eliminated the requirement that institutions describe the 
options available to students at other institutions and, instead, have 
required that institutions include in all of their student warnings a 
reference to College Navigator for information about similar programs.
    Comments: One commenter stressed the importance of consumer testing 
of the content of the student warning and recommended that we develop 
the text of the warning in coordination with the Consumer Financial 
Protection Bureau, Federal Trade Commission, and State attorneys 
general. Another commenter emphasized the importance of including 
students who are currently attending the programs most likely to be 
affected in any consumer testing, including students attending programs 
offered by for-profit institutions.
    Discussion: The regulations include text for the student warnings. 
The Secretary will use consumer testing to inform any modifications to 
the text that have the potential to improve the warning's 
effectiveness. As a part of the consumer testing process, we will seek 
input from a wide variety of sources, which may include those suggested 
by the commenter.
    Changes: None.
    Comments: Some commenters asserted that requiring an institution to 
give warnings to students and prospective students would violate the 
institution's First Amendment rights and particularly its rights 
relating to commercial speech. These commenters argued that the 
required warning is not purely factual and uncontroversial, but rather 
is an ideological statement reflecting a Department bias against the 
for-profit education industry. Commenters stated that the Department 
should provide to students and prospective students any such warnings 
it considers necessary, rather than requiring the institution to do so.
    Discussion: We do not agree that it is a violation of an 
institution's First Amendment rights to require it to give warnings to 
students and prospective students. We discuss, first, the commenters' 
objections to the content of the required warnings and, next, their 
objection to the requirement that the institution itself provide the 
warnings.
    As acknowledged by the commenters who objected to the required 
warnings, these regulations govern commercial speech, which is 
``expression related solely to the economic interests of the speaker 
and its audience, . . . speech proposing a commercial transaction''; 
``material representations about the efficacy, safety, and quality of 
the advertiser's product, and other information asserted for the 
purpose of persuading the public to purchase the product also can 
qualify as commercial speech.'' APSCU v. Duncan, 681 F.3d 427, 455 
(D.C. Cir. 2012) (citations omitted). As the commenters also 
acknowledged, the case law recognizes that the government may regulate 
commercial speech, and that different tests apply depending on whether 
the government prohibits commercial speech or, as is the case with 
these regulations, merely requires disclosures.\169\
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    \169\ Disclosures may be ``appropriately required . . . in order 
to dissipate the possibility of consumer confusion or deception.'' 
Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 
471 U.S. 626, 651 (1985). If a requirement is ``directed at 
misleading commercial speech and imposes only a disclosure 
requirement rather than an affirmative limitation on speech, the 
less exacting scrutiny set out in Zauderer v. Office of Disciplinary 
Counsel of Supreme Court of Ohio, 471 U.S. 626, 105 S.Ct. 2265, 85 
L.Ed.2d 652, governs.'' Milavetz, Gallop & Milavetz, P.A. v. United 
States, 559 U.S. 229, 230 2010).
---------------------------------------------------------------------------

    Courts have required that laws regulating commercial speech must 
directly advance a significant government interest and must do so in

[[Page 64967]]

a manner narrowly tailored to that goal. Central Hudson Gas and Elec. 
Corp. v. Public Service Comm'n of N.Y., 447 U.S. 557, 564 (1980).
    A government requirement that parties disclose ``accurate, factual 
commercial information'' does not violate the First Amendment if the 
requirement is ``reasonably related'' to a significant government 
interest, including not merely ``preventing deception,'' but other 
significant interests as well. Am. Meat Inst. v. U.S. Dep't of Agric., 
76 F.3d 18 (D.C. Cir. 2014). In the context of gainful employment 
programs, as discussed in the NPRM, the government does indeed have an 
interest in preventing deceptive advertising. Advertising that a 
service provides a benefit ``without alerting consumers to its 
potential cost . . . is adequate to establish that the likelihood of 
deception . . . `is hardly a speculative one.' '' Milavetz, Gallop & 
Milavetz, P.A. v. United States, 559 U.S. 229, 251 (2010) (quoting 
Zauderer, 471 U.S. at 652). However, the government has an interest in 
not just preventing deception, but an affirmative interest in providing 
consumers information about an institution's educational benefits and 
the outcomes of its programs. This interest is well within the range of 
interests that justify requiring a regulated entity to make disclosures 
about its products or services. See Am. Meat Inst., 760 F.3d at 27.
    The warnings will provide consumers with information of the kind 
that Congress has already determined necessary to make an ``informed 
judgment about the educational benefits available at a given 
institution.'' Public Law 101-542, sec. 102, November 8, 1990, 104 
Stat. 2381. Moreover, the government's continued interest over time in 
disclosures of this nature evidence the significance of its interest. 
See Am. Meat Inst., 760 F.3d at 23-24.
    The particular warnings in these regulations are new, but, for more 
than thirty years, Congress has required institutions that receive 
title IV, HEA program funds to make numerous disclosures to current and 
prospective students akin to the disclosures required under these 
regulations.\170\ The statutory disclosure requirements were first 
enacted in 1980 and have been expanded repeatedly since then, most 
recently in 2013. The warning requirements in these regulations are 
based on the same Federal interest in consumer disclosures demonstrated 
over these past decades, demonstrating that the interest underlying 
these regulations is a significant governmental interest.
---------------------------------------------------------------------------

    \170\ Section 485 of the HEA was enacted in 1980 and has been 
repeatedly amended, most recently in 2013. Section 485 requires an 
institution to disclose to employees and current and prospective 
students myriad details regarding campus security policies and 
statistics on crimes committed on or near campuses, 20 U.S.C. 
1092(f); statistics regarding the number and costs of, and revenue 
from, its athletic programs, 20 U.S.C. 1092(g); and some 23 
categories of information about the educational programs and student 
outcomes, including disclosures of some of the very kinds of 
information--for the institution as a whole--as required for GE 
programs in these regulations, including completion rate, placement 
rate, and retention rate. 20 U.S.C. 1092(a)(1)(L), (R), (U). Not 
only does the HEA require these disclosures, but the HEA also 
specifies the manner in which the rate is to be calculated. See, 
e.g., 20 U.S.C. 1092(a)(3) (completion rate). These disclosures must 
be made through various media, including ``electronic media.'' See 
20 U.S.C. 1092(a)(1). In addition, section 487(a)(8) of the HEA 
requires an institution that advertises job placement rates as a 
means of attracting students to enroll to make available to 
prospective students ``the most recent data concerning employment 
statistics, graduation statistics, and any other information 
necessary to substantiate the truthfulness of the advertisements.'' 
20 U.S.C. 1094(a)(8).
---------------------------------------------------------------------------

    Courts have found that the requirement that the disclosure is 
``narrowly tailored'' to the governmental interest is ``self-evidently 
satisfied'' when the government requires an entity to ``disclose 
`purely factual and uncontroversial information' about attributes of 
the product or service being offered.'' Am. Meat Inst., 760 F.3d at 26 
(citation omitted). The commenters contended that the required warnings 
and disclosures are not ``factual, uncontroversial information'' and 
noted that the court in APSCU v. Duncan indicated doubt that the 
language of the warning required under the 2011 Prior Rule would meet 
that test. APSCU v. Duncan, 870 F.Supp.2d at 155 n.7. They contended 
that the text of the warning proposed in Sec.  668.410(a) is similarly 
flawed.
    We do not agree that the text of the proposed warning was not 
factual and uncontroversial. However, as discussed in this section, we 
have made a number of revisions to the proposed student warning text, 
and, accordingly, we consider here whether the student warning text in 
the final regulations is factual and not controversial.
    The text of the student warning contains a mixture of fact and 
explanation. The purely factual component--that ``this program has not 
passed standards established by the Department''--is not controversial 
at the time the warning is required because institutions will have had 
an opportunity to challenge or appeal the Department's calculation of 
the relevant data.\171\ Similarly, the statement that ``if in the 
future the program does not pass the standards, students who are then 
enrolled may not be able to use federal student grants or loans to pay 
for the program'' and may have to find other ways to pay for the 
program is simply a statement of what might happen if a program does 
not meet the standards and cannot be considered inaccurate or 
controversial. The remainder of the warning text in the final 
regulations--which states that the Department based these standards on 
the amounts students borrow for enrollment in the program and their 
reported earnings--is also a factual statement. No part of the student 
warning text conveys an ideological message or bias against for-profit 
institutions, given that all GE programs, whether they are offered by 
for-profit institutions or by public institutions, must provide the 
warnings in accordance with the regulations, and the warnings are 
composed solely of factual statements.
---------------------------------------------------------------------------

    \171\ The warning is required only after the Department has 
issued a notice of determination informing the institution of its 
final D/E rates and that the institution is subject to the student 
warning requirements. That determination is the outcome of an 
administrative appeal process and, as final agency action, is 
subject to review by a Federal court under the Administrative 
Procedure Act. By the time the warning is required, therefore, the 
institution's opportunity to controvert the determination is over.
---------------------------------------------------------------------------

    In response to comments contending that the Department--rather than 
the institution--should issue warnings to the consumer on a Department 
Web site, such as College Navigator, or by direct mailings, we note 
that existing HEA disclosure requirements are based on congressional 
findings that having the institution disclose ``timely and accurate 
data is essential to any successful student assistance system.'' H. R. 
Rep. No. 733, 96th Cong., 2d Sess. (1980) at 52.\172\ These regulations 
similarly require the institution to disclose through the student 
warning the potential significance of a program's D/E rates. The 
mandate that institutions deliver the message on their Web sites is 
tailored to deliver the message in an effective manner, and the content 
of the message is tailored to provide the kind of information that 
consumers need to evaluate an individual program that the institution 
promotes as preparing students for gainful employment.
---------------------------------------------------------------------------

    \172\ The congressional findings state that ``education is 
fundamental to the development of individual citizens and the 
progress of the Nation as a whole'' and that student consumers and 
their parents must be able to obtain information to make an 
``informed judgment about the educational benefits available at a 
given institution.'' Public Law. 101-542, sec. 102, November 8, 
1990, 104 Stat 2381.
---------------------------------------------------------------------------

    Although the Department can post warnings for hundreds or even 
thousands of GE programs on a Department Web site, we do not

[[Page 64968]]

consider such posting to be an effective means of reaching consumers. 
We note that Congress has reached the same conclusion by requiring that 
institutions make numerous disclosures not only in their publications 
but, more recently, through ``electronic media,'' 20 U.S.C. 1092(a)(1), 
a term already interpreted by the Department to include posting on 
Internet Web sites, 34 CFR 668.41(b), and posting to the institution's 
Web site, 20 U.S.C. 1015a(h)(3) (net price calculator). These statutory 
requirements demonstrate a congressional determination that disclosure 
to the consumer by the institution itself is necessary to achieve the 
Federal objective of enabling consumers to make ``informed choices.'' 
\173\ Because the student warnings required by these regulations target 
a similar and often identical audience as the disclosures already 
required by the HEA, we believe the congressional mandate provides a 
sound basis for requiring institutions themselves to make the warnings 
in order to achieve the purpose of the regulations.
---------------------------------------------------------------------------

    \173\ Congress demonstrated this most recently in Public Law 
110-315, sec. 110, August 8, 2008, enacting section 132 of the 
Higher Education Act, which in subsection (h) requires institutions 
to disclose on their own Web sites a ``net price calculator'' 
regarding their programs, while subsection (a) requires the 
Department to implement a ``College Navigator'' Web site displaying 
a wide range of data, including some similar data. 20 U.S.C. 
1015a(a), (h). In that same law, Congress also amended section 485 
of the HEA to add at least seven new disclosures to those already 
required of the institution itself. 20 U.S.C. 1085(a), as amended by 
Public Law 110-315, sec. 488(a), 122 Stat. 3293.
---------------------------------------------------------------------------

    The regulations require an institution to provide the warnings not 
only by including the warning on its Web site, but by delivering the 
warning directly to the consumer. The latter method is also tailored to 
the objective of giving effective and timely information. This is not 
the first instance in which regulations have required this kind of 
individual, direct communication by institutions with consumers about 
Federal aid: Section 454(a)(2) of the HEA authorizes the Department to 
require institutions to make disclosures of information about Direct 
Loans, and Direct Loan regulations require detailed explanations of 
terms and conditions that apply to borrowing and repaying Direct Loans. 
The institution must provide this information in ``loan counseling'' 
given to every new Direct Loan borrower in an in-person entrance 
counseling session, on a separate form that must be signed and returned 
to the institution by the borrower, or by online or electronic delivery 
that assures borrower acknowledgement of receipt of the message. 34 CFR 
685.304(a)(3).\174\ The requirement in those regulations closely 
resembles the requirements here that the institution provide the 
warnings directly to the affected consumers.
---------------------------------------------------------------------------

    \174\ The regulations also require even more detailed counseling 
by the institution for students exiting the institution. 34 CFR 
685.304(b).
---------------------------------------------------------------------------

    Although we carefully considered the commenters' concerns, we do 
not believe that there are any First Amendment issues raised by the 
student warning requirements in the final regulations. Further, we 
weighed the concerns against the significant government interest in 
providing consumers an effective warning regarding a program's 
performance and eligibility status. In this situation, failure to 
disclose the potential for loss of eligibility and the consequences of 
that loss could be misleading and this information is critical to the 
informed educational decision making of students and prospective 
students.
    Changes: None.
    Comments: We received a number of comments about when student 
warnings must be delivered to prospective students and who constitutes 
a ``prospective student.'' First, commenters expressed concern that 
institutional obligations with respect to prospective students were 
unclear. As discussed under ``Sec.  668.401 Scope and Purpose,'' 
commenters were confused about when an individual would be considered a 
``prospective student'' for the purpose of the student warning 
requirements and when student warnings were first and subsequently 
required to be given to prospective students. In this regard, 
commenters recommended that, to avoid undue administrative burden and 
compliance challenges, we eliminate the requirement that institutions 
provide student warnings upon first contact with a prospective student, 
given that student warnings are required before execution of an 
enrollment agreement and in connection with promotional materials. 
Commenters also expressed concern that the burden associated with 
giving repeated warnings may outweigh the benefits. Along these lines, 
some commenters recommended that we conduct consumer testing to 
determine the point at which student warnings would be most meaningful 
to prospective students.
    As discussed in ``Section 668.401 Scope and Purpose,'' some 
commenters recommended that student warnings be given not just to 
``prospective students'' as defined in the proposed regulations, but 
also to family members, counselors, and others making enrollment 
inquiries on their behalf.
    Discussion: We agree that the proposed regulations were not clear 
about how the definition of ``prospective student'' and the student 
warning requirements interacted. As discussed under ``Sec.  668.401 
Scope and Purpose,'' we have narrowed the definition of ``prospective 
student.'' However, we agree with the commenter that a third party who 
makes the first contact with an institution, such as a parent or 
counselor, may play a significant advisory role in the educational 
decision-making process for a prospective student. That individual 
should be given the student warning to convey to the student and we are 
revising the regulations accordingly. With these changes, we believe 
that it will be clear when and to whom student warnings must be 
delivered.
    For prospective students, we continue to believe that student 
warnings should be required both upon first contact and prior to 
enrollment. Although there will be situations in which contact is first 
made and a prospective student indicates his or her intent to enroll 
within a relatively short period of time after that, we believe that 
any redundancy in requiring delivery of the student warnings at both of 
these junctures is outweighed by the value in ensuring prospective 
students have this critical program information at times when they may 
most benefit from it.
    Changes: We have clarified in Sec.  668.410(a)(6)(i) (Sec.  
668.410(a)(2)(i) in the proposed regulations) that first contact about 
enrollment in a program, triggering the obligation to deliver the 
student warning, may be between a prospective student and a third party 
acting on behalf of an institution. We have also clarified in the 
definition of ``prospective student'' in Sec.  668.402 that such first 
contact may be between a third party acting on behalf of a prospective 
student and an institution or its agent.
    Comments: Some commenters were concerned about the manner in which 
student warnings may be delivered to students and prospective students. 
With respect to enrolled students, commenters expressed concern that 
institutions would bury the warning in a lot of other information to 
lessen the warning's impact. These commenters believed that the 
permitted methods of delivery--hand-delivery, group presentations, and 
electronic mail--allow for institutional abuse. They suggested that the 
Department be more specific about the permitted methods of delivery, 
consider other ways in which student warnings could be delivered--

[[Page 64969]]

for example, requiring posted warnings in classrooms and financial aid 
offices--and use consumer testing to determine the most effective means 
of delivery and format. One commenter recommended that we require 
institutions to obtain student acknowledgement of receipt of the 
warning.
    Other commenters recommended changes to the student warning 
requirements to lessen institutional burden and give institutions more 
flexibility. Some of these commenters conflated the student warning and 
the disclosure template delivery requirements. One commenter noted 
their differences and requested that we collapse the requirements into 
a single requirement. For example, the proposed regulations require 
institutions to obtain written confirmation that a prospective student 
received a copy of the disclosure template; as noted by another 
commenter, there was no such requirement with respect to the student 
warning. Some commenters recommended that email confirmation that 
students have received the student warning should satisfy the student 
warning requirements. One commenter suggested that an institution 
should be able to meet the student warning requirements by delivering 
the disclosure template that includes the student warning to a 
prospective student as required under Sec.  668.412. One commenter was 
unsure how institutions would deliver the required written student 
warning to prospective students who contact the institution by 
telephone about enrollment in a program, and one commenter proposed 
that oral warnings be permitted.
    Discussion: We agree with the commenter who suggested the 
Department should more clearly specify the manner in which student 
warnings may be delivered. To that end, we indicate in the final 
regulations the permitted methods of delivery of a student warning to 
each of: (1) Enrolled students, (2) prospective students upon first 
contact, and (3) prospective students prior to entering into an 
enrollment agreement.
    For enrolled students, as in the proposed regulations, the 
regulations permit delivery of the student warning in writing by hand-
delivery or by email. To ensure that the student warning is prominently 
displayed, and not lost within an abundance of other information, we 
are revising the regulations to clarify that any warning delivered by 
hand must be delivered as a separate document, as opposed to one page 
in a longer document; and any warning delivered by email must be the 
only substantive content of the email. We recognize that student 
warnings delivered by email may go unread by students and that there is 
a significant benefit to taking steps to help ensure that warnings 
delivered by email are actually read by the students. Accordingly, as 
suggested by a commenter, we are revising Sec.  668.410(a) to require 
that, for a warning delivered by email, an institution must send the 
email to the primary email address used by the institution for 
communicating with the student about the program, and receive 
electronic or other written acknowledgement that the student has 
received the email. If an institution receives a response indicating 
the email could not be delivered, the attempted delivery is not enough 
to meet the requirement in the regulations, and the institution must 
send the information using a different address or method of delivery. 
An institution may satisfy the acknowledgement requirement through a 
variety of methods such as a pop-up window that requires students to 
acknowledge that they received the warning. Institutions must maintain 
records of their efforts to deliver the warnings required under the 
regulations. We believe that the burden on institutions to obtain this 
acknowledgement is outweighed by the increased likelihood that in the 
course of, or as a result of, acknowledging receipt, students will read 
the warning and take it into account when making educational and 
financial decisions. We note that the requirement to obtain this kind 
of acknowledgement is no more burdensome than the requirement that 
institutions do so with regard to entrance counseling requirements. See 
section 485(l)(2) of the HEA (20 U.S.C. 1092(l)(2)); 34 CFR 
682.604(f)(3); 34 CFR 685.304(a)(3)(ii)-(iii) (requiring written or 
electronic receipt acknowledgment).
    For the requirement that an institution or its agent provide the 
student warning upon first contact with a prospective student or a 
third party acting on behalf of a prospective student, we are 
clarifying that the warning may be delivered in the same manner as the 
warning is delivered to enrolled students--by hand-delivery or by 
email--in accordance with the same requirements that apply to the 
delivery of warnings to enrolled students. As proposed by a commenter, 
we are revising the student warning and disclosure template delivery 
requirements relating to prospective students to permit an institution 
to deliver the disclosure template with the student warning. In this 
regard, we are moving the requirement that an institution update its 
disclosure template to include the student warning from Sec.  668.412 
to Sec.  668.410(a)(7) in order to consolidate all of the requirements 
related to student warnings in one section of the regulations, although 
we continue to reference this requirement in Sec.  668.412.
    We recognize that the first contact between an institution or its 
agent and a prospective student or a third party acting on the 
prospective student's behalf may be made by telephone. Although we 
continue to believe that a written warning is more effective than an 
oral warning, given that a prospective student will receive the student 
warning in writing prior to entering into an enrollment agreement, we 
are revising the regulations to permit an oral warning in these 
circumstances to lessen administrative burden for institutions, while 
at the same time ensuring that prospective students receive important 
information at a critical time in their decision-making process.
    For the student warning that must be delivered to a prospective 
student at least three, but not more than 30, days prior to entering 
into an enrollment agreement, we are clarifying that all the written 
methods of delivery permitted for student warnings upon first contact--
but not oral delivery--are also permitted in this circumstance. In this 
regard, we note that, in requiring that a written warning delivered by 
hand be in a separate document, an institution may not build the 
student warning into an enrollment or similar agreement where the 
information could be easily overlooked.
    We believe that direct delivery of the warning to students and 
prospective students makes it most likely that students receive it and 
review it. While we encourage institutions to post the student warning 
in classrooms and financial aid offices, institutions will not be 
required to do so as it is unclear whether the additional benefits of 
this beyond the other delivery requirements would outweigh the added 
burden.
    As suggested by a commenter, we intend to solicit feedback on the 
most effective delivery methods through consumer testing.
    Changes: We have clarified the methods by which an institution may 
deliver the required warnings to students and prospective students in 
Sec.  668.410(a)(5) and (a)(6). In Sec.  668.410(a)(5), we have added 
the requirement that student warnings that are hand-delivered must be 
provided in a separate document. We have also required that student 
warnings that are delivered by email must be the only substantive 
content of the email and the

[[Page 64970]]

institution must receive an electronic or other written acknowledgement 
from the student that the student received the warning. In addition, we 
have specified that if an institution receives a response that the 
email could not be delivered, the institution must use a different 
address or mode of delivery. Finally, the regulations have been revised 
to require that an institution maintain records of its efforts to 
deliver the warning.
    In Sec.  668.410(a)(6), we have clarified that the methods of 
delivery specified for enrolled students, as revised, also apply to 
prospective students, and we have provided that student warnings may be 
delivered to a prospective student by providing the prospective student 
a disclosure template that has been updated to include the student 
warning. The same requirements with respect to email delivery and 
acknowledgment of receipt that apply to the warnings to enrolled 
students will also apply to warnings delivered to prospective students 
or a third party acting on behalf of the prospective student.
    We also have revised Sec.  668.410(a) to specify that an 
institution may deliver any required warning orally to a prospective 
student or third party except in the case of a warning that is required 
to be given before a prospective student enrolls in, registers, or 
makes a financial commitment with respect to a program.
    Comments: Some commenters contended that the requirement that 
student warnings be provided to the extent practicable in languages 
other than English for students for whom English is not their first 
language is unclear because the requirement does not indicate how a 
school would determine whether English is the first language of a 
student.
    Discussion: Section 668.410(a)(4) (Sec.  668.410(a)(3) in the 
proposed regulations) requires that an institution provide, ``if 
practicable,'' ``alternatives to English-language warnings'' to those 
prospective students and currently enrolled students for whom English 
is not their first language. This requirement is not unconstitutionally 
vague. There are many ways in which an institution could practicably 
identify individuals for whom English may not be their first language. 
However, we note one simple test generally applicable to consumer 
transactions that could be used by institutions in determining whether 
alternatives to non-English warnings are warranted. That test is 
whether the language principally used in marketing and recruiting for 
the program was a language other than English.\175\ Where institutional 
records show that a student responded to an advertisement in a language 
other than English, or was recruited by an institutional representation 
in an oral presentation conducted in a language other than English, an 
institution may readily and practicably identify that student or 
prospective student as one whose first language is not English. Other 
methods might also be practicable, but institutions should at a minimum 
already be familiar with their obligations when they advertise in 
languages other than English. In addition, institutions should be 
mindful that Federal civil rights laws (including title VI of the Civil 
Rights Act of 1964) require institutions to take appropriate measures 
to ensure that all segments of its community, including those with 
limited English proficiency, have meaningful access to all their 
programs and all vital information.
---------------------------------------------------------------------------

    \175\ See, e.g., 16 CFR 14.9, Requirements concerning clear and 
conspicuous disclosures in foreign language advertising and sales 
materials: Where ``clear and conspicuous disclosures are required,'' 
the disclosure shall appear in the ``predominant language of the 
publication in which the advertisement or sales material appears.'' 
See also FTC Final Rule, Free Annual File Disclosures, 75 FR 9726, 
9733 (Mar. 3, 2010) (noting ``the Commission's belief that a 
disclosure in a language different from that which is principally 
used in an advertisement would be deceptive'').
---------------------------------------------------------------------------

    Changes: None.
    Comments: With respect to the provision in proposed Sec.  
668.412(b)(2) that would require institutions to update a program's 
disclosure template to include the student warning, one commenter 
requested that institutions have 90 days from receipt of notice from 
the Secretary that student warnings are required to make the update, 
rather than 30 days as provided in the regulations.
    Discussion: Because the student warning will include critical 
information that students will need to consider as a part of their 
educational and financial decision making, we believe that the student 
warning must be conveyed as quickly as possible once it has been 
determined that the program could become ineligible based on its D/E 
rates in the next award year. As the Department will provide the text 
of the warning, and institutions should already be aware of or have 
ready access to any required additional information, we believe that 30 
days is a reasonable amount of time to update the disclosure template 
with the warning. Any burden that institutions might face in meeting 
this requirement is outweighed by the necessity that students receive 
this important information as promptly as possible.
    Changes: We have moved the requirement that institutions update 
their disclosure templates to include any required student warning from 
Sec.  668.412(b)(2) to Sec.  668.410(a)(7), so that all of the 
requirements with respect to student warnings are in one place for the 
reader's convenience.
    Comments: Several commenters opposed the provision prohibiting an 
institution from enrolling a prospective student before expiration of a 
three-day period following delivery of a required student warning. The 
commenters argued that students are intelligent consumers who do not 
require a cooling-off period and that the provision is designed to 
discourage prospective students from enrolling by making enrollment 
inconvenient. For the same reasons, one of the commenters asked that, 
if the Department retains the cooling-off period in the final 
regulations, it eliminate the requirement that a student warning be 
provided anew before a prospective student may be enrolled, if more 
than 30 days have passed since the student warning was last given.
    Discussion: There is evidence that some institutions use high-
pressure sales tactics that make it difficult for prospective students 
to make informed enrollment decisions.\176\ We believe that the three-
day cooling-off period provided for in Sec.  668.410(a)(6)(ii) (Sec.  
668.410(a)(2)(ii) of the proposed regulations) strikes the right 
balance between allowing sufficient time for prospective students to 
consider their educational and financial options outside of a 
potentially coercive environment, while ensuring that those prospective 
students who have had the opportunity to make an informed decision can 
enroll without having to wait an unreasonable amount of time. We 
further believe that students are more likely to factor the information 
contained in the student warning into their financial and educational 
decisions if the warning is delivered when the student is in the 
process of making an enrollment decision. We believe 30 days is a 
reasonable window before a student warning must be reissued.
---------------------------------------------------------------------------

    \176\ See For-Profit Colleges: Undercover Testing Finds Colleges 
Encouraged Fraud and Engaged in Deceptive and Questionable Marketing 
Practices (GAO-10-948T), GAO, August 4, 2010 (reissued November 30, 
2010); For Profit Higher Education: The Failure to Safeguard the 
Federal Investment and Ensure Student Success, Senate HELP 
Committee, July 30, 2012.
---------------------------------------------------------------------------

    Changes: None.
    Comments: Many commenters stated that GE programs that do not pass 
the D/E rates measure should be subject to

[[Page 64971]]

limits on their enrollment of students who receive title IV, HEA 
program funds. Commenters variously proposed that we limit enrollment 
of students who receive title IV, HEA program funds to the number of 
students enrolled in the program in the previous year or to an average 
enrollment of students receiving title IV, HEA program funds over the 
previous three years. These commenters argued that enrollment limits 
would provide institutions with the incentive to improve programs more 
quickly and limit the potential risks to students and taxpayers. 
According to these commenters, disclosures and student warnings do not 
provide sufficient protection for students and will not stop an 
institution from increasing the enrollment of a poorly performing 
program to maximize title IV, HEA program funds received before the 
program loses eligibility, at significant cost to students, taxpayers, 
and the Federal government.
    We also received a number of comments opposing limits on enrollment 
for programs that do not pass the D/E rates measure. These commenters 
asserted that disclosures and student warnings are sufficient to 
provide students with the information they need to make their own 
educational decisions. One commenter cited economic theory as 
supporting the proposition that, if parties are fully informed, 
imposing quotas or limitations creates market inefficiencies. This 
commenter asked that we consider the costs to students who are not 
permitted to enroll in a program and compare those costs to the assumed 
benefits of not enrolling in a program that may or may not become 
ineligible. The commenters argued that enrollment limits would 
significantly hinder efforts by institutions to improve programs and 
could lead to the premature closing of programs.
    Discussion: We agree that it is important to protect students from 
enrolling in poorly performing programs and to protect the Federal 
investment in GE programs. However, we believe that the accountability 
framework, in which the D/E rates measure is used to determine a 
program's continuing eligibility for title IV, HEA program funds, 
adequately safeguards the Federal investment and students, while 
allowing GE programs the opportunity to improve. Further, we believe 
that the warnings to students and prospective students about programs 
that could become ineligible based on their D/E rates for the next 
award year, and the required disclosures, are meaningful protections 
that will enable students and their families to make informed 
decisions.
    Changes: None.
    Comments: Several commenters suggested that institutions should 
have the opportunity to pay down the debt of students and provide the 
students some relief while, at the same time, improving program 
performance under the accountability metrics. These commenters argued 
that a voluntary loan reduction plan would permit institutions a 
greater measure of control over program performance under the 
accountability metrics and benefit students, particularly those 
students who withdraw from, or fail, a program early in the program. 
The commenters proposed a number of specific terms for such a loan 
reduction plan, including giving institutions flexibility to determine 
the amount of institutional grants to be used to pay down student debt.
    Discussion: We acknowledge the desire to ease the debt burden of 
students attending programs that become ineligible and to shift the 
risk to the institutions that are enrolling students in these programs. 
We also recognize that the loan reduction plan proposal would give 
institutions with the funds to institute such a program a greater 
measure of control over their performance under the D/E rates measure. 
However, as stated in the NPRM, the discussions among the negotiators 
made it clear that these issues are extremely complex, raising 
questions such as the extent to which relief would be provided, what 
cohort of students would receive relief, and whether the proposals made 
by negotiators would be sufficient. The comments we received confirm 
that this issue requires further consideration. Accordingly, the 
Department is not addressing these concerns in the final regulations, 
and will continue to explore ways to provide debt relief to students in 
future regulations.
    Changes: None.
    Comments: Many commenters urged the Department to directly offer 
debt relief to students enrolled in programs that lose eligibility for 
title IV, HEA program funds under the GE regulations, as well as to 
students enrolled in programs that are not passing under the D/E rates 
measure, so that students are not burdened with sole responsibility for 
debts accumulated at programs that did not prepare them for employment 
in their respective fields. They argued that affected students should 
be ``made whole'' through discharges of their title IV, HEA program 
loans from the Department and reinstatement of their lost Pell Grant 
eligibility. The Department, the commenters said, could then pursue 
from the institutions collection of the discharged funds. They reasoned 
that such relief would be fair to students, provide institutions with 
incentive for improvement, and reallocate risk from students to 
institutions, which are in a better position to assume it. The 
commenters asserted that students should not be subject to potentially 
severe financial consequences from borrowing title IV, HEA program 
funds to attend programs that the Department permitted to operate with 
its approval, despite not achieving program outcomes deemed acceptable 
under the D/E rates measure. According to the commenters, provisions 
for borrower relief would allow affected students to pursue educational 
opportunities that offered value, and institutions would be held 
accountable for the costs to taxpayers of poorly spent title IV, HEA 
program funds.
    One commenter contended that, in the context of borrower relief, 
the Department was placing undue emphasis on supporting institutions 
and avoiding litigation, and not enough emphasis on protecting students 
and their families. The commenter proposed that the Department could 
phase in borrower relief for students over the transition period, with 
programs not passing the D/E rates measure subject only to student 
warnings in the first year after implementation of the regulations and 
enrollment limits and borrower relief provisions taking effect in 
subsequent years of the transition period.
    Many of the commenters who supported full debt relief for borrowers 
in affected programs requested that, if full relief is not possible, 
student borrowers be provided partial relief, in the form presented by 
the Department during the negotiated rulemaking sessions where an 
institution with a program facing ineligibility in the next year would 
be required to make available to the Department, for example, through a 
letter of credit, sufficient funds to reduce the debt burden of 
students who attended the program during that year if the program 
became ineligible.
    We also received general comments opposing any borrower relief 
provisions in the regulations.
    Discussion: The Department acknowledges the concern that borrowers 
attending programs that are determined ineligible will remain 
responsible for the debt they accumulated. However, as explained in the 
NPRM, none of the circumstances under which the Department has the

[[Page 64972]]

authority to discharge title IV, HEA loans under the HEA as a result of 
ineligibility are applicable to these regulations. 20 U.S.C. 
1087(c)(1). This discharge authority does not extend to loans obtained 
by borrowers who met properly administered admission standards for 
enrollment in a program or at an institution that was not 
eligible.\177\ We also acknowledge the commenters' interest in 
excluding those periods in which a student may have received a Pell 
Grant for attendance at a GE program that did not pass the D/E rates 
measure from limits otherwise applicable to Pell Grant eligibility. 
However, section 401(c)(5) of the HEA provides that the period during 
which a student may receive Federal Pell Grants ``shall not exceed 12 
semesters.'' 20 U.S.C. 1070a(c)(5). We read this provision as leaving 
the Department no authority to exclude specific time periods from that 
limit.
---------------------------------------------------------------------------

    \177\ As noted in the NPRM, the Department has previously 
expressly interpreted section 437(c) of the HEA in controlling 
regulations to provide no relief for a claim that the loan was 
arranged for enrollment in an institution that was ineligible, or 
that the institution arranged the loan for enrollment in an 
``ineligible program.'' 34 CFR 682.402(e); 59 FR 22462, 22470 (April 
29, 1994), 59 FR 2486, 2490 (Jan. 14, 1994).
---------------------------------------------------------------------------

    With respect to the other borrower relief proposals that commenters 
offered, as we have previously stated, these proposals raise important 
but complex issues that the Department will continue to consider 
outside of this rulemaking.
    Changes: None.
    Comments: One commenter recommended that we revise Sec.  
668.410(b)(1), which generally prohibits disbursement of title IV, HEA 
program funds to a student enrolled in a program that has lost 
eligibility under the regulations, to permit disbursement of such funds 
until the student completes the program.
    Discussion: We decline to adopt the commenter's proposal. A GE 
program's loss of eligibility is effective, under 34 CFR 668.409(b), on 
the date specified in the notice of final determination. Section 
668.410(b)(1) adopts by explicit reference the general rule in Sec.  
668.26(d), which the Department applies in all instances in which an 
institution's participation in the title IV, HEA programs ends. Section 
668.26(d)(1), consistent with Sec.  600.41(d), provides that after a GE 
program loses eligibility, an institution may make no new commitments 
for title IV, HEA program funds, but may fund the remainder of certain 
commitments of grant and loan aid. These provisions apply the loss of 
eligibility to students then enrolled in the program in a way that 
modestly defers the effect of that loss as it affects their ability to 
meet their financial commitments and provides some time to make 
alternative arrangements or transition to another program or 
institution. Students may therefore continue to receive title IV, HEA 
program funds for attendance at a program that has lost eligibility 
through the end of any ongoing loan period or payment period, which 
periods could include a full award year.\178\ Even if we were to 
interpret the HEA to permit extending the period during which students 
could receive title IV, HEA program funds to attend an ineligible 
program beyond these long-established limits, we see no valid reason to 
do so. To further extend the period during which students may continue 
to receive title IV, HEA program funds to attend an ineligible program 
would encourage students to invest more time, money, and limited Pell 
Grant eligibility in programs that produce unacceptable student 
outcomes. The commenter offers no reason to treat a loss of eligibility 
under these regulations differently than any other loss of eligibility, 
and we see none.
---------------------------------------------------------------------------

    \178\ Loans and grants are treated similarly, but slightly 
differently, under Sec.  668.26(d). With respect to Direct Loans, 
the loss of eligibility will be expected to occur during a ``period 
of enrollment''--a term defined under 34 CFR 685.102 as a period 
that must coincide with one or more bona fide academic terms 
established by the school for which institutional charges are 
generally assessed (e.g., a semester, trimester, or quarter in weeks 
of instructional time; an academic year; or the length of the 
program of study in weeks of instructional time).
    The period of enrollment is referred to as the ``loan period.'' 
The maximum period for which a Direct Loan may be made is an 
academic year, 34 CFR Sec.  685.203, and therefore the ``loan 
period'' for a loan cannot exceed an academic year even if the 
program of study is longer than an academic year. Section 
668.26(d)(3) limits the disbursements that may be made after loss of 
eligibility to those made on ``a loan,'' if all of the following 
conditions are met: The borrower must be enrolled on the date on 
which eligibility is lost; the loss of eligibility must take place 
during a loan period; a first disbursement on the loan has already 
been made before the date on which eligibility is lost; and the 
institution must continue to provide training in that GE program at 
least through the scheduled completion date of the academic year for 
which the loan was scheduled, or the length of the program, 
whichever falls earlier. With respect to Pell Grants, the 
institution may disburse Pell Grant funds under similar conditions: 
The student is enrolled on the date program eligibility ceases, the 
institution has already received a valid output record for the 
student, the requested Pell Grant is intended to be disbursed for 
the ``payment period'' [academic term or portion of a term, see: 34 
CFR 668.4] during which the loss of eligibility occurs, or a prior 
payment period, and the institution continues to provide training in 
the program until at least the completion of the payment period. 34 
CFR 668.26(d)(1).
---------------------------------------------------------------------------

    Changes: None.
    Comments: One commenter suggested that we revise Sec.  
668.410(b)(2), which provides for a three-year period of ineligibility 
for programs that are failing or in the zone and that are voluntarily 
discontinued, to more clearly indicate when the period of ineligibility 
begins and ends. The commenter recommended revisions based on language 
in the iCDR regulations in 34 CFR 668.206.
    Discussion: We appreciate the commenter's suggestion and are 
revising the provision to indicate more clearly when the three-year 
period of ineligibility begins.
    Changes: We have revised Sec.  668.410(b)(2) to clarify that the 
three-year period of ineligibility begins, as applicable, on the date 
specified in the notice of determination informing the institution of a 
program's ineligibility or on the date the institution discontinued a 
failing or zone program.
    Comments: One commenter suggested that we revise Sec.  
668.410(b)(2) and (b)(3), which provide for a three-year period of 
ineligibility for programs that are failing or in the zone and that are 
voluntarily discontinued, to capture programs that are voluntarily 
discontinued after the institution receives draft D/E rates that would 
be failing or in the zone if they were final. In such cases, the 
commenter recommended that the Department should, despite the program's 
discontinuance, calculate its final D/E rates and, if those final D/E 
rates are failing or in the zone, impose the three-year ineligibility 
period as provided in Sec.  668.410(b)(2) on that program and any 
substantially similar programs. The commenter suggested that, without 
the proposed revision, there would be a ``loophole'' that institutions 
could exploit to avoid the three-year ineligibility period.
    Discussion: We agree with the commenter that we should not permit 
an institution to avoid the three-year ineligibility period by 
discontinuing a poorly performing program after the issuance of draft 
D/E rates that are failing or in the zone, but before the issuance of 
final D/E rates. Accordingly, the final regulations provide that, if an 
institution discontinues a program after receiving draft D/E rates that 
are failing or in the zone, the institution may not seek to reestablish 
that program, or establish a substantially similar program, until final 
D/E rates have been issued for that program, and only then if the final 
D/E rates are passing or the three-year period of ineligibility has 
expired. In the event there is a three-year period of ineligibility 
that is triggered by the final D/E rates, the period will begin on the 
date that the program was discontinued, and not the date the final D/E 
rates were issued, so

[[Page 64973]]

that the ineligibility period is no longer than the three years that 
would apply to any other zone or failing program that is voluntarily 
discontinued.
    Changes: We have revised Sec.  668.410(b)(2) to provide that a 
program that was discontinued after receiving draft D/E rates that are 
failing or in the zone, but before receiving final D/E rates, is 
ineligible, and the institution may not seek to establish a 
substantially similar program, unless the program's final D/E rates are 
determined to be passing or, if its final D/E rates are also failing or 
in the zone, the three-year ineligibility period, dating from the 
institution's discontinuance of the program, has expired. We also have 
revised this section to clarify that the provision regarding 
determination of the date a program is voluntarily discontinued applies 
to programs discontinued before their final D/E rates are issued.
    Comments: We received a number of comments about the definition of 
``substantially similar'' programs and the limitations on an 
institution's ability to start a program that is substantially similar 
to an ineligible program.
    Several commenters expressed concern that the definition of 
``substantially similar'' is not broad enough to capture all of the 
similar programs that an institution may seek to establish in the place 
of a poorly performing program in order to avoid accountability. These 
commenters said that the definition should not require that programs 
share the same credential level in order to be considered substantially 
similar. These commenters were concerned that, for example, an 
institution could simply convert an ineligible certificate program into 
a new associate degree program, without complying with the three-year 
ineligibility period and taking any action to improve the program. 
Similarly, commenters were also concerned that the requirement that 
substantially similar programs share the first four digits of a CIP 
code is too narrow. They argued that there is sufficient overlap 
between four-digit CIP codes such that institutions could avoid the 
restriction on establishing a program that is substantially similar to 
a program that became ineligible within the most recent three years by 
using another four-digit CIP code that aligns with the same curriculum. 
These commenters suggested that we define programs as ``substantially 
similar'' if they share the same two-digit CIP codes. Alternatively, 
the commenters recommended that the Department evaluate on a case-by-
case basis whether programs with the same two-digit CIP code are 
substantially similar, and require documentation that a new program 
within the same two-digit CIP code will meet the D/E rates measure.
    Other commenters suggested that we treat programs as substantially 
similar only if they share the same four-digit CIP code and credential 
level. These commenters also recommended that we permit the 
establishment of programs that are substantially similar to an 
ineligible program if the institution has other substantially similar 
programs that are passing the D/E rates measure. For example, the 
commenters explained, if an institution offers multiple substantially 
similar programs and at least 50 percent of those programs are passing 
the D/E rates measure, an institution would be permitted to establish a 
substantially similar program.
    Discussion: We agree with the commenters who recommended that 
programs should not be required to share the same credential level in 
order to be considered substantially similar and that a definition of 
``substantially similar'' that considers credential level would permit 
institutions to avoid accountability by changing program length.
    However, we do not agree that the definition of substantially 
similar should be broadened to encompass all programs within a two-
digit CIP code as substantially similar or that it is necessary to 
establish a process to evaluate for each new program whether the 
assigned four-digit CIP code best represents the program content. We 
are removing the phrase ``substantially similar'' from the definition 
of CIP code and establishing in Sec.  668.410 that two programs are 
substantially similar to one another if they share the same four-digit 
CIP code. Institutions may not establish a new program that shares the 
same four-digit CIP code as a program that became ineligible or was 
voluntarily discontinued when it was in the zone or failing within the 
last three years. An institution may establish a new program with a 
different four-digit CIP code that is not substantially similar to an 
ineligible or discontinued program, and provide an explanation of how 
the new program is different when it submits the certification for the 
new program. We presume based on that submission that the new program 
is not substantially similar to the ineligible or discontinued program, 
but the information may be reviewed on a case by case basis to ensure a 
new program is not substantially similar to the other program.
    We believe that these revisions strike an appropriate balance 
between preventing institutions from closing and restarting a poorly 
performing program to avoid accountability and ensuring that 
institutions are not prevented from establishing different programs to 
provide training in fields where there is demand.
    We believe that it is appropriate to require an institution that is 
establishing a new program to provide a certification under Sec.  
668.414 that includes an explanation of how the new program is not 
substantially similar to each program offered by the institution that, 
in the prior three years, became ineligible under the regulations' 
accountability provisions or was voluntarily discontinued by the 
institution when the program was failing, or in the zone with respect 
to, the D/E rates measure. We also discuss this change in ``Section 
668.414 Certification Requirements for GE Programs.''
    Changes: We have revised Sec.  668.410 to provide that a program is 
substantially similar to another program if the programs share the 
first four digits of a CIP code. We also have revised this section to 
provide that the Secretary presumes a program is not substantially 
similar to another program if the programs do not share a four-digit 
CIP code. The institution must submit an explanation of how the new 
program is not substantially similar to the ineligible or voluntarily 
discontinued program. In Sec.  668.410(b)(3), we have also corrected 
the reference to Sec.  668.414(b) to Sec.  668.414(c).

Section 668.411 Reporting Requirements for GE Programs

    Comments: Numerous commenters asserted that institutions with low 
borrowing rates or low cohort default rates should be exempt from the 
reporting requirements, arguing that such programs do not pose a high 
risk to students or taxpayers. For example, some commenters recommended 
exempting a program from the reporting requirements where an 
institution certifies that: (1) Less than fifty percent of the students 
in the program took out loans for the two most recent academic years, 
(2) fewer than 20 students receiving title IV, HEA program funds 
completed the program during the most recent two academic years, and 
(3) the default rate falls below a reasonable threshold for two 
consecutive years. These commenters proposed that a program should be 
subject to the reporting requirements for a minimum of two years at the 
point that it does not meet one of these three exemption requirements 
for two consecutive years. Other commenters proposed variations

[[Page 64974]]

of this approach, such as exempting from the reporting requirements 
institutions with an institutional cohort default rate of less than 
fifteen percent. Similarly, one commenter said that foreign schools 
should be exempt from the reporting requirements, asserting that 
certificate programs at foreign institutions are of low risk to 
American taxpayers since those programs have relatively few American 
students compared to the entire enrollment in the program.
    Discussion: We do not agree that a program, foreign or domestic, 
should be exempt from the reporting requirements because it has a low 
borrowing rate, low institutional cohort default rate, or low number of 
students who receive title IV, HEA program funds. The information that 
institutions must report is necessary to calculate the D/E rates and to 
calculate or determine many of the disclosure items as provided in 
Sec.  668.413. (See ``Section 668.413 Calculating, Issuing, and 
Challenging Completion Rates, Withdrawal Rates, Repayment Rates, Median 
Loan Debt, Median Earnings, and Program Cohort Default Rates'' for a 
discussion of the disclosure items that the Department will calculate.) 
Exempting some institutions from the reporting requirements, whether 
partially or fully, would undermine the effectiveness of both the 
accountability and transparency frameworks of the regulations because 
the Department would be unable to assess the outcomes of many programs. 
In addition, students would not be able to access relevant information 
about these programs and compare outcomes across multiple metrics. 
Further, a policy that allowed exemptions from reporting, 
accountability, and transparency, regardless of the basis, in some 
years but not others would be impossible to implement. Without 
consistent annual reporting, the Department would, in many cases, be 
unable to calculate the D/E rates or disclosures in non-exempted years 
as these calculations require data from prior years when the exemption 
may have applied.
    Changes: None.
    Comments: A few commenters recommended requiring institutions to 
report additional items to the Department. Specifically, some 
commenters argued that the Department should collect and make public 
job placement rates to enable the Department, States, researchers, and 
consumers to easily access this information to compare programs at 
different schools. The commenters also asserted that requiring 
institutions to report these rates at the student level would improve 
compliance at institutions that are currently required to calculate job 
placement rates but do not do so.
    Other commenters recommended that institutions be required to 
report the SOC codes associated with their programs. These commenters 
disagreed with the Department's assertion in the NPRM that it would not 
be appropriate to collect SOC codes at the student level. They argued 
that requiring institutions to report the SOC codes that they must 
disclose under Sec.  668.412 would strengthen the Department's ability 
to monitor whether programs have the necessary accreditation or other 
requirements for State licensing and would support more accurate and 
realistic disclosure of the SOC codes associated with a program's CIP 
code.
    Discussion: We agree that allowing the Department, States, 
researchers, and consumers to access job placement information will be 
beneficial. Accordingly, we are adding a requirement for institutions 
to report job placement rates at the program level if the institution 
is required by its accrediting agency or State to calculate a placement 
rate for either the institution or the program using the State's or 
agency's required methodology and to report the name of the State or 
accrediting agency. For additional information about job placement 
rates, see the discussion under ``Section 668.412 Disclosure 
Requirements for GE Programs.'' While all other required reporting for 
the initial reporting period must be made by July 31, 2015, due to 
operational issues, institutions will report job placement rates at a 
later date and in such manner as prescribed by the Secretary in a 
notice published in the Federal Register.
    The Department already identifies SOC codes for GE programs as part 
of each institution's PPA. We will continue to consider requirements 
for updating and monitoring SOC codes to improve oversight while 
limiting the reporting burden on institutions.
    Changes: We have added a requirement in Sec.  668.411(a)(3) that 
institutions must report to the Department a placement rate for each GE 
program, if the institution is required by its accrediting agency or 
State to calculate a placement rate for either the institution or the 
program, or both, using the methodology required by that accrediting 
agency or State, and the name of that accrediting agency or State. We 
have also renumbered the paragraphs that follow this reporting 
requirement. In Sec.  668.411(b)(1), we have clarified that the July 31 
reporting deadline does not apply to the reporting of placement rates 
but rather that reporting on that item will be on a date and in a 
manner announced by the Secretary in a notice published in the Federal 
Register.
    Comments: Several commenters raised concerns that the reporting 
requirements would be very burdensome for institutions and that the 
Department underestimated in the NPRM the burden and cost to implement 
these provisions. In particular, some commenters argued that the 
reporting requirements would duplicate reporting that institutions 
already provide and that the additional compliance burden and paperwork 
hours would lead to higher costs for students. Another commenter said 
that they would need to hire additional staff to comply with the 
reporting requirements.
    Discussion: Any burden on institutions to meet the reporting 
requirements is outweighed by the benefits of the accountability and 
transparency frameworks of the regulations to students, prospective 
students, and their families. The Department requires the reporting 
under the regulations to calculate D/E rates, as provided in Sec. Sec.  
668.404 and 668.405, and to calculate or determine many of the 
disclosure items, as provided in Sec.  668.413. (See ``Section 668.413 
Calculating, Issuing, and Challenging Completion Rates, Withdrawal 
Rates, Repayment Rates, Median Loan Debt, Median Earnings, and Program 
Cohort Default Rate'' for a discussion of the disclosure items that the 
Department will calculate.) Although there is some overlap with current 
enrollment reporting and reporting for the purposes of the 150 percent 
Direct Subsidized Loan Limits, those data do not include award years 
prior to 2014-2015, nor do they include several data elements required 
for the calculation of D/E rates, including institutional debt, private 
education loan debt, tuition and fees, and allowance for books and 
supplies.
    We believe that our estimates of the burden of the reporting 
requirements are accurate. As an initial matter, the commenters did not 
submit any data to show that the Department's estimates are inaccurate. 
The Department's estimates are based on average anticipated costs and 
the actual burden may be higher for some institutions and lower for 
others. Various factors, such as the sophistication of an institution's 
systems, the size of the institution and the number of GE programs that 
it has, whether or not the institution's operations are centralized, 
and whether the institution can update existing

[[Page 64975]]

systems to meet the reporting requirements will affect the level of 
burden for any particular institution. (See Paperwork Reduction Act of 
1995 for a more detailed discussion of the Department's burden 
estimates.)
    We have not estimated whether or how many new personnel may be 
needed to comply with the reporting requirements. Allocating resources 
to meet the reporting requirements is an individual institution's 
administrative decision. Some institutions may need to hire new staff, 
others will redirect existing staff, and still others will not need to 
make staffing changes because they have highly automated reporting 
systems.
    In order to minimize burden, the Department will provide training 
to institutions on the new reporting requirements, provide a format for 
reporting, and, so that institutions have sufficient time to submit 
their data for the first reporting period, enable NSLDS to accept 
reporting from institutions beginning several months prior to the July 
31, 2015, deadline. Additionally, we will consider other ways to 
simplify our reporting systems.
    Changes: None.
    Comments: One commenter recommended that institutions should only 
be required to report data they have currently available in an 
electronic format. The commenter believed that some institutions may 
not have, in easily accessible formats, the older data that the 
Department would need to calculate rates in the first few years after 
implementation of the regulations due to migrations to new data systems 
and the rapid changes in student information systems in recent years.
    Discussion: In accordance with the record retention requirements 
under Sec.  668.24(e), most institutions should have retained the 
information regarding older cohorts of students that must be reported 
in the initial years of the regulations, even if the data are 
maintained in multiple systems or formats. Further, many institutions 
may have a policy of retaining student records for longer periods, or 
do so as a result of State or accreditor requirements. Nonetheless, we 
understand that some institutions may no longer have records for years 
prior to the required retention period under Sec.  668.24(e). Pursuant 
to the 2011 Final Rules, institutions were similarly required to report 
information from several years prior to the reporting deadline. The 
vast majority of institutions were able to comply with the requirements 
of the 2011 Final Rules, and we again anticipate that cases where data 
are completely unavailable will be limited. In those instances, an 
institution may, under Sec.  668.411, provide an explanation acceptable 
to the Secretary for the institution's inability to comply with part of 
the reporting requirements.
    Changes: None.
    Comments: Some commenters recommended adding an alpha-numeric 
program identifier as an optional reporting requirement so that 
institutions could report program information separately for individual 
program locations or formats (e.g. on-line program, part-time program, 
evening, or weekend program). The commenters asserted that calculating 
the disclosure items separately in this way would give students and 
prospective students more meaningful information about program outcomes 
for their particular location or format.
    Discussion: Although we will permit an institution to disaggregate 
some disclosure items, such as tuition and fees and the percentage of 
students who borrowed to attend the program by program length, location 
or format, other disclosures, such as the D/E rates and the items that 
the Department calculates for institutions under Sec.  668.413, will be 
made at the six-digit OPEID, CIP code, and credential level and may not 
be disaggregated. Therefore, adding this optional reporting field is 
unnecessary. See ``Section 668.412 Disclosure Requirements for GE 
Programs'' for a more detailed discussion of whether and when an 
institution may disaggregate its disclosures.
    Changes: None.
    Comments: Some commenters requested clarification and additional 
information about how institutions should report and track students' 
enrollment in GE programs. They noted that students often switch 
programs mid-course or enroll in multiple programs at once, 
particularly at community colleges.
    Discussion: We intend to revise the GE Operations Manual and the 
NSLDS GE User Guide to reflect the regulations. In updating these 
resources, we will provide additional guidance on tracking student 
enrollment. Additionally, we will provide ongoing technical support to 
institutions regarding compliance with the reporting requirements.
    Changes: None.
    Comments: One commenter argued that the reporting requirements in 
Sec.  668.411 would violate section 134 of the HEA (20 U.S.C. 1015c), 
which prohibits the creation of new student unit record databases. The 
commenter asserted that the new requirements under the regulations for 
institutions to report private education loan data and other personal 
data on individuals who receive title IV, HEA program funds and for the 
Department to retain this newly required data in NSLDS would constitute 
such a drastic expansion of NSLDS as to constitute a new database in 
violation of the statutory prohibition against such an expansion of an 
existing database. APSCU v. Duncan, 930 F.Supp.2d at 220, 221. The 
commenter further contended that the Department has the burden of 
proving that gathering personally identifiable information pursuant to 
these regulations does not create a new database under section 134 of 
the HEA even if that collection were limited to data on individuals 
receiving title IV, HEA program funds.
    Discussion: As explained previously, in response to the court's 
interpretation of relevant law in APSCU v. Duncan, the Department has 
changed the reporting and accountability determinations in these 
regulations such that they pertain only to individuals receiving title 
IV, HEA program funds. The 2011 Prior Rule required institutions to 
report data on all individuals enrolled in a GE program, including 
those who did not receive title IV, HEA program funds; the Department 
retained that data in NSLDS. The court found that retaining data on 
individuals who did not receive title IV, HEA program funds was an 
improper creation of a new database.\179\ Importantly, the court 
disavowed any view that it was ruling that 20 U.S.C. 1015c barred the 
Department from gathering and retaining in NSLDS new data not 
previously collected on individuals who received title IV, HEA program 
funds. Accordingly, the commenter's assertion that the court considered 
20 U.S.C. 1015c to bar the addition of new data to NSLDS on individuals 
receiving title IV, HEA funds is unsupportable.
---------------------------------------------------------------------------

    \179\ [NSLDS's] ``overall purpose'' has never included the 
collection of information on students who do not receive and have 
not applied for either federal grants or federal loans. To expand it 
in that way would make the database no longer ``a system (or a 
successor system) that . . . was in use by the Secretary, directly 
or through a contractor, as of the day before August 14, 2008.'' 20 
U.S.C. 1015c(b)(2). The Department could not create a student unit 
record system of information on all students in gainful employment 
programs; nor can it graft such a system onto a pre-existing 
database of students who have applied for or received Title IV 
assistance. For that reason--and not, as the court previously held, 
because the added information is unnecessary for the operation of 
any Title IV program--the expansion is barred by the statutory 
prohibition on new databases of personally identifiable student 
information.
    APSCU v. Duncan, 930 F.Supp.2d at 221 (emphasis added).
---------------------------------------------------------------------------

    The objection that the Department fails to demonstrate that adding 
to the

[[Page 64976]]

NSLDS new data title IV, HEA program funds recipients does not create a 
new database disregards the essential purposes for gathering this added 
data: To determine GE program eligibility, and to provide ``accurate 
and comparable information'' to ``students, prospective students, and 
their families.'' 79 FR 16426, 16488. Each of these objectives is 
distinct, and therefore the Department intended each to operate if the 
other were found to be unenforceable. Id. Section 134 of the HEA allows 
us to use current NSLDS data, and to add data to NSLDS, for both 
purposes under section 134 because both are ``necessary for the 
operation of programs authorized by . . . title.'' 20 U.S.C. 
1015c(b)(1). Section 134 does not define what uses are ``necessary for 
operation of the title IV programs,'' nor does the HEA statute 
articulate a list of those functions for which the Department can use 
NSLDS. Whether a use is ``necessary'' is left to the Department's 
discretion, in light of statutory mandates, duly-authorized 
regulations, or simple practical necessity. For example, from its 
inception in 1993, the Department has used NSLDS as to determine 
institutional eligibility by reason of an institution's CDR, a purpose 
almost identical to determining GE program eligibility. Nothing in 
section 435 of the HEA, which controls calculation of iCDR, mentions 
NSLDS or directs the Department to use NSLDS to calculate iCDR. 
Nevertheless, the Department has consistently used NSLDS to calculate 
iCDR for purposes of section 435(a). Similarly, the Department has by 
regulation since 1989 terminated eligibility of an institution with a 
single year iCDR exceeding 40 percent or more. 34 CFR 668.206(a)(1), 54 
FR 24114, 24116 (June 5, 1989). The Department has used NSLDS for that 
regulatory eligibility determination as well. See Notice of a New 
System of Records, 59 FR 65532 (Dec. 20, 1994) 18-40-0039, Purpose (2), 
Routine Use (a)(2).\180\ Accordingly, use of NSLDS data to determine 
programmatic eligibility under these regulations involves the identical 
kind of eligibility determination as the iCDR determination process 
used for NSLDS over the past 20 years. Section 485 of the HEA 
authorizes the Department to maintain in NSLDS information that ``shall 
include (but is not limited to) . . . the eligible institution in which 
the student was enrolled . . .'' 20 U.S.C. 1092b(a)(6). Because the 
court upheld the Department's authority to determine whether a program 
in fact prepared students for gainful employment, the Department is 
adding data to the existing NSLDS database as needed to make a 
programmatic eligibility determination. Adding data regarding 
recipients of title IV student financial assistance in order to make 
this eligibility determination does not change NSLDS into a new 
database.
---------------------------------------------------------------------------

    \180\ The NSLDS is currently renumbered as 18-11-06.
---------------------------------------------------------------------------

    The Court further concluded that requiring disclosures was well 
within the Department's authority. APSCU v. Duncan, 870 F.Supp.2d at 
156. Doing so is, in the judgment of the Department, necessary for the 
operation of the title IV, HEA programs. Adding data on individuals who 
have received title IV, HEA program funds to NSLDS in order to 
facilitate these disclosures similarly does not change NSLDS into a new 
database.
    Changes: None.

Sec.  668.412 Disclosure Requirements for GE Programs

General

    Comments: Several commenters recommended that the Department 
include some but not all of the proposed disclosure items in the final 
regulations. They argued that including all of the information would 
overwhelm students. Although commenters identified varying disclosure 
items that they believed prospective and enrolled students would find 
most helpful, they generally agreed that the most critical information 
for students includes information about how long it takes to complete a 
program, how much the program costs, the likelihood that students would 
find employment in their field of study, and their likely earnings in 
that field. Another commenter suggested that the Department survey 
students about the types of information they would find helpful in 
choosing an academic program or college.
    Discussion: We believe that all of the proposed disclosures would 
provide useful and relevant information to prospective and enrolled 
students. However, we agree with the commenters that it is critical to 
provide prospective and enrolled students with the information that 
they would find most helpful in evaluating a program when determining 
whether to enroll or to continue in the program. As we discussed in the 
NPRM, we do not intend to include all of the disclosure items listed in 
Sec.  668.412 on the disclosure template each year. We will use 
consumer testing to identify a subset of possible disclosure items that 
will be most meaningful for students.
    Changes: None.
    Comments: Several commenters supported having robust disclosures, 
and they recommended requiring additional disclosures on the disclosure 
template. In particular, commenters recommended requiring institutions 
to disclose the names and qualifications of a program's instructors, 
the institution's most recent accreditation findings (e.g., self-
studies, accreditation visiting team action reports and action 
letters), compliance audits, financial statements, and the 
institution's application for Federal funds to the Department. 
Commenters also recommended that the Department post each institution's 
program participation agreement (PPA) online for public inspection or, 
at a minimum, require institutions to publicly post the GE-related 
portions of the institution's PPA so that the public can review the 
information regarding its GE programs certified by the institution 
under Sec.  668.414. Some of the commenters argued that even robust 
disclosures would be inadequate to protect consumers and that the 
disclosures should work in conjunction with other substantive 
protections like strong debt metrics and certification requirements, 
provisions for borrower relief, and enrollment caps.
    Discussion: In determining which pieces of information to require 
institutions to disclose, we have focused on identifying the 
information that will be most helpful to prospective and enrolled 
students, and we have built flexibility into the regulations to allow 
for modifications based on consumer testing and student feedback. 
Although access to accrediting agency documentation or Federal 
compliance audits of institutions is valuable and institutions may opt 
to disclose this information independently, including this information 
on the disclosure template may not be useful to prospective and 
enrolled students. Nonetheless, if consumer testing or other sources of 
evidence show that prospective and enrolled students would benefit from 
this information, we would consider adding these items to the 
disclosure template in the future through a notice published in the 
Federal Register.
    As discussed under ``Section 668.414 Certification Requirements for 
GE Programs,'' institutions will be required to certify that the GE 
programs listed on their PPA meet applicable accreditation, licensure, 
and certification requirements. The PPA is a standardized document that 
largely mirrors the requirements in 34 CFR 668.14. Unless an 
institution has a provisional PPA, the PPA for one

[[Page 64977]]

institution will be nearly identical to that of another except for the 
list of the institution's GE programs. Because PPAs do not generally 
contain unique information about institutions, we do not believe that 
it would be helpful to consumers for the Department to begin publishing 
institutions' PPAs or requiring institutions to publish the GE-related 
portions of their PPAs. We note, however, that we would provide a copy 
of an institution's PPA upon request through the Freedom of Information 
Act process.
    Lastly, as discussed in the NPRM and in these regulations, we 
believe that the disclosure requirements, combined with the 
accountability metrics, the certification requirements, and the student 
warnings, will be effective in supporting and protecting consumers. We 
address in ``Section 668.410 Consequences of the D/E Rates Measure'' 
comments suggesting we adopt enrollment limits and borrower relief 
provisions.
    Changes: None.
    Comments: A commenter stated that institutions should be allowed to 
disclose multiple SOC codes that match a program's CIP code.
    Discussion: We agree that a program may be designed to lead to 
several occupations as indicated by Department of Labor SOC codes. For 
this reason, allowing institutions to select one or multiple SOC codes 
for inclusion on the disclosure template is among the disclosures that 
were required under the 2011 Final Rules and the potential disclosures 
under these regulations.
    Changes: None.
    Comments: Several commenters compared the disclosure requirements 
of the proposed regulations to those of the current regulations. One 
commenter believed that adding new disclosures to the current 
requirements without coordinating them would be administratively 
burdensome for institutions and confusing for students. Some commenters 
noted that, as under the current regulations, some programs will have 
too few students to make some of the disclosures because of privacy 
concerns. These commenters recommended incorporating existing sub-
regulatory guidance from the Department into the final regulations that 
directs institutions to refrain from disclosing information, such as 
median loan debt, where ten or fewer students completed the program. 
Some commenters argued that the current disclosures are adequate and 
should be retained in the final regulations without any changes. 
Lastly, one commenter noted that the NPRM did not describe the impact 
of the current disclosure requirements or whether they are achieving 
their purpose.
    Discussion: Although the disclosures in Sec.  668.6(b) of the 2011 
Final Rules are useful, the additional disclosures in these regulations 
will make additional valuable information available to students and 
prospective students. Further, the current disclosure requirements are 
limiting because Sec.  668.6(b) does not give the Department the 
flexibility to change the items as it learns more about the information 
students find most useful. We agree with the commenters that we must 
carefully consider how to transition from the current disclosure 
requirements to the requirements of the final regulations without 
confusing or overwhelming students, and we will use consumer testing to 
identify the best way to do this. We will also provide guidance and 
technical assistance to institutions to help them transition to the new 
disclosures. We will be evaluating the impact of the disclosures we are 
establishing in these regulations.
    Because it will take some time for the Department to conduct 
consumer testing regarding the disclosure template and to seek comment 
on the disclosure template pursuant to the Paperwork Reduction Act of 
1995, we are providing in the regulations that institutions must comply 
with the requirements in this section beginning on January 1, 2017. To 
ensure that institutions continue to disclose information about their 
GE programs, we are retaining and revising Sec.  668.6(b) to provide 
that institutions must comply with those disclosure requirements until 
December 31, 2016.
    With respect to the privacy concerns raised by the commenters, for 
the 2011 Final Rules, the Department provided sub-regulatory guidance 
to institutions instructing them not to disclose median loan debt, the 
on-time completion rate, or the placement rate (unless the 
institution's State or accrediting agency methodology requires 
otherwise) for a program if fewer than 10 students completed the 
program in the most recently completed award year. This guidance 
remains in effect. Further, we are revising Sec. Sec.  668.412 to 
reflect this guidance.
    Changes: We have revised Sec. Sec.  668.412 to specify that an 
institution may not include on the disclosure template information 
about completion or withdrawal rates, the number of individuals 
enrolled in the program during the most recently completed award year, 
loan repayment rates, placement rates, the number of individuals 
enrolled in the program who received title IV loans or private loans 
for enrollment in the program, median loan debt, mean or median 
earnings, program cohort default rates, or the program's most recent D/
E rates if that information is based on fewer than 10 students.
    We also have revised Sec.  668.412 to specify that institutions 
must begin complying with the disclosure requirements beginning on 
January 1, 2017. We also have revised Sec.  668.6(b) to provide that 
institutions must comply with those disclosure requirements through 
December 31, 2016.
    Comments: Commenters raised general concerns about the burden 
associated with the disclosure requirements. In particular, some 
commenters were concerned that the potential for annual changes in the 
content and format of the disclosures would create uncertainty and 
significant administrative burden for institutions. One commenter 
recommended that the Department study how students use information 
before establishing the disclosure requirements. The commenter 
suggested that the Department calculate simple measures and publish 
relevant information on College Navigator while conducting this study. 
Other commenters objected that disclosure requirements were vague and 
burdensome by, for example, requiring disclosure of the total cost of 
tuition, fees, books, supplies, and equipment that would be incurred to 
complete the program within its stated term.
    Discussion: We believe that the benefits of disclosure items for 
consumers outweigh the increase in institutional burden. In addition, 
the Department does not intend to require institutions to make all of 
the disclosures each year. The regulations allow the Department 
flexibility to adjust the disclosures as we learn more about what 
information will be most helpful to students and prospective students. 
However, we do not expect that the disclosure template will vary 
dramatically from year to year, and so in most years, there will be 
little added burden because of this provision. We will publish changes 
to the items to be disclosed in the Federal Register, providing an 
opportunity for the public, specifically institutions and consumers, to 
provide us with feedback about those changes.
    Further, we have included provisions to minimize the burden 
associated with the disclosures as much as possible. We recognize that 
an institution may not know precisely the cost that a prospective 
student would incur to attend and complete a GE program, as must be 
disclosed but the institution must already gather much of the same data 
to comply with the disclosure

[[Page 64978]]

obligations imposed by section 1132(h) of the HEA, and the solution 
adopted there is applicable here: If the institution is not certain of 
the amount of those costs, the institution shall include a disclaimer 
advising that the data are estimates.\181\
---------------------------------------------------------------------------

    \181\ See 20 U.S.C. 1015a(h). Institutions must also make 
available, directly or indirectly through Department sites, not only 
tuition and fees for the three most recent academic years for which 
data are available, but a statement of the percentage changes in 
those costs over that period. 20 U.S.C. 1015a(i)(5).
---------------------------------------------------------------------------

    In addition, the Department, rather than institutions, will 
calculate the bulk of the disclosure items, as discussed under 
``Section 668.413 Calculating, Issuing, and Challenging Completion 
Rates, Withdrawal Rates, Repayment Rates, Median Loan Debt, Median 
Earnings, and Program Cohort Default Rates.'' As we implement the 
regulations, we will continue to analyze the burden associated with the 
disclosure requirements and consider ways to minimize that burden.
    Changes: None.
    Comments: Some commenters raised concerns about how the proposed 
disclosure requirements would affect or be affected by other existing 
or planned efforts and initiatives such as the college ratings system, 
College Navigator, and College Scorecard. One commenter suggested that 
the disclosures should be coordinated with the planned college ratings 
system. Other commenters noted that institutions already disclose 
graduation rates, costs, and other information through College 
Navigator and the College Scorecard, and argued that requiring 
additional disclosures that use similar data points but measure 
different cohorts of students would not be helpful to prospective 
students. Some of the commenters suggested that modifying College 
Navigator and College Scorecard to provide students and families with 
meaningful information with respect to all programs and all 
institutions would be less burdensome and more effective.
    In addition to these concerns, one commenter suggested that the 
Department utilize College Navigator, the College Scorecard, and the 
College Affordability and Transparency Center to disclose when an 
institution's GE program is in the zone to ensure that students and 
other users have access to information about programs in jeopardy of 
losing their eligibility.
    Discussion: The College Navigator and the College Scorecard are 
useful for consumers and we intend for the planned college ratings 
system to provide additional helpful information. But, we do not agree 
that they make the GE disclosures unnecessary. First, these three tools 
provide, or in the case of the college ratings system will provide, 
consumers with information at an institutional level. They do not 
provide information about the graduation rates, debt, or employment and 
earnings outcomes of particular GE programs. Second, College Navigator 
and the College Scorecard are, and the college ratings system will be, 
accessible through the Department's Web site, whereas institutions will 
be required to publish the disclosures required by these regulations 
where students are not only more likely to see them, but also more 
likely to see them early in their search process--on the institutions' 
own Web sites and additionally, in informational materials such as 
brochures. Accordingly, we believe that the disclosures required by 
these regulations will be more effective in ensuring that students and 
prospective students obtain critical information about program-level 
student outcomes. We note that this approach is consistent with long-
standing provisions in the HEA requiring institutions to publish 
consumer information on their Web sites under the assumption that 
students and families are likely to look on those Web sites for that 
information.
    With respect to the suggestion that the Department use College 
Navigator, the College Scorecard, and the College Affordability and 
Transparency Center to alert prospective students and families when an 
institution has a GE program in the zone under the D/E rates, the 
Department intends to make this information publicly available and may 
choose to use one of these or another vehicle to do so.
    Changes: None.
    Comments: Several commenters argued that all institutions 
participating in the title IV, HEA programs should be required to make 
the disclosures for all of their programs. They contended that it is 
unfair and discriminatory to apply the transparency framework only to 
GE programs. The commenters asserted that the disclosures would not be 
meaningful and could be misleading to students because of a lack of 
comparability across institutions in different sectors, noting that a 
program at a proprietary institution would be subject to the 
regulations while the same program at a public institution might not.
    Discussion: As discussed under ``Section 668.401 Scope and 
Purpose,'' these regulations apply to programs that are required, under 
the HEA, to prepare students for gainful employment in a recognized 
occupation in order to be eligible to participate in the title IV, HEA 
programs. The regulations do not establish requirements for non-GE 
programs.
    The disclosures will be valuable even though they do not apply to 
all programs at all institutions because, we believe, that information 
about program performance and student outcomes have value in and of 
themselves. Prospective students will be able to evaluate the 
information contained in a particular program's disclosures against 
their own goals and reasons for pursuing postsecondary education 
regardless of whether they have comparable information for programs at 
other institutions. For example, they can consider whether a program 
will lead to the earnings they desire, and whether the debt that other 
students who attended that program incurred would be manageable for 
them. Further, students will have access to comparable information for 
all programs leading to certificates or other non-degree credentials 
since these programs will be subject to the disclosure requirements 
regardless of the institution's sector. We acknowledge that students 
will have less ability to compare degree programs because only degree 
programs offered by for-profit institutions will be subject to these 
regulations. We do not believe this significantly diminishes the value 
of the disclosures as students will nonetheless have the ability to 
compare programs across the for-profit sector.
    Changes: None.
    Comments: Some commenters asserted that requiring an institution to 
make the disclosures required under Sec.  668.412 would violate the 
institution's First Amendment rights. They made similar arguments to 
those made by some commenters in connection with the student warning 
requirements under Sec.  668.410.
    Discussion: See ``Section 668.410 Consequences of the D/E Rates 
Measure'' for a discussion of the relevant law with respect to laws 
that mandate disclosures to consumers and potential consumers. As with 
the student warnings, the disclosure requirements directly advance a 
significant government interest--both preventing deceptive advertising 
about GE programs and providing consumers information about an 
institution's educational benefits and the outcomes of its programs. 
The disclosure requirements too are based on the same significant 
Federal interest in consumer disclosures evidenced in more than thirty 
years of statutory disclosure requirements for institutions that 
receive title IV, HEA program funds akin to the disclosures required 
under

[[Page 64979]]

these regulations.\182\ As with the student warnings, the disclosures 
required under Sec.  668.412 are purely factual and will not be 
controversial when disclosed, as institutions will have had the 
opportunity to challenge or appeal the disclosures calculated or 
determined by the Department.\183\ Finally, the individual disclosure 
items listed in Sec.  668.412 have been narrowly tailored to provide 
students and prospective students with the information the Department 
considers most critical in their educational decision making, and the 
Department will use consumer testing to inform its determination of 
those items it will require on the disclosure template. As with the 
student warnings, we believe that requiring an institution to both 
include the disclosure template on its program Web site and directly 
distribute the template to prospective students is the most effective 
manner of advancing our significant government interest.
---------------------------------------------------------------------------

    \182\ See n. 242, supra.
    \183\ The disclosures required by Sec.  668.412(a) consist of 
either statistical data elements--for example, dollar amounts, 
ratios, time periods--and simple facts, such as whether the program 
meets any educational prerequisites for obtaining a license in a 
given State. The disclosures are required under Sec.  668.412 only 
after the institution itself has calculated the data, or the 
Department has calculated the data and given the institution an 
opportunity to challenge each such determination under Sec.  
668.413.
---------------------------------------------------------------------------

    The fact that Congress has already required, in section 485 of the 
HEA, that institutions disclose data such as completion rates and cost 
of attendance does not mean that the disclosures required by these 
regulations would cause confusion. The HEA requires disclosures about 
the institution as a whole, for example, the completion, graduation, 
and retention rates of all its students, disaggregated by such 
characteristics as gender, race, and type of grant or loan assistance 
received, but not by program. 34 CFR 668.45(a)(6). Far from creating 
consumer confusion, the regulations here address a significant gap in 
those disclosures: The characteristics of individual GE programs. 
Particularly for consumers who enroll in a program in order to be 
trained for particular occupations, this program-level information can 
reasonably be expected to be far more useful than information on the 
institution as a whole.
    Changes: None.

Specific Disclosures

    Comments: Several commenters raised concerns that because the 100 
percent of normal time completion rate disclosure is calculated on a 
calendar time basis, it does not align with the time period (award 
years) over which the D/E rates are calculated. One of these commenters 
also questioned how an institution that offers programs measured in 
clock hours would determine the length of the program in weeks, months, 
or years.
    Discussion: We continue to believe that completion rates should be 
disclosed on a calendar time basis rather than on an academic or award 
year basis for the purposes of the disclosures. For example, for a 
program that is 18 months in length, an institution will disclose the 
percentage of students that completed the program within 18 months. 
This disclosure is intended to help prospective and enrolled students 
understand how long it might take them to complete a program. Consumers 
understand time in terms of calendar years, months, and weeks much more 
readily than they understand time in terms of an ``academic year'' or 
``award year'' as defined under the title IV, HEA program regulations. 
Several title IV, HEA program regulations, including the disclosure 
provisions of the current regulations that have been in effect since 
July 1, 2011, already require that institutions determine the length of 
a program in calendar time. In addition, institutions must provide the 
program length, in weeks, months, or years, for all title IV, HEA 
programs to NSLDS for enrollment reporting.
    Changes: None.
    Comments: None.
    Discussion: Section 668.412(a)(4) of the proposed regulations would 
have required institutions to disclose the number of clock or credit 
hours, as applicable, necessary to complete the program. However, in 
some cases, competency-based and direct-assessment programs are not 
measured in clock or credit hours for academic purposes. Accordingly, 
we are adding language that would allow an institution to disclose the 
amount of work necessary to complete such programs in terms of a unit 
of measurement that is the equivalent of a clock or credit hour.
    Changes: In Sec.  668.412(a)(4), we have added the words ``or 
equivalent.''
    Comments: Numerous commenters urged the Department to develop a 
standardized placement rate that would apply to all GE programs, 
arguing that it would provide important information to students. The 
commenters criticized the approach in the proposed regulations of 
requiring an institution to calculate a placement rate only if required 
to do so by its accrediting agency or State, arguing that it would lead 
to inconsistent disclosures because not all programs would have 
placement rates and because institutions would use differing 
methodologies. The commenters believed that developing a national 
placement rate methodology, even if the rate itself is not verifiable, 
would allow students to compare placement rates across programs and 
would protect against manipulation and misrepresentation of placement 
rates. They believed that standardizing the rate by specifying, for 
example, how soon after graduation a student must be employed, how long 
a student must be employed, and whether a student must be working in 
the field for which he or she was trained to be considered ``placed'' 
would improve the reliability and comparability of the rates.
    Some of the commenters suggested alternatives to developing a 
standardized placement rate methodology. For instance, a few commenters 
suggested that the Department use the placement rate under Sec.  
668.513 for the purposes of the disclosures. Another commenter 
suggested that, if requiring all institutions to calculate placement 
rates using a standardized methodology for all of their programs would 
be overly burdensome for institutions not already required to calculate 
a placement rate, the Department should require only institutions 
already required to calculate a placement rate by their accrediting 
agency or State to disclose a placement rate calculated using a 
national methodology.
    Discussion: We appreciate the commenters' suggestion to develop a 
national placement rate methodology, and we agree that this would be a 
useful tool for prospective and enrolled students, researchers, 
policymakers, and the public. However, we are not prepared at this time 
to include such a methodology in these regulations. We will continue to 
consider developing a national placement rate methodology in the 
future.
    Changes: None.
    Comments: Some commenters argued that if the Department does not 
establish a uniform methodology, it should require institutions subject 
to existing placement rate disclosure requirements from their State or 
accrediting agency to disclose the lowest placement rate of the rates 
they are required to calculate. Other commenters suggested that the 
Department require institutions to disclose under these regulations 
each of the placement rates that they are required to disclose by other 
entities. These commenters believed that including all of the 
calculated rates on the disclosure template would provide prospective 
students and other stakeholders a more comprehensive picture of student 
outcomes.

[[Page 64980]]

    Discussion: The regulations in Sec.  668.412 provide that job 
placement rates must be disclosed if an institution is required to 
calculate such rates by a State or accrediting agency. This requirement 
applies to all placement rate calculations that a State or accrediting 
agency may require.
    We are revising Sec.  668.412(a)(8) to clarify that, as in the 2011 
Final Rules, an institution is required to disclose a program's 
placement rate if it is required by an accrediting agency or State to 
calculate the placement rate at the institutional level, the program 
level, or both. If the State or accrediting agency requirements apply 
only at the institutional level, under these regulations, the 
institution must use the required institution level methodology to 
calculate a program level placement rate for each of its programs. As 
in the 2011 Final Rules, a ``State'' is any State authority with 
jurisdiction over the institution, including a State court or a State 
agency, and the requirement to calculate a placement rate under these 
regulations may stem from requirements imposed by the authority 
directly or agreed to by the institution in an agreement with the State 
authority.
    Changes: We have revised Sec.  668.412(a)(8) to clarify that an 
institution must disclose a program's placement rate if it is required 
by an accrediting agency or State to calculate the placement rate 
either for the institution, the program, or both, using the required 
methodology of the State or accrediting agency.
    Comments: Some commenters recommended requiring institutions to 
disclose the mean or the median earnings of graduates of the GE 
program.
    Discussion: We agree with the commenters that either of the mean or 
median earnings of a program would be useful information for 
prospective students and enrolled students.
    Changes: We have revised Sec.  668.412(a)(11) to add the mean, in 
addition to median, earnings as a possible disclosure item to be 
included on the disclosure template.
    Comments: We received a number of comments regarding the 
requirement that institutions disclose whether a program satisfies 
applicable professional licensure requirements and whether the program 
holds any necessary programmatic accreditations. Commenters recommended 
that we require institutions to disclose the applicable educational 
prerequisites for professional licensure in the State in which the 
institution is located and in any other State included in the 
institution's MSA rather than just whether the program satisfies them. 
Some commenters questioned the value of including disclosures regarding 
licensure, certification, and accreditation, noting that a program 
would not be eligible for title IV, HEA program funds if it could not 
certify under Sec.  668.414 that it meets the licensure, certification, 
and accreditation requirements. These commenters urged the Department 
to maintain and strengthen the certification requirements under 
``Section 668.414 Certification Requirements for GE Programs.'' They 
also recommended that if the certification requirements are removed, 
then an institution should be required to clearly and prominently 
disclose if a GE program does not have the necessary programmatic 
accreditation. These commenters asserted that where a program does meet 
certain requirements, it is typically easy to find disclosures 
indicating this information, but that it is often much more difficult 
to find disclosures indicating that a program does not meet particular 
requirements and that provide information on the consequences of 
failing to do so.
    Several commenters recommended that the disclosures be broadened to 
reflect the circumstances in the location where a prospective student 
lives, rather than the State in which the institution is located. (See 
the more detailed discussion of this issue under ``Section 668.414 
Certification Requirements for GE Programs.'')
    Other commenters argued that the disclosure requirements are overly 
broad and that it would be extremely burdensome for institutions to 
determine whether a program holds proper programmatic accreditation. 
They believed that such a determination would be subjective and that it 
would be almost impossible to meet this requirement using a 
standardized template.
    Some commenters asserted that, if a program does not meet the 
requirements in Sec.  668.414, for consistency purposes, the 
institution should be required to disclose that students are unable to 
use title IV, HEA program funds to enroll in the program.
    Some commenters suggested that the Department use consumer testing, 
as well as consult with other agencies and parties such as the CFPB, 
FTC, accrediting agencies, and State attorneys general, to specify the 
text and format of the programmatic accreditation disclosure. Along 
these lines, some commenters were concerned that describing criteria as 
``required'' or ``necessary'' would be ineffective without adding 
clarifying text to make it clear that the programmatic accreditation is 
needed to qualify to take an exam without additional qualifications 
such as a minimum number of years working in the field of study.
    Discussion: We agree with the commenters that students and 
prospective students should know whether a program satisfies the 
applicable educational prerequisites for professional licensure 
required by the State in which the institution is located and in any 
other State within the MSA in which the institution is located and 
whether a program is programmatically accredited. Because students may 
seek employment outside of their State or MSA, however, we believe it 
would also be helpful to students to know of any other States for which 
the institution has determined whether the program meets licensure and 
certification requirements and those States for which the institution 
has not made any such determination. We are revising the regulations 
accordingly.
    We decline to require institutions to disclose the actual licensure 
or certification requirements that are met given the burden this would 
impose on institutions. We believe that the more critical information 
for students is whether or not the program satisfies the applicable 
requirements.
    The disclosure requirements regarding programmatic accreditation in 
the proposed regulations were not overly broad, burdensome, or 
subjective. However, we are simplifying these requirements to make the 
disclosures more effective for consumers and to facilitate 
institutional compliance. We are revising Sec.  668.412(a)(15) to 
require institutions to disclose, if required on the disclosure 
template, simply whether the program is programmatically accredited. 
Under Sec.  668.414, an institution is already required to certify that 
a program is programmatically accredited, if such accreditation is 
required by a Federal governmental entity or by a governmental entity 
in the State in which the institution is located or in which the 
institution is otherwise required to obtain State approval under 34 CFR 
600.9. Accordingly, institutions should already have obtained these 
necessary programmatic accreditations. For any other programmatic 
accreditation, the regulations merely require disclosure of this 
information. It will be to an institution's benefit to disclose any 
programmatic accreditation it has obtained beyond the accreditation 
required under Sec.  668.414. Finally, we do not agree that the 
proposed requirements were subjective, but we have, nonetheless, 
revised the

[[Page 64981]]

requirement to avoid reference to ``necessary'' programmatic 
accreditation. As revised, institutions are required only to disclose 
whether they have the programmatic accreditation. We are also revising 
the regulations to require an institution to disclose the name of the 
accrediting agency or agencies providing the programmatic accreditation 
so that students have this important information.
    It is not necessary to require institutions to disclose that 
students are unable to use title IV, HEA program funds to enroll in a 
program if the program does not meet the requirements in Sec.  668.414. 
If a program does not meet those requirements, then it is not 
considered a GE program and therefore would not be required to make any 
disclosures under these regulations.
    As we have discussed, we will conduct consumer testing to learn 
more about how to convey information to students and prospective 
students. However, we believe that there is sufficient explanation 
within the description of the disclosure items for institutions to know 
what needs to be disclosed and when State or Federal licensing and 
certification requirements have been met or whether a program has been 
programmatically accredited.
    Changes: We have revised Sec.  668.412(a)(14) to require that an 
institution indicate whether the GE program meets the licensure and 
certification requirements of each State within the institution's MSA, 
and any other State in which the institution has made a determination 
regarding those requirements. We have also revised the regulations to 
require that the institution include a statement that the institution 
has not made a determination with respect to the licensure or 
certification requirements of other States not already identified. We 
have revised Sec.  668.412(a)(15) to simplify the required disclosure 
and to require institutions to disclose, in addition to whether the 
program is programmatically accredited, the name of the accrediting 
agency.
    Comments: None.
    Discussion: The proposed regulations provided that the disclosure 
template must include a link to the Department's College Navigator Web 
site, or its successor site, so that students and prospective students 
have an easy reference to a resource that permits easy comparison among 
similar programs. As the Department or another Federal agency may in 
the future develop a better tool that serves prospective students in 
this regard, we are revising Sec.  668.412(a)(16) to refer to College 
Navigator, its successor site, or another similar Federal resource, 
which would be designated by the Secretary in a notice published in the 
Federal Register.
    Changes: We have added in Sec.  668.412(a)(16) a reference to other 
similar Federal resource.
    Comments: None.
    Discussion: For the readers' convenience, we have consolidated the 
requirements relating to student warnings in Sec.  668.410(a), 
including the requirement that institutions include the student warning 
on the disclosure template. Although we are removing the substantive 
provisions of this requirement from Sec.  668.412(b)(2), we are adding 
a cross-reference to the requirement in Sec.  668.410(a).
    Changes: We have revised Sec.  668.412(b)(2) to provide that an 
institution must update the disclosure template with the student 
warning as required under Sec.  668.410(a)(7).

Program Web Pages and Promotional Materials

    Comments: A commenter objected to the provision that would require 
the institution to change its Web site if the Department were to 
determine that the required link to the disclosure template is not 
sufficiently prominent, on the ground that this restricted its First 
Amendment rights.
    Discussion: Section 668.412(c) requires an institution to ``provide 
a prominent, readily accessible, clear, conspicuous and direct link to 
the disclosure template for the program'' on various Web pages, and to 
``modify'' its Web site if the Department determines that the required 
link is not ``prominent, readily accessible, clear, conspicuous and 
direct.'' This provision does not, as the commenter suggests, give the 
Department free rein to dictate the content of the institution's Web 
site in derogation of the institution's First Amendment rights. The 
Department's authority reaches no further than necessary to cure a 
failure by the institution to display the required link adequately. 
Requirements that consumer disclosures be ``clear and conspicuous'' are 
not unusual in Federal law, and the Federal Trade Commission (FTC), for 
example, has provided extensive guidance on how required disclosures 
are to be made in electronic form in a manner that meets a requirement 
that information be presented in a ``clear and conspicuous'' 
manner.\184\ The Department would require any corrective action based 
on the kinds of considerations listed by the FTC in this guidance. We 
believe the regulations give the institution sufficient flexibility to 
design, manage, and modify, as needed, the content of its Web page as 
long as it makes the link sufficiently prominent. The regulations do 
not authorize the Department to require an institution to remove or 
modify any content included on the pertinent Web page. Rather, the 
institution is required to make only those changes needed to make the 
required link stand out to the consumer.
---------------------------------------------------------------------------

    \184\ FTC, .com Disclosures, March 2013. The FTC advises a 
party, when using a hyperlink to lead to a disclosure, to--
    --Make the link obvious;
    --Label the hyperlink appropriately to convey the importance, 
nature, and relevance of the information it leads to;
    --Use hyperlink styles consistently, so consumers know when a 
link is available;
    --Place the hyperlink as close as possible to the relevant 
information it qualifies and make it noticeable;
    --Take consumers directly to the disclosure on the click-through 
page;
    --Assess the effectiveness of the hyperlink by monitoring click-
through rates and other information about consumer use and make 
changes accordingly.
    Id. at ii. Available at www.ftc.gov/sites/default/files/attachments/press-releases/ftc-staff-revises-online-advertising-disclosure-guidelines/130312dotcomdisclosures.pdf.
---------------------------------------------------------------------------

    Changes: None.
    Comments: Several commenters supported the provisions designed to 
ensure that the link to a program's disclosure template is easily found 
and accessible from multiple access points on a program's Web site. 
However, the commenters urged the Department to provide examples of a 
link that is ``prominent, readily accessible, clear, conspicuous, and 
direct.'' Some of the commenters advised conducting consumer testing 
with the types of individuals who are a part of the target audience for 
these templates, including prospective students and those advising them 
on which program to attend, as well as consulting with the Consumer 
Financial Protection Bureau (CFPB), FTC, and State attorneys general. 
They argued that these efforts would help to ensure that the template 
will be easily found and that complicated terms like ``repayment 
rates'' and ``default'' that consumers might not readily understand 
will be adequately explained. One commenter recommended that the 
disclosures be incorporated directly into program Web sites so that 
prospective students will be able to find them easily.
    Discussion: We will test the format and content of the disclosure 
template with consumers and other relevant groups, and will provide 
examples of acceptable ways to make a link easy to find and accessible 
based on the results of that testing.

[[Page 64982]]

    We agree that, in lieu of providing on a program's Web page a link 
to the disclosure template, an institution should be able to include 
the disclosure template itself.
    Changes: We have revised Sec.  668.412(c) to clarify that an 
institution may include the disclosure template or a link to the 
disclosure template on a program's Web page.
    We have also clarified in this section that the provisions relating 
to a program's Web page apply without regard to whether the Web page is 
maintained by the institution or by a third party on the institution's 
behalf. To improve the organization of the regulations, we have moved 
the provisions relating to providing separate disclosure templates for 
different program locations or formats to new paragraph (f).
    Comments: A few commenters provided suggestions regarding the 
requirement that institutions include the disclosure template or a link 
to the disclosure template in all promotional materials. One commenter 
urged the Department to increase enforcement of these requirements, 
noting that many institutions are not in compliance with the current 
regulations in Sec.  668.6(b)(2)(i). The commenter recommended that the 
Department consult with the CFPB, FTC, and State attorneys general to 
identify effective enforcement mechanisms related to disclosures. Other 
commenters argued that the Department should specify that the links to 
the disclosure template from promotional materials should also be 
prominent, clear, and conspicuous, because predatory schools will hide 
this information by using illegible type. The commenters urged the 
Department to provide clear examples of links on promotional materials 
that would be considered acceptably prominent or clear and conspicuous, 
noting that the FTC and FCC have issued this type of information. 
Another commenter urged the Department to address situations where a 
student's first point of contact with a program is through a lead 
generating company. The commenter recommended requiring institutions to 
post disclosures prominently in any venue likely to serve as a 
student's first point of interaction with the institution, including 
lead generation outlets, and also to require lead generation companies 
that work with GE programs and institutions to provide clear and 
conspicuous notice to students that they should consult with the 
Department for information about GE programs, costs, outcomes, and 
other pertinent information.
    Discussion: We appreciate the commenters' suggestion to consult 
with and learn from other enforcement-focused agencies to improve and 
strengthen our enforcement efforts. We note that under Sec.  
668.412(c)(2), the Secretary has the authority to require an 
institution to modify a Web page if it provides a link to the 
disclosure template that is not prominent, readily accessible, clear, 
conspicuous, and direct. This provision will strengthen our ability to 
enforce these provisions by giving us a way to prompt institutions to 
make changes without requiring a full program review.
    We agree with the commenters who suggested requiring that links to 
the disclosure template from promotional materials be prominent, clear, 
and conspicuous. We believe that this will make it clear that 
institutions may not undermine the intent of this provision by 
including in their promotional materials a link in a size, location, 
or, in the case of a verbal promotion, speed that will be difficult to 
find or understand. We are revising the regulations to make this clear. 
We intend to issue guidance consistent with the guidance provided by 
the FTC on what we would consider to be a prominent, readily 
accessible, clear, conspicuous, and direct link to the disclosure 
template on promotional materials.
    With regard to lead generating companies, we are clarifying in the 
regulations that institutions will be responsible for ensuring that all 
of their promotional materials, including those provided by a third 
party retained by the institution, contain the required disclosures or 
a direct link to the disclosure template, as required under Sec.  
668.412(d)(1).
    Changes: We have revised Sec.  668.412(d)(1) to make clear that the 
requirements apply to promotional materials made available to 
prospective students by a third party on behalf of an institution. We 
have also revised Sec.  668.412(d)(1)(ii) to require that all links 
from promotional materials to the disclosure template be prominent, 
readily accessible, clear, conspicuous, and direct.

Format and Delivery

    Comments: None.
    Discussion: As discussed in ``Section 668.401 Scope and Purpose,'' 
we are simplifying the definition of ``credential level'' by treating 
all of an institution's undergraduate programs with the same CIP code 
and credential level as one ``GE program,'' without regard to program 
length, rather than breaking down the undergraduate credential levels 
according to the length of the program as we proposed in the NPRM. For 
the purpose of the accountability framework, we believe the benefits of 
reducing reporting and administrative complexity outweigh the 
incremental value that could be gained from distinguishing among 
programs of different length. For the purposes of the transparency 
framework, however, there are not the same issues of reporting and 
administrative complexity. Further, we believe that prospective 
students and students will benefit from having information available to 
make distinctions between programs of different lengths. We are 
revising Sec.  668.412(f) to require institutions to provide a separate 
disclosure template for each length of the program. The institution 
will be allowed to disaggregate only those items specified in Sec.  
668.412(f)(3), which were discussed in connection with disaggregation 
by location and format.
    Changes: We have revised Sec.  668.412(f)(1) to require 
institutions to provide a separate disclosure template for each length 
of the program, and specified in Sec.  668.412(f)(3) the disclosure 
items that may be disaggregated on the separate disclosure templates.
    Comments: Some commenters argued that the Department should not 
permit institutions to disaggregate the disclosures that the Department 
calculates under Sec.  668.413 by location or format, as provided in 
Sec.  668.412(c)(2) of the proposed regulations. The commenters noted 
that this could undermine the Department's intention to avoid 
inaccuracies and distortions in the relevant data. These commenters 
were also concerned that if more information is disaggregated by 
location or format, it will be very difficult for consumers to find and 
understand that information. The commenters recommended that the 
Department test whether disaggregated data would provide better, 
clearer, and more accessible information and, if testing shows positive 
results, revise the regulations in the future to provide this option.
    Other commenters recommended that the Department calculate separate 
rates for the disclosures under Sec.  668.413 for different locations 
or formats of a program if an institution opted to distinguish its 
programs in reporting to the Department. As discussed under ``Sec.  
668.411 Reporting Requirements for GE Programs,'' these commenters 
suggested allowing institutions to use an optional program identifier 
to instruct the Department to disaggregate the disclosure calculations 
based on

[[Page 64983]]

different locations or formats of a program.
    Discussion: Because there are several disclosure items that may 
vary significantly depending on where the program is located or how it 
is offered, allowing institutions to disaggregate some of their 
disclosures will provide consumers with a more accurate picture of 
program costs and outcomes. For example, a program that is offered in 
multiple States may be subject to placement rate requirements by more 
than one State or accrediting agency with differing methodologies.
    However, we agree with the commenters who were concerned that 
allowing institutions to disaggregate the disclosures calculated by the 
Secretary could be counterproductive. We did not intend in the proposed 
regulations for institutions to be able to disaggregate the disclosure 
rates calculated under Sec.  668.413, and we have revised the 
regulations to make this more clear by specifying which of the 
disclosure items institutions may disaggregate. The following chart 
identifies the disclosure items that institutions must disaggregate if 
they provide separate disclosures by program, based on the length of 
the program or location or format, and those items that may not be 
disaggregated under any circumstances. We note that, regardless of 
whether institutions choose to disaggregate certain disclosure items, 
programs will still be evaluated at the six-digit OPEID, CIP code, and 
credential level.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
If an institution disaggregates by        Disclosure items institutions
 length of the program or chooses to       may not disaggregate by
 disaggregate by location or by format,    location or format under any
 the following disclosures must be         circumstances.
 disaggregated by length of the program,  Sec.   668.412(a)(1)--primary
 location, or format, as applicable.       occupations program prepares
Sec.   668.412(a)(4)--number of clock or   students to enter.
 credit hours or equivalent, as
 applicable.
Sec.   668.412(a)(5)--total number of     Sec.   668.412(a)(2)--
 individuals enrolled in the program       completion and withdrawal
 during the most recently completed        rates.
 award year.                              Sec.   668.412(a)(6)--loan
                                           repayment rate.
Sec.   668.412(a)(7)--total cost of       Sec.   668.412(a)(10)--median
 tuition and fees and total cost of        loan debt.
 books, supplies, and equipment incurred
 for completing the program within the
 length of the program.
Sec.   668.412(a)(8)--program placement   Sec.   668.412(a)(11)--mean or
 rate.                                     median earnings.
Sec.   668.412(a)(9)--the percentage of   Sec.   668.412(a)(12)--program
 individuals enrolled during the most      cohort default rate.
 recently completed award year that
 received a title IV loan or a private
 loan for enrollment.
Sec.   668.412(a)(14)--whether the        Sec.   668.412(a)(13)--annual
 program satisfies applicable              earnings rate.
 educational prerequisites for            Sec.   668.412(a)(15)--whether
 professional licensure or certification   the program is
 in States within the institution's MSA    programmatically accredited
 or other States for which the             and the name of the
 institution has made that determination   accrediting agency.
 and a statement indicating that the      Sec.   668.412(a)(16)--link to
 institution has not made that             College Navigator.
 determination for other States not
 previously identified.
------------------------------------------------------------------------

    Changes: We have renumbered the applicable regulations. The 
provisions permitting an institution to publish a separate disclosure 
template for each location or format of a program are in Sec.  
668.412(f)(2) of the final regulations. In Sec.  668.412(f)(3), we have 
specified the disclosure items that an institution must disaggregate if 
it uses a separate disclosure template for the length of the program or 
if it chooses to use separate disclosure templates based on the 
location or format of the program.
    Comments: We received a number of suggestions for how we could 
improve the disclosure template from an operational perspective. For 
example, some of the commenters recommended adding skip logic to the 
template application so that fields for which there is no information 
to disclose can be skipped. These commenters further suggested that the 
template instructions should clarify that institutions should enter 
only information for students enrolled in programs for a given CIP 
code, not for students enrolled in other non-GE credential level 
programs in the same CIP code. The commenters also recommended the 
template be designed to ensure cohorts are designated appropriately and 
to allow institutions to enter different time increments instead of 
weeks, months, or years. Additionally, some commenters recommended 
ensuring that the template is compliant with the Americans with 
Disabilities Act. Another commenter argued that the disclosure template 
should be a ``fill-in-the-blank'' document in a common Microsoft Word 
file for easy incorporation into Web sites.
    Discussion: We will continue to improve the template to make it 
easier for institutions to complete and display it as well as to make 
it more useful for students and prospective students. We appreciate the 
suggestions offered by the commenters and will consider them as we 
revise the template to reflect these final regulations.
    We note that we have already addressed several of the 
recommendations in the current template. For instance, we have 
incorporated skip logic so that institutions will not be asked to 
disclose certain information if fewer than 10 students completed the 
applicable GE program. The template also meets all accessibility 
requirements. Further, we have refined our Gainful Employment 
Disclosure Template Quick Start Guides and the instructions within the 
template to provide greater clarity.
    With respect to the suggestion to allow institutions more 
flexibility to use different increments of time besides weeks, months, 
and years, we note that we have selected these units intentionally to 
match the program lengths used for the purposes of the 150 percent 
Subsidized Loan Limit and NSLDS Enrollment reporting requirements. 
Further, we believe that calendar time is most easily understood by 
consumers.
    Regarding the suggestion to provide a fill-in-the-blank disclosure 
document for institutions to complete and incorporate into their Web 
site, we disagree that this approach would be appropriate. We believe 
that the disclosure template is effective because it is standardized in 
its appearance. Although a Word document may be easier to use, it would 
result in a lack of consistency in presentation across programs. We 
believe that requiring an easy-to-find link and description of the 
disclosures, combined with our ability to work with institutions to 
make changes to improve the placement and visibility of the 
disclosures, will offset any perceived disadvantage to using an 
application to create the template.
    Changes: None.
    Comments: We received suggestions from numerous commenters on 
proposed Sec.  668.412(e) regarding the direct distribution of 
disclosures to prospective students, particularly on how the 
disclosures must be provided, when the disclosures must be provided, 
and how institutions should document that students received the 
disclosures.
    Several commenters provided feedback about how institutions should 
provide the disclosures. Specifically, some commenters opposed the 
proposed requirement for institutions to provide the disclosures as a 
stand-alone

[[Page 64984]]

document that student must sign, while others supported requiring the 
disclosures to be made clearly and directly, with text specified by the 
Department. Other commenters recommended exploring other means of 
distributing the disclosures to students, such as providing a video to 
each school to use or posting a video on YouTube that describes the 
disclosure information. Some commenters stressed the need to consult 
with the CFPB, FTC, and State attorneys general to determine whether 
prospective students should be asked to sign a document confirming that 
they received a copy of the disclosure template and, if so, what it 
should say and when and how it should be conveyed to maximize the 
effectiveness of the disclosures.
    We also received several comments about the requirement that 
institutions provide the disclosures before a prospective student signs 
an enrollment agreement, completes registration, or makes a financial 
commitment to the institution. Some commenters recommended allowing 
institutions to obtain written confirmation from a student that they 
received a copy of the disclosure template at the same time as when the 
student signs an enrollment agreement, provided that new students are 
not penalized if they fail to attend any course sessions after the 
first seven days of the beginning of the term. Other commenters, in 
contrast, argued that the Department should specify a minimum length of 
time before students can enroll or make a financial commitment to the 
institution after receiving the disclosure template. Some of these 
commenters recommended instituting a minimum waiting period of three 
days after providing a prospective student with the disclosures before 
enrolling the student in order to provide students with sufficient time 
to review and understand the intricacies of their enrollment contracts.
    Several commenters recommended allowing institutions to use a 
variety of means to confirm that the disclosures were provided to 
prospective students, including email messages, telephone calls, or 
other means that can be documented. The commenters argued that 
requiring written confirmation could complicate students' planning and 
would pose significant compliance challenges for institutions. The 
commenters also noted that students often enroll at community colleges 
without selecting their course of study or program and that the 
regulations should reflect this reality.
    Discussion: We agree with the commenters who stated that it is 
important that prospective students receive the information in the 
disclosure template directly and clearly prior to enrolling in a 
program. We recognize, however, that not all enrollment processes will 
take place in person, and that hand-delivering the disclosure template 
as a written, stand-alone document may not be feasible in all 
situations. In addition, in light of commenter confusion about how the 
student warning and disclosure template delivery requirements worked 
together in the proposed regulations, we believe that it would 
facilitate institutional compliance if the delivery requirements 
aligned, to the extent possible. Accordingly, we are revising Sec.  
668.412(e) to provide that the same written delivery methods may be 
used to deliver the disclosure template as may be used to deliver 
student warnings. Specifically, the disclosure template may be provided 
to a prospective student or a third party acting on behalf of the 
prospective student by hand-delivering the disclosure template to the 
prospective student or third party individually or as part of a group 
presentation or sending the disclosure template as the only substantive 
content in an email to the primary email address used by the 
institution for communicating with the prospective student or third 
party about the program. As provided in the proposed regulations, the 
institution must obtain acknowledgement that the student or third party 
has received a copy of the disclosure template. If the disclosure 
template is delivered by hand, the acknowledgement must be in writing. 
If the disclosure template is sent by email to a prospective student or 
third party, an institution may satisfy the acknowledgement requirement 
through a variety of methods such as a pop-screen that asks the student 
to click ``continue'' or ``I understand'' before proceeding. Requiring 
these types of acknowledgements does not impose a significant burden on 
institutions or prospective students, yet provides adequate assurance 
that a prospective student has received important information about the 
program. Institutions must also maintain records of their efforts to 
provide the disclosure template.
    We appreciate the commenters' suggestions about additional and 
alternative methods for delivering the disclosure template to 
prospective students. Although we encourage institutions to consider 
innovative ways to deliver information about program outcomes to 
students, we believe that, to facilitate institutional compliance, it 
is preferable to have one, clear delivery requirement in the 
regulations. As discussed in the NPRM and elsewhere in this document, 
we will conduct consumer testing to test the manner of delivery of the 
disclosure template. In the course of consumer testing, we may also 
consult with one or more of the entities recommended by the commenters.
    It is critical that prospective students receive the disclosure 
template before enrolling in a program so that the information on the 
template can inform their decision about whether to enroll in the 
program. Although we believe it is imperative that, for programs that 
are subject to the student warning requirement, prospective students 
have a cooling-off period between receiving the warning and enrolling 
in the program, it is not necessary for programs that are not at risk 
of losing eligibility based on their D/E rates for the next award year. 
In all cases, students will be able to access the information on the 
disclosure template through the program's Web site and via its 
promotional materials prior to receiving the disclosure template 
directly from the institution.
    Lastly, students must enroll in an eligible program in order to be 
eligible for title IV, HEA program funds. Any prospective student who 
has indicated that he or she intends to enroll in a GE program must be 
provided these disclosures.
    Changes: We have revised Sec.  668.412(e) to specify that the 
disclosure template may be delivered to prospective students or a third 
party acting on behalf of the student by hand-delivering the disclosure 
template to the prospective student or third party individually or as 
part of a group presentation or sending the disclosure template to the 
primary email address used by the institution for communicating with 
the prospective student or third party about the program. We have also 
revised the regulations to require that, if the disclosure template is 
provided by email, the template must be the only substantive content in 
the email, the institution must receive written or other electronic 
acknowledgement of the prospective student's or third party's receipt 
of the disclosure template, and the institution must send the 
disclosure template using a different address or method of delivery if 
the institution receives a response that the email could not be 
delivered. We also have revised the regulations to require institutions 
to maintain records of their efforts to provide the disclosure 
template.

[[Page 64985]]

Section 668.413 Calculating, Issuing, and Challenging Completion Rates, 
Withdrawal Rates, Repayment Rates, Median Loan Debt, Median Earnings, 
and Program Cohort Default Rates Completion and Withdrawal Rates

    Comments: A commenter contended that students who are excluded from 
the D/E rates calculation under Sec.  668.404(e) should similarly be 
excluded from the completion and withdrawal rate calculations.
    Discussion: In calculating the D/E rates and the repayment rate for 
a program, as provided in Sec.  668.404(e) and Sec.  668.413(b)(3)(vi) 
respectively, we exclude a student if he or she (1) has a loan that was 
in a military deferment status, (2) has a loan that may be discharged 
based on total and permanent disability, (3) was enrolled in another 
eligible program at the institution for which these rates are 
calculated or at another institution, or (4) died. We exclude these 
students because a student's ability to work and have earnings or repay 
a loan could be diminished under any of the circumstances listed, which 
could adversely affect a program's results, even though the 
circumstances are the result of student choices or unfortunate events 
that have nothing to do with program performance. Of these 
circumstances, only two are reasonably appropriate for holding an 
institution harmless for the purpose of determining completion and 
withdrawal rates--if the student died or became totally and permanently 
disabled while he or she was enrolled in the program. Therefore, as a 
general matter we agree to account for students in these two groups by 
excluding them from the completion and withdrawal rates.
    However, our ability to identify these individuals is limited. For 
a student who borrowed, we may learn of a disability if the student has 
applied for or received a disability discharge of a loan. However, in 
instances where the individual seeks that discharge after the draft 
rates are calculated, or where we are not aware of a borrower's death, 
the institution will have to provide relevant documentation during the 
challenge process described in Sec.  668.413(d) to support the 
exclusion. For a student who does not borrow, i.e., receives a Pell 
Grant only, we would not typically know if the student becomes disabled 
or dies while enrolled in the program. Again, the institution will have 
to identify and provide documentation to support the exclusion of these 
students during the challenge process described in Sec.  668.413(d).
    For instances where an institution identifies a student who 
borrowed but has not applied for a disability discharge of a loan 
before the draft completion and withdrawal rates are calculated, or for 
a student who does not borrow, we will assess whether the student may 
be excluded from the calculation of the rates on the basis of a medical 
condition by applying the standard we use in Sec.  668.404(e)(2) to 
determine if the disability exclusion applies for the purpose of the D/
E rates measure. Specifically, under 34 CFR 682.402(c)(5)-(6) and 34 
CFR 685.213(b)(6)-(7), the Department reinstates a loan previously 
discharged on the basis of total and permanent disability if the 
borrower receives a loan after that previous loan was discharged. To be 
eligible for a loan, an individual must be enrolled to attend 
postsecondary school on at least a half-time basis. 34 CFR 
685.200(a)(1). That is, the existing regulations infer that an 
individual who is able to attend school on at least a half-time basis 
is not totally and permanently disabled.
    Accordingly, we are providing in Sec.  668.413(a)(2)(ii) that a 
student may be excluded from the calculation of the completion rates or 
withdrawal rates, as applicable, if the student became totally and 
permanently disabled while enrolled in the program and unable to 
continue enrollment on at least a half-time basis.
    Changes: We have revised Sec.  668.413(b) to provide that a student 
who died while enrolled in the program is excluded from the enrollment 
cohort used for calculating completion and withdrawal rates. We have 
also provided in this section that a student who became totally and 
permanently disabled, while enrolled in the program, and who was unable 
to continue enrollment in school on at least a half-time basis, is 
excluded from the enrollment cohort used for calculating completion and 
withdrawal rates.
    Comments: Some commenters expressed concern that disclosing four 
different completion rates would be excessive and potentially 
overwhelming for prospective students.
    Discussion: Although we believe that the various completion rates 
would capture the experience of full-time and part-time students in a 
way that would be beneficial to both enrolled and prospective students, 
as well as institutions as they work to improve student outcomes, we 
agree that providing four completion rates on the disclosure template 
may be overwhelming for students and prospective students. Accordingly, 
as was the case in the NPRM, we have provided that we will use consumer 
testing to assess which of the disclosures, including the various 
options for completion and withdrawal rates, are most meaningful for 
students and prospective students. The disclosure template will include 
only those items identified by the Secretary as required disclosures 
for a particular year.
    Changes: None.
    Comments: Commenters asked the Department to clarify the 
methodology for calculating completion rates and withdrawal rates. 
Specifically, some commenters asked that we define the cohort of 
students for whom completion rates and withdrawal rates are calculated 
and address whether the cohort includes all students who received title 
IV, HEA program funds in a particular award year, or at any time in the 
past.
    A number of commenters suggested that, for the purpose of 
calculating completion rates, we determine a student's enrollment 
status at a fixed point after the start of a term, rather than on the 
first day of the student's enrollment in the program, because many 
students may subsequently change their enrollment status. Another 
commenter suggested that institutions, and not the Department, 
calculate the completion and withdrawal rates that will be included in 
the disclosures.
    Discussion: The Department will calculate the disclosure items 
indicated in Sec.  668.413 in order to ensure accuracy and consistency 
in the calculations.
    With regard to the comments about the cohort used to calculate the 
completion and withdrawal rates, we clarify that the ``enrollment 
cohort'' is comprised of all the students who began enrollment in a GE 
program during a particular award year, where students are those 
individuals receiving title IV, HEA program funds. For example, all 
students who began enrollment in a GE program at any time during the 
2011-2012 award year comprise the enrollment cohort for that award 
year. The Department will track the students in the enrollment cohort 
to calculate a completion rate at the end of the calendar date for each 
measurement period, i.e., at 100, 150, 200, and 300 percent of the 
length of the program. We will apply the same process for the next 
enrollment cohort for the program--the students who began enrollment 
during the 2012-2013 award year--and for every subsequent enrollment 
cohort for that program.
    However, because students may enroll in a program at any time 
during an award year, we will determine on a student-by-student basis 
whether a

[[Page 64986]]

student completed the program within the length of the program or the 
applicable multiple of the program. As an example, consider the 
calculation of the 100 percent of normal time completion rate 
associated with a two-year program for the students that enrolled in 
the program during the 2011-2012 award year, assuming that 100 students 
began enrollment in the program at various times during that award 
year. We will determine for each student individually whether he or she 
completed the program within two years by comparing for each student, 
the date the student began enrollment in the program to the date they 
completed the program. If, for example, 75 of those students completed 
the program within two years of when they began enrollment, the 100 
percent of normal time completion rate for the 2011-2012 enrollment 
cohort would be 75 percent. Both completion and withdrawal rates under 
the regulations will be calculated using this methodology.
    Changes: We have revised Sec.  668.413(b)(1) to clarify that the 
enrollment cohort for an award year represents the students who began 
the GE program at any time during that award year.

Repayment Rate

    Comments: Some commenters asked whether there is a distinction made 
for the repayment rate calculation cohort period for medical or dental 
programs that require a residency.
    Discussion: We see no reason to make a distinction in the cohort 
period for medical and dental programs that require a residency. For 
the D/E rates calculation, we adjust the cohort period because we would 
not expect students, while in a residency or other type of required 
training, to have earnings at a level that is reflective of the 
training they received. In comparison, we do expect borrowers to repay 
their loans while in residency or other training. Consequently, 
modifying the cohort period would not be appropriate.
    Changes: None.
    Comments: With respect to the repayment rate methodology in Sec.  
668.413(b)(3), some commenters objected to the breadth of the exclusion 
for students enrolled in another eligible program at the institution or 
another institution, specifically noting the absence of any requirement 
that the institution provide documentation to validate the exclusion. 
On the other hand, some commenters supported the exclusion for 
borrowers currently enrolled in an eligible program regardless of 
whether it is the same program as that in which they originally 
enrolled, and for borrowers in military deferment. These commenters 
suggested expanding the exclusion to include other borrowers in 
deferment status, other than deferments for unemployment or economic 
hardship, including students working in the Peace Corps.
    Discussion: The repayment rate disclosure will show consumers how 
effectively those who are expected to repay their loans are actually 
repaying them and, from that information, allow consumers to evaluate 
program performance. We exclude from the repayment rate calculation, as 
well as the D/E rates calculation, students who are in school or in 
military deferment because those statuses are reflective of individual 
choices that have little to do with the effectiveness of the program 
(see Sec.  668.412(a)(13) and Sec.  668.404(d)(3)). We decline to add 
an exclusion for borrowers in the Peace Corps because there is no 
longer a separate deferment in the title IV, HEA program regulations 
for such borrowers, and, therefore, there would be no way to easily 
identify these students from other students with an economic hardship 
deferment. As we do not expect the number of borrowers with an economic 
hardship deferment due to Peace Corps service to be significant, we 
believe the advantage to consumers of including all students in 
economic hardship status in the repayment rate calculation greatly 
outweighs any benefit from excluding all such students because they may 
include Peace Corps volunteers.
    Changes: None.
    Comments: Some commenters asserted that rehabilitated loans, which 
are defaulted loans subsequently paid in full or defaulted loans that 
returned to active repayment status, should not be treated as defaulted 
loans for the purpose of calculating loan repayment rates.
    Discussion: We disagree that rehabilitated loans that were once in 
default should not be considered defaulted for the purpose of the 
repayment rate calculation. The repayment rate is intended to assess 
whether a program's borrowers are able to manage their debt. A 
borrower's default on a loan at some previous time, even if the loan is 
no longer in default status, indicates that the borrower was unable to 
manage his or her debt burden. This information should be reflected in 
a program's repayment rate.
    Changes: None.
    Comments: One commenter contended that the determination of the 
outstanding balance for each of a borrower's loans at the beginning and 
end of the award year is unduly complicated because of the need to 
prorate payments for the reporting of consolidated or multiple loans in 
a borrower's loan profile. Further, the commenter suggested that 
measurement of active repayment of a borrower's entire portfolio, 
possibly using a ``weighted'' method of calculating a student's loan 
portfolio based on the amount of debt, would be more accurate and solve 
the potential problem of negative outcomes of simple proration for 
those earning higher degrees.
    Discussion: We do not believe that the loan repayment rate 
calculations are overly complex. If a borrower has made a payment 
sufficient to reduce the outstanding balance of a consolidation loan 
during the measurement period, the borrower is included as a borrower 
in active repayment. A consolidation loan may have been used to pay off 
one or more original loans obtained for the program being measured, for 
that program and other programs offered by the same institution, or for 
that program and programs offered by other institutions. There is no 
practicable way to allocate payments made by a borrower among the 
components of the consolidation debt corresponding to the original 
loans, and the commenter proposed no reasonable basis to allocate 
payments made among a borrower's original loan and other loans 
associated with other programs or other institutions. Regardless, the 
Department, and not the institution, calculates a program's repayment 
rate using data already reported by the institution, so the burden of 
calculating the rates will fall on the Department, rather than the 
institution.
    Changes: None.
    Comments: Some commenters asserted that a borrower making full 
payments in an income-driven repayment plan, such as Income Based 
Repayment, Income Contingent Repayment, and Pay As You Earn, should 
count positively towards the program's repayment rate by being included 
in the numerator of the calculation even if the borrower's principal 
year-end balance is not reduced. These commenters argued that because 
the Department has made income-driven repayment plans available to 
borrowers to assist them in managing their debt, programs should not be 
penalized if a student takes advantage of such a plan as the 
institution does not have control over whether the plan will result in 
negative amortization.
    Discussion: The loan repayment rate presents a simple measurement: 
the proportion of borrowers who are

[[Page 64987]]

expected to be repaying their loans during a given year who are 
actually paying enough during that year to owe less at the end of the 
year than they owed at the start of the year (i.e. paid all interest 
and at least one dollar of principal). Income-driven plans are 
available to assist borrowers whose loan debt in relation to their 
income places them in a ``partial financial hardship''; a program where 
many borrowers are forced to enroll in such plans is not leading to 
good outcomes. As a result, a repayment rate disclosure that treated 
such borrowers as in ``active repayment'' would not provide meaningful 
information to consumers about a program's student outcomes and, worse, 
may give prospective students unrealistic expectations about the likely 
outcomes of their investment in such a program.
    Changes: None.

Program Cohort Default Rate

    Comments: None.
    Discussion: As discussed in ``Section 668.403 Gainful Employment 
Program Framework,'' program cohort default rates will be used in the 
regulations as a potential disclosure under Sec.  668.412 only, rather 
than as a standard for determining program eligibility. To reflect that 
change, we are removing from Sec. Sec.  668.407, 668.408, and 668.409 
the provisions that established that the Secretary will use the 
methodology and procedures, including challenge procedures, in subpart 
R to calculate program cohort default rates; the provisions relating to 
the notice to institutions of their draft program cohort default rates; 
and the provisions relating to the issuance and publication of an 
official program cohort default rate.
    Changes: We have revised Sec. Sec.  668.413(b)-(f) to: Establish 
that the Secretary will use the methodology and procedures, including 
challenge procedures, in subpart R to calculate program cohort default 
rates; and to incorporate provisions relating to the notice to 
institutions of their draft program cohort default rates and relating 
to the issuance and publication of an official program cohort default 
rate.
    Comments: None.
    Discussion: As discussed in ``Section 668.403 Gainful Employment 
Program Framework,'' program cohort default rates will be used in the 
regulations as a potential disclosure under Sec.  668.412 only, rather 
than as a standard for determining program eligibility, and we will use 
the procedures in subpart R to calculate the rate. However, certain 
sections of subpart R pertained to eligibility and are not necessary 
for these final regulations and we are removing those sections from the 
final regulations. Specifically, Sec.  668.506 of subpart R addressed 
the effect of a program cohort default rate on the continued 
eligibility of a program. Other provisions in subpart R governed 
challenges to the accuracy and completeness of the data used to 
calculate program cohort default rates and, additionally, appeals of 
results that might have led to loss of program eligibility. With 
respect to appeals, Sec.  668.513 would have permitted an institution 
to appeal a loss of eligibility based on academic success for 
disadvantaged students. Section 668.514 would have permitted an 
institution to appeal a loss of eligibility based on the number of 
students who borrowed title IV loans as a percentage of the total 
number of individuals enrolled in the program. Section 668.515 would 
have permitted an institution to appeal a loss of eligibility if at 
least two of the three program cohort default rates are calculated as 
average rates and would be less than 30 percent if calculated for the 
fiscal year alone. These provisions are being removed from the final 
regulations.
    The provisions that remain serve the purpose of ensuring that the 
calculation process results in an accurate rate.
    Changes: We have removed and reserved Sec. Sec.  668.506, 668.513, 
668.514, and 668.515 of subpart R.
    Comments: One commenter objected to proposed Sec.  668.504(c)(1), 
which would allow an institution to submit a participation rate index 
challenge only to a draft program cohort default rate that could result 
in loss of eligibility of a program. The commenter believed that 
institutions should be allowed to assert a participation rate index 
challenge to any draft rate, because a successful assertion of a 
challenge, which would be relatively inexpensive and readily 
demonstrated, would eliminate the need to pursue more complicated, 
detailed, and costly challenges on other grounds to the draft and final 
program cohort default rates.
    Discussion: As previously stated, in these regulations we are using 
program cohort default rates only as a disclosure. We therefore retain 
only those provisions of proposed subpart R that do not relate to loss 
of eligibility. Challenges based on a participation rate index would 
not have changed the calculation of the official rate, but would have 
only relieved the institution from loss of eligibility for the affected 
program. Because program cohort default rates will not affect 
eligibility, there is no reason to adopt a procedure that affected only 
whether the program would lose eligibility. The rate itself is useful 
information for consumers, and should be disclosed.
    Changes: We have removed and reserved Sec.  668.504(c).
    Comments: None.
    Discussion: Proposed Sec.  668.502(a) provided that we would begin 
the program cohort default rate calculation process by counting whether 
at least 30 borrowers entered repayment in the fiscal year at issue; if 
fewer than 30 did so, we then counted whether at least 30 borrowers 
entered repayment in that year and the two preceding years. This 
approach conformed to institutional CDR requirements but is no longer 
applicable given that we are not adopting the program cohort default 
rate as an accountability metric. Because the rate will be used only as 
a disclosure, we will apply the minimum n-size of 10 that, as discussed 
in ``Section 668.412 Disclosure Requirements for GE Programs,'' we have 
established for all of the disclosure items.
    This change requires a number of conforming changes to various 
provisions in subpart R. We are revising Sec. Sec.  668.502, 668.504, 
and 668.516 to reflect the use of a minimum cohort size of 10 for the 
purposes of calculating, challenging, and appealing program cohort 
default rates.
    Changes: We have revised Sec.  668.502(a) to provide for the 
Department to calculate a program cohort default rate for a program as 
long as that rate is based on a cohort of 10 or more borrowers. We also 
have revised Sec.  668.502(d) to reflect the use of cohorts with 10 or 
more borrowers in the calculation and Sec.  668.502(d)(2) describes how 
we will calculate the rate if there are fewer than 10 borrowers in a 
cohort for a fiscal year. We have made conforming changes in Sec.  
668.504(a)(2) regarding draft program cohort default rates.
    We have revised Sec.  668.516 to describe our determination of an 
official program cohort default rate more accurately and to provide 
that an institution may not disclose an official program cohort default 
rate under Sec.  668.412(a)(12) if the number of borrowers in the 
applicable cohorts is fewer than 10. As revised, Sec.  668.516 explains 
that we notify the institution if we determine that the applicable 
cohort has fallen to fewer than 10.
    Comments: None.
    Discussion: In considering the changes to subpart R previously 
described, we determined that as proposed, the regulations did not 
explicitly address how the Department, in the first two years that 
rates are calculated under the regulations, would

[[Page 64988]]

calculate a program's rate where the number of borrowers in the fiscal 
year was fewer than 10 and for which the Department would include in 
the calculation borrowers from the prior two fiscal years' cohorts. In 
turn, the regulations did not explicitly address how an institution 
would challenge a program's draft cohort default rate in these 
circumstances. Specifically, an institution would not have had an 
opportunity to challenge--at the draft rate stage--the data on 
borrowers from the prior two years, because the Department would not 
have calculated rates for those years. We are, therefore, revising 
Sec.  668.502(d)(2) and Sec.  668.504(a)(2) to clarify how this process 
will work to allow an opportunity to make that challenge.
    Section 668.502(d)(2), as revised in these regulations, sets forth 
how the Department will calculate a program's cohort default rate if 
there are fewer than 10 borrowers. Section 668.502(d)(2)(i) provides 
that, in the first two years that we calculate a program's cohort 
default rate, we include in our calculation the number of borrowers in 
that cohort and in the two most recent prior cohorts for which we have 
relevant data. Under Sec.  668.502(d)(2)(ii), for other fiscal years, 
we include in our calculation the number of borrowers in the program 
cohort and in the two most recent program cohorts as previously 
calculated by the Department.
    We are revising Sec.  668.504(a)(2) to provide that, except as set 
forth in Sec.  668.502(d)(2)(i), the draft cohort default rate of a 
program is always calculated using data for that fiscal year alone.
    With these changes, we make it clear that the challenge process 
under Sec.  668.504(b) includes challenges with respect to rates with 
fewer than 10 borrowers in the first two years for which the Department 
uses data from the two most recent prior fiscal years.
    Changes: We have revised Sec.  668.502(d)(2), and made conforming 
changes to Sec.  668.504(a)(2), to describe how the Department, in the 
first two years in which it calculates a program's cohort default rates 
under these regulations, will calculate a rate for a program that has 
fewer than 10 borrowers in the fiscal year being measured and for which 
the Department uses data on borrowers from the prior two years to 
calculate the rate and to clarify that an institution may challenge 
that data once it receives its draft program cohort default rate or 
official program cohort default rate.
    Comments: Some commenters objected to the adoption of institution 
level CDR rules in determining the cohort default rate of a program on 
the grounds that those rules measured only the percentage of borrowers 
who actually defaulted on their loans within the three-year period, 
without regard to the number who would likely have defaulted but were 
placed, often by reason of extensive efforts by the institution, in 
deferment or forbearance status so that default would likely be 
forestalled until after the close of the three-year period. These 
rules, they asserted, made CDR an inadequate measure of the repayment 
performance of the affected borrowers, and the commenters urged the 
Department to measure program cohort default rates using only the 
performance of borrowers who entered into repayment status and were not 
in deferment or forbearance status for a significant portion of the 
three-year period.
    Discussion: As explained in the NPRM and in this preamble, we will 
calculate the program cohort default rate using the process and 
standards already used to calculate institutional cohort default rates, 
in part because institutions are already familiar with those 
procedures. We do not believe it would be appropriate to change the 
calculation method to exclude those in deferment or forbearance because 
it would lead to inconsistency between institutional CDR and program 
cohort default rates which could be confusing to consumers.
    Changes: None.
    Comments: One commenter asserted that in instances in which a 
cohort of borrowers entering repayment is very small, default by one or 
two borrowers may produce a failing program cohort default rate but 
that rate would not be meaningful information for consumers.
    Discussion: As discussed, we agree that disclosures based on 
cohorts consisting of fewer than ten borrowers are not justified for 
privacy concerns, but we see no reason, and the commenter did not offer 
one, that a rate based on that number would not be useful to consumers. 
We note that each of the required disclosures must be made if the 
cohort on which the data are based includes 10 or more individuals, and 
that rate or data could always be affected by actions of a very small 
number. Nevertheless, we consider all that data useful to the consumer, 
and see no reason to designate some disclosures based on small numbers 
as useful, but others, such as default rate, as uninformative. An 
institution that considers a program cohort default rate to be 
misleading because the number of borrowers involved was small is free 
to provide that explanation to prospective students.
    Changes: None.
    Comments: One commenter noted that proposed Sec.  668.507 would 
give the Department discretion whether to include in the program cohort 
default rate calculation debt incurred for a GE program offered by 
another institution if the two institutions were under common ownership 
and control, but gave no indication of the conditions that would prompt 
the Department to do so. The commenter suggested that debt incurred at 
institutions under common ownership and control be included in the 
calculation for a program only if the institutions have the same 
accreditation and admission standards. The commenter contended that 
institutions with different accreditation and admission standards are 
so significantly independent that transfers from one to the other are 
not likely to be arranged in order to manipulate program cohort default 
rates, and that the regulations should not penalize an institution to 
which a borrower transfers in order to pursue a more advanced degree by 
attributing defaults at the institution from which the student is 
transferring to the institution to which the student is transferring.
    Discussion: We believe that Sec.  668.503, which governs the 
determination of program cohort default rates for programs that have 
undergone a change in status such as a merger or acquisition, addresses 
situations in which debt will ordinarily be combined to calculate the 
rate. We also believe that, by using program cohort default rate as a 
disclosure only, rather than as an accountability metric, there is less 
incentive to attempt to manipulate this rate. We therefore do not 
believe further changes to the regulations are necessary.
    Changes: None.

General

    Comments: Some commenters expressed concern regarding the minimum 
size of a cohort for disclosure of repayment rates.
    Discussion: With respect to the concerns raised by the commenters, 
for the 2011 Final Rules, the Department provided sub-regulatory 
guidance to institutions instructing them not to disclose various data 
for a program if fewer than 10 students completed the program in the 
most recently completed award year. We believe this guidance continues 
to provide a useful bright line, and it remains in effect. As discussed 
in ``Section 668.412 Disclosure Requirements for GE Programs,'' because 
of privacy concerns, an institution may not disclose data

[[Page 64989]]

described in Sec.  668.413 if that data is derived from a cohort of 
fewer than 10 students, and, for those data calculated and issued by 
the Department, the Department does not issue or make public any data 
it calculates from such a cohort.
    Changes: We have added paragraph (g) to Sec.  668.413 to provide 
that we do not publish determinations made by the Department under 
Sec.  668.413, and an institution may not disclose a rate or amount 
determined under that section, if the determination is based on a 
cohort of fewer than ten students.

Section 668.414 Certification Requirements for GE Programs

    Comments: Several commenters supported the proposed program 
certification requirements because, they believed, the requirements are 
streamlined, clear, and feasible to implement.
    Discussion: We appreciate the commenters' support.
    Changes: None.
    Comments: A number of commenters objected to the program 
certification requirements. They contended that States, accrediting 
agencies, and the Department serve different roles, and that requiring 
certifications would be inconsistent with that framework. The 
commenters asserted it would be more appropriate for the Department to 
rely on States and accreditors to monitor whether institutions have 
obtained the necessary program approvals from them because independent 
monitoring by the Department would be derivative and duplicative of 
their efforts. The commenters also argued that program quality and 
outcomes are more appropriately evaluated by an institutional 
accreditor and, similarly, that determining whether a program meets a 
State's standards should be the responsibility of the State. Finally, 
one commenter stated that the certification requirements would 
contravene the HEA's recognition requirements with respect to program 
accreditors.
    Discussion: The Department agrees that accrediting agencies and 
States play important roles in approving institutions to operate and 
offer programs and providing ongoing oversight of whether institutions 
and programs meet those State and accrediting requirements. However, 
this may not always guarantee that a program meets all minimum 
educational standards for students to obtain employment in the 
occupation the institution identified as being associated with that 
training. For example, in some States, for some types of programs, 
institutions are allowed to offer a program even if it does not meet 
the requirements for licensure or certification in that State. In such 
instances, under the regulations, for a program to be eligible for 
title IV, HEA program funds, the program will be required to meet State 
licensure, certification, and accreditation standards for the 
occupations the institution identifies for the program where it would 
not have had to in the absence of the certification requirements.
    Even where the certification requirements are partly duplicative of 
State and accreditor efforts, there is no conflict with the HEA to 
require an institution to verify that a program meets applicable State 
and accrediting standards in light of the Department's responsibility 
to protect students and ensure that title IV, HEA program funds are 
used for proper purposes, in this case, to prepare students for gainful 
employment in a recognized occupation. We believe there is minimal 
burden associated with providing this information to the Department.
    The certification requirements have the added benefit of creating 
an enforcement mechanism for the Department to take action if a 
required approval has been lost, or if a certification that was 
provided was false. Further, Federal and State law enforcement agencies 
may be able to prosecute any misrepresentations made by institutions in 
their own investigations and enforcement actions.
    Changes: None.
    Comments: One commenter, while noting support for the proposed 
provisions, suggested that institutions that do not satisfy all State 
or Federal program-level accrediting and licensing requirements should 
not be eligible to participate in the title IV, HEA programs.
    Discussion: Institutions will be required to ensure that the 
programs they offer have the necessary Federal, State, and accrediting 
agency approvals to meet the requirements for the jobs associated with 
those programs. If a program does not meet these requirements, the 
institution will have to either obtain the necessary approvals or risk 
losing title IV, HEA program eligibility.
    Changes: None.
    Comments: A number of commenters asserted that the initial and 
continuing reporting requirements to update the certifications would be 
burdensome. They noted that for existing programs, institutions would 
be required to submit transitional certifications and reporting 
covering several years of data at the same time. The commenters were 
concerned that institutions would make unintentional errors for which 
they would be held liable. They were also concerned about how the 
implementation of the regulations would affect the timing of an 
institution's PPA recertification.
    Discussion: The Department estimates that there will be minimal 
additional administrative burden associated with the certification 
requirements. We believe that any burden is outweighed by the benefits 
of the requirements which, as described previously, will help ensure 
that programs meet minimum standards for students to obtain employment 
in the occupations for which they receive training. Furthermore, after 
the initial period where institutions will be required to submit 
transitional certifications for existing programs by December 31st of 
the year that the regulations take effect, the continuing certification 
procedure will be combined and synchronized with the existing PPA 
recertification process to minimize any increased institutional burden 
and facilitate compliance. This will have no bearing on the timing of 
an institution's PPA recertification process. The only time an 
institution will need to update its existing program certification 
separately from the PPA recertification process will be when there is a 
change in the program or in its approvals that makes the existing 
program certification no longer accurate. Institutions will be required 
under 34 CFR 600.21 to update the program certification within 10 days 
of such a change. Regarding the commenter's concern that the 
certification requirements will increase institutions' possible 
liability and exposure to litigation, these requirements could affect 
complaints that are based upon violations of the new requirements but, 
in other cases, could also reduce complaints as students and 
prospective students receive better and more transparent information.
    Changes: We have revised Sec.  668.14(b) to provide that an 
institution must update a program certification within 10 days of any 
change in the program or in its approvals that makes the existing 
certification no longer accurate. We have also made a conforming change 
to Sec.  600.21 to include program certifications in the list of items 
that an institution must update within 10 days.
    Comments: One commenter suggested that the Department clarify in 
the regulations how the certifications would work together with the 
debt measures to establish that a program meets all of the gainful 
employment standards. Another commenter requested assurances that

[[Page 64990]]

the existing certification requirements would continue to apply even 
after the D/E rates measure is implemented.
    Discussion: The certification requirements are an independent 
pillar of the accountability framework of these regulations that 
complement the metrics-based standards. To determine whether a program 
provides training that prepares students for gainful employment as 
required by the HEA, these regulations provide procedures to establish 
a program's eligibility and to measure its outcomes on a continuing 
basis. Accordingly, the certification requirements will continue to 
apply after the D/E rates measure becomes operational.
    Changes: None.
    Comments: Some commenters stated that providing certifications for 
GE programs would provide an important baseline for key information 
about a program, and suggested that the certification requirements 
should be expanded. In this regard, commenters argued that the 
Department should require institutions to affirm that programs lead to 
gainful employment for their graduates, add additional certification 
requirements for institutions with failing or zone programs, or require 
institutions that do not meet the certification requirements to pay 
monetary penalties.
    Discussion: An expanded certification process as suggested by the 
commenters is unnecessary in light of the requirements already provided 
in the regulations. An important goal of the certification requirements 
is to ensure that institutions assess on an ongoing basis whether their 
programs meet all required Federal, State, and accrediting standards. 
Furthermore, we do not believe that additional certification 
requirements for institutions with failing or zone programs are needed, 
because the Department has existing procedures that consider an 
institution's financial responsibility and administrative capability at 
least annually, and an institution with demonstrated problems, such as 
having failing or zone programs under the regulations, may be subject 
to additional restrictions and oversight. Consequently, an expanded 
certification process would add little to the existing requirements.
    Changes: None.
    Comments: One commenter recommended that we require institutions to 
provide separate certifications for programs by location.
    Discussion: If a program does not meet the certification 
requirements in any State where an institution is located, then the 
program as a whole would be considered deficient and could not be 
certified. Consequently, we do not believe it is necessary to require 
separate certifications.
    Changes: None.
    Comments: Some commenters argued that institutions should be 
required to certify that their programs provide students with access to 
information about the licensure and certifications required by 
employers, or that meet industry standards nationwide, and provide an 
explanation to students of the certification options available in a 
particular field. The commenters suggested that the provision of such 
information by institutions would demonstrate that they are 
sufficiently aware of requirements for employment in the industries for 
which they are preparing students to work. Similarly, some commenters 
suggested that the regulations should require institutions to provide 
new data or information to students prior to enrolling to help them 
understand the certificates or licenses that are needed for a 
particular occupation so that the students can make better decisions. 
On the other hand, one commenter asserted that institutions should not 
be required to identify the licensure and certifications required by 
all employers.
    Some commenters suggested more information about how a program 
provides training that prepares students for gainful employment should 
be included in the transitional certification along with an affirmation 
signed by the senior executive at the institution. Specifically, the 
commenters asserted that institutions should provide affirmations about 
job outcomes for programs subject to the transitional certification 
requirements because those programs are already participating in the 
title IV, HEA programs and information about their student outcomes is 
available.
    Discussion: We appreciate the suggestion that more detailed 
information should be required as a part of the certifications, but 
believe that the regulations strike an appropriate balance between 
affirming that a program meets certain requirements while not creating 
ambiguity or increasing burden in providing more detailed statements 
about the program's outcomes. Requiring institutions to certify that 
their programs provide the training necessary to obtain certifications 
expected by employers or industry organizations would be impractical as 
preferences will likely vary among employers and organizations. Without 
objective and reliable standards, such as those set by State or Federal 
agencies like the Federal Aviation Administration or the Department of 
Transportation, or by accrediting agencies, the Department would be 
unable to enforce such a requirement.
    Further, we do not believe that requiring institutions to provide 
additional information in their certifications would further the 
objectives of these provisions as the certifications are limited in 
scope to whether a program meets certain objective minimum standards. 
Further, we believe that the D/E rates measure and required disclosures 
address the commenter's suggestions.
    Changes: None.
    Comments: Some commenters made suggestions regarding the 
Department's approval of institutions' certifications. Specifically, 
one commenter asserted that the Department should give special 
consideration to whether programs that are significantly longer or 
require a higher credential than comparable programs should be 
approved.
    Discussion: Because the Department does not review program content, 
it cannot make determinations about the appropriate credential level 
for a particular program. With respect to program length, additional 
requirements are not necessary because existing regulations at Sec.  
668.14(b)(26) already provide that a program must demonstrate a 
reasonable relationship between the length of the program and entry-
level requirements for employment in the occupation for which the 
program provides training. Under Sec.  668.14(b)(26), the relationship 
is considered to be reasonable if the number of clock hours of the 
program does not exceed by more than 50 percent the minimum number of 
clock hours required for training that has been established by the 
State in which the program is located. Also, where it is unclear 
whether a program's length is excessive, the Department may check with 
the applicable State or accrediting agency to resolve the issue.
    Changes: None.
    Comments: Some commenters expressed concern that, for new programs, 
the proposed regulations would require an application only in those 
instances where the new program is the same, or substantially similar 
to, a failing or ineligible program offered by the same institution. 
These commenters noted that an institution could circumvent the 
certification process by misrepresenting a new program as not 
substantially similar to the failing, zone, or ineligible program.
    Discussion: An institution that offered a program that lost 
eligibility, or that voluntarily discontinued a program

[[Page 64991]]

when it was failing or in the zone under the D/E rates measure, may not 
offer a new program that is substantially similar to the ineligible, 
zone, or discontinued program for three years. We recognize the 
possibility that some institutions might make minor changes to a 
program and represent that the new program is not substantially similar 
to its predecessor. To address the commenter's concern, we are removing 
the definition of ``substantially similar'' from the definition of CIP 
code, and establishing in Sec.  668.410 that two programs are 
substantially similar if they share a four-digit CIP code. We believe 
that precluding institutions from establishing new programs within the 
same four-digit CIP code will deter institutions from making small 
changes to a program solely for the purpose of representing that the 
new program is not substantially similar to the discontinued program, 
other than in instances where a program could be associated with a 
range of CIP codes, as suggested by the commenters. To address this 
concern that a similar program could be established using a different 
four-digit CIP code, we are revising Sec.  668.414(d)(4) to require an 
institution that is establishing a new program to explain in the 
program certification that is submitted to the Department how the new 
program is different from any program the institution offered that 
became ineligible or was voluntarily discontinued within the previous 
three years. The institution must also identify a CIP code for the new 
program. We will presume that a new program is not substantially 
similar to the ineligible or discontinued program if it does not share 
a four-digit CIP code with the other program. The certification and 
explanation reported by the institution may be reviewed on a case-by-
case basis to determine if the two programs are not substantially 
similar. A program established in contravention of these provisions 
would be considered ineligible and the institution would be required to 
return the title IV, HEA program funds received for that program.
    We believe that these changes will make it more difficult for an 
institution to continue to offer the same, or a similar program and 
claim that it is not substantially similar to an ineligible or 
discontinued program, while allowing an institution to establish new 
programs in different areas that may better serve their students.
    Changes: We have revised the certification requirements to include 
a requirement in Sec.  668.414(d)(4) that an institution affirm in its 
certification that, and provide an explanation of how, a new program is 
not substantially similar to a program that became ineligible or was a 
zone or failing program that was voluntarily discontinued in the 
previous three years.
    Comments: Several commenters urged the Department to create an 
approval process for all new programs before an institution could start 
enrolling students who receive title IV, HEA program funds to mitigate 
the risk of students incurring significant amounts of debt in programs 
unlikely to pass the D/E rates measure. One commenter suggested that 
limiting certifications to the PPA is not sufficient, and that 
applications for all new program approvals should require certification 
regarding licensing and certification.
    While some commenters said approval requirements should apply to 
all new programs, other commenters suggested that an institution should 
be required to seek new program approval only if it had one or more 
failing programs at that time under the D/E rates measure, regardless 
of their similarity to the new program. Other commenters expressed the 
view that an institution that wished to build upon a successful 
existing program, such as by adding a graduate-level program, should be 
exempted from any new program approval process, or be subject to a 
streamlined approval process.
    As a part of a new program approval requirement, some commenters 
proposed that institutions should have to certify that they conducted a 
reasoned analysis of the expected debt and earnings of graduates, as 
well as expected completion rates, and add that information to their 
PPA certification before starting any new program.
    Discussion: The Department did not propose and is not including in 
the final regulations an approval process for new programs. As 
previously stated, we believe that the D/E rates measure is the best 
measure of whether a program prepares students for gainful employment. 
While we agree that it is important for institutions to conduct a 
reasoned analysis of expected program outcomes such as the expected 
debt and earnings of graduates, or expected completion rates, we will 
not require institutions to submit this information or certify that it 
was conducted because there is no basis upon which the Department could 
assess such information to determine whether the analysis was 
sufficient or that the analysis indicates that the program will indeed 
pass the D/E rates measure in the future. Without this ability, we do 
not believe adding such requirements would be useful.
    Changes: None.
    Comments: To increase transparency, some commenters suggested that 
an institution's PPA, or the portions related to its GE programs, 
should be published on a public Web site to provide the public and 
policy makers the opportunity to assess the institution's analysis, 
discussed in the previous comment, that the program would meet the D/E 
rates. They argued that this additional reporting should not be 
particularly burdensome for an institution because it should already be 
conducting such analysis. They also argued that the Department should 
strengthen its procedures to verify the accuracy and veracity of the 
information contained in a PPA, arguing that, otherwise, an 
institutional officer providing a false certification would have little 
risk of being identified and held accountable.
    Discussion: As the Department is not requiring the analysis of 
potential debt and earnings outcomes as requested by the commenter, we 
are also declining to publish institutions' PPAs. As discussed in 
``Section 668.412 Disclosure Requirements for GE Programs,'' there also 
is little variation in the PPA and the disclosure and certification 
requirements already provide sufficient protections for students. 
Similarly, it would not be beneficial to modify procedures to verify 
the information contained in institutions' PPAs. As with any 
representation made by an institution, the Department has the authority 
to investigate and take action against an institution that fraudulently 
misrepresents information in its PPA when those issues are identified 
during audits, program reviews, or when investigating complaints about 
an institution or program.
    Changes: None.
    Comments: Several commenters argued that six months is an 
insufficient amount of time for institutions to submit transitional 
certifications after the regulations become effective. They recommended 
increasing the time period or eliminating the transitional 
certifications altogether and require only that institutions provide 
the certifications as a part of their periodic PPA recertification.
    Discussion: The Department understands that there is some 
administrative burden associated with submitting the transitional 
program certifications. However, programs should already be meeting the 
minimum requirements regarding accreditation, licensure, and 
certification, so the additional burden on institutions of providing 
this information should be minimal. This reporting burden is outweighed 
by the importance of

[[Page 64992]]

promptly confirming after the regulations become effective that all 
programs meet the certification requirements. This will reduce the 
potential harm to students who become enrolled, or continued harm to 
students already enrolled, in programs that do not meet the minimum 
standards. If we were to wait until PPA recertification, a significant 
amount of time could pass before a program's deficiencies would come to 
light during which students would continue to accumulate debt and 
exhaust title IV, HEA program eligibility in a program providing 
insufficient preparation.
    Changes: None.
    Comments: Some commenters argued that institutions offering a 
program in multiple States might not meet the licensure, certification, 
and accreditation requirements in each State. They suggested that 
institutions should be prohibited from enrolling students in a State 
where these requirements are not met. Other commenters recommended 
requiring institutions to disclose to students when a program does not 
meet the applicable certification requirements for the State where the 
student is located, but that the student should still be able to choose 
to enroll in that program. Several commenters asserted that a student 
might still choose to enroll in such a program because the student 
intends to move to, and work in, a different State where the program 
would meet any applicable certification requirements.
    Some commenters criticized the requirements of the proposed 
regulations to obtain necessary programmatic accreditation and State-
level approvals where the MSA within which they operate spans multiple 
States. Several commenters were concerned that it would be difficult 
for programs to meet the requirements of all of these States. The 
commenters stated that the State-MSA requirement could lead to 
confusion in a large MSA where an institution might not be aware of 
which governmental agencies have requirements and of differing 
requirements between States. One commenter suggested that the MSA 
requirement would be contrary to provisions in OMB Bulletin 13-01. 
Another commenter asserted that the State-MSA requirement would limit 
an institution's ability to offer programs specialized to meet local 
labor market needs.
    Some commenters argued that that the use of MSAs was not 
appropriate for online programs, because they are not bound by physical 
location. Other commenters asserted that the physical location of 
students should determine the relevant States whose requirements must 
be met rather than the physical location of institutions. They 
suggested that the certifications should apply to any State in which a 
sizeable number or plurality of students are enrolled.
    Discussion: We do not agree that it is too difficult for an 
institution to identify all of the governmental agencies that have 
licensure, certification, and accreditation requirements in the States 
that intersect with the MSA where a program is located. It is an 
institution's responsibility to be aware of the requirements in the 
States where its students are likely to seek employment and ensure that 
their programs meet those requirements. However, we recognize that in 
some cases, State requirements may conflict in such a way that it would 
be impossible to concurrently meet the requirements of multiple States. 
For example, Ohio and Kentucky, which are a part of the Cincinnati, 
Ohio MSA, require nail technicians to receive a minimum of 200 and 600 
clock hours of training, respectively, in order to obtain a license. 
However, the regulations at Sec.  668.14(b)(26) provide that the length 
of a program cannot exceed 150 percent of the minimum number of clock 
hours of training established by a State for the relevant occupation. 
In this case, a nail technician program in Cincinnati could not 
concurrently meet the requirements for both Ohio and Kentucky because a 
program length beyond 300 hours would violate Sec.  668.14(b)(26), 
jeopardizing the program's title IV, HEA program eligibility. As a 
result, we are revising the regulations to remove the MSA certification 
requirement. However, institutions will still be required under Sec.  
668.412(a)(14) to disclose whether a program meets applicable 
requirements in each State in the institution's MSA.
    We are addressing this potential conflict between different State 
requirements within an institution's MSA by eliminating the proposal 
for program certifications to cover the States within an MSA, and 
requiring instead that the institution provide applicable program 
certifications in any State where the institution is otherwise required 
to obtain State approval under 34 CFR 600.9.
    The current State authorization regulations apply to States where 
an institution has a physical location, and the program certification 
requirements also apply in those States so those two sets of 
requirements are aligned. If any changes are made in the future to 
extend the State authorization requirements in 34 CFR 600.9 to apply in 
other States, we intend the program certification requirements to 
remain aligned. Since institutions will have to ensure they maintain 
appropriate State approvals under the State authorization regulations, 
we anticipate that institutions will actively address any potential 
conflicts at that time. We believe that the requirements for the 
applicable program certifications should also be provided for those 
States. This will ensure a program and the institution that provides 
the program have the necessary State approvals for purposes of the 
Title IV, HEA programs. Linking the State certification requirements in 
Sec.  668.414(d)(2) with the State authorization regulations in Sec.  
600.9 to identify States where institutions must obtain the applicable 
approvals benefits students and prospective students because the State 
authorization requirements include additional student protections for 
the students enrolled in the programs for which certifications would be 
required.
    While institutions will not be prohibited from enrolling students 
in a program that does not meet the requirements of any particular 
State, a program that does not meet the applicable requirements in the 
State where it is located for the jobs for which it trains students 
will be ineligible to receive title IV, HEA program funds. As discussed 
in ``Section 668.412 Disclosure Requirements for GE Programs,'' 
institutions may be required to include on a program's disclosure 
template whether the program meets the licensure, certification, and 
accreditation requirements of States, in addition to the States in the 
institution's MSA, for which the institution has made a determination 
regarding those requirements so that students who intend to seek 
employment in those other States can consider this information before 
enrolling in the program.
    Changes: We have removed from Sec.  668.414 the requirement that an 
institution's certification regarding programmatic accreditation and 
licensure and certification must be made with respect to each State 
that intersects with the program's MSA. We have revised this section to 
require that the institution's program certification is required in any 
State in which the institution is otherwise required to obtain State 
approval under 34 CFR 600.9.

Section 668.415 Severability

    Comments: One commenter recommended that we omit the provisions of 
Sec.  668.415 regarding the severability of the provisions of subpart 
Q. Specifically, the commenter argued

[[Page 64993]]

that the provisions of the regulations are too intertwined such that if 
a court found any part of the regulations invalid, it would not allow 
the remaining provisions to stand. In that event, the commenter argued, 
the remaining provisions would not serve the Department's intent and 
the rulemaking process would be undermined.
    Discussion: We believe that the provisions of subpart Q are 
severable. Each provision of subpart Q serves a distinct purpose within 
the accountability and transparency frameworks and provides value to 
students, prospective students, and their families and the public, 
taxpayers, and the Government that is separate from, and in addition 
to, the value provided by the other provisions. Although we recognize 
that severability is an issue to be decided by a court, Sec.  668.415 
makes clear our intent that the provisions of subpart Q operate 
independently and the potential invalidity of one or more provisions 
should not affect the remainder of the provisions.\185\
---------------------------------------------------------------------------

    \185\ ``Whether an administrative agency's order or regulation 
is severable, permitting a court to affirm it in part and reverse it 
in part, depends on the issuing agency's intent.'' Davis Cty. Solid 
Waste Mgmt. v. EPA, 108 F.3d 1454, 1459 (D.C. Cir. 1997) (quoting 
North Carolina v. FERC, 730 F.2d 790, 795-96 (D.C. Cir. 1984). 
``Severance and affirmance of a portion of an administrative 
regulation is improper if there is `substantial doubt' that the 
agency would have adopted the severed portion on its own.'' Davis, 
108 F.3d at 1459. Additionally, a court looks to whether a rule can 
function as designed if a portion is severed. ``Whether the 
offending portion of a regulation is severable depends upon the 
intent of the agency and upon whether the remainder of the 
regulation could function sensibly without the stricken provision.'' 
MD/DC/DE Broadcasters Ass'n. v. FCC, 236 F.3d 13, 22 (D.C. Cir. 
2001) (citations omitted).
---------------------------------------------------------------------------

    Changes: None.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by the 
Office of Management and Budget (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 stated in the 
Executive order.
    This final regulatory action will have an annual effect on the 
economy of more than $100 million because the estimated Federal student 
aid, institutional revenues, and instructional expenses associated with 
students that drop out of postsecondary education, transfer, or remain 
in programs that lose eligibility for title IV, HEA funds as a result 
of the regulations is over $100 million on an annualized basis. The 
estimated annualized costs and transfers associated with the 
regulations are provided in the ``Accounting Statement'' section of 
this Regulatory Impact Analysis (RIA). Therefore, this final action is 
``economically significant'' and subject to review by OMB 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 final regulatory action and have determined 
that the benefits justify the costs.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these final regulations only on a reasoned 
determination that their benefits justify their costs. In choosing 
among alternative regulatory approaches, we selected those approaches 
that maximize net benefits. Based on the analysis that follows, the 
Department believes that these final regulations are consistent with 
the principles in Executive Order 13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, or tribal governments in the exercise of 
their governmental functions.
    In this regulatory impact analysis we discuss the need for 
regulatory action, the potential costs and benefits, net budget 
impacts, assumptions, limitations, and data sources, as well as 
regulatory alternatives we considered.
    Elsewhere in this section, under Paperwork Reduction Act of 1995, 
we identify and explain burdens specifically associated with 
information collection requirements.
    A detailed analysis, including our Regulatory Flexibility Analysis, 
is found in Appendix A to this document.

Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995 does not require you to respond 
to a collection of information unless it displays a valid OMB control 
number. We display the valid OMB control numbers assigned to the 
collections of information in these regulations at the end of the 
affected sections of the regulations.
    Sections 668.405, 668.406, 668.410, 668.411, 668.412, 668.413, 
668.414, 668.504, 668.509, 668.510, 668.511, and 668.512 contain 
information collection requirements. Under the Paperwork Reduction Act 
of 1995 (PRA) (44 U.S.C. 3507(d)), the Department has submitted a copy 
of these sections, related forms, and Information Collection Requests 
(ICRs) to the Office of Management and Budget (OMB) for its review.

[[Page 64994]]

    The OMB Control numbers associated with the regulations and related 
forms are 1845-0123 (identified as 1845-NEW1 in the NPRM), 1845-0122 
(identified as 1845-NEW2 in the NPRM), and 1845-0121 (identified as 
1845-NEW3 in the NPRM). Due to the removal of the pCDR measure as an 
accountability metric, the number of GE programs and enrollments in 
those programs have been reduced throughout this section.

Section 668.405 Issuing and Challenging D/E Rates

    Requirements: Under the regulations, the Secretary will create a 
list of students who completed a GE program during the applicable 
cohort period from data reported by the institution. The list will 
indicate whether the list is of students who completed the program in 
the two-year cohort period or in the four-year cohort period, and it 
will also indicate which of the students on the list will be excluded 
from the debt-to-earnings (D/E) rates calculations under Sec.  
668.404(e), for one of the following reasons: a military deferment, a 
loan discharge for total and permanent disability, enrollment on at 
least a half-time basis, completing a higher undergraduate or graduate 
credentialed program, or death.
    The institution will then have the opportunity, within 45 days of 
being provided the student list from the Secretary, to propose 
corrections to the list. After receiving the institution's proposed 
corrections, the Secretary will notify the institution whether a 
proposed correction is accepted and will use any corrected information 
to create the final list.
    Burden Calculation: We have estimated that the 2010-2011 and the 
2011-2012 total number of students enrolled in GE programs is projected 
to be 6,436,806 (the 2010-2011 total of 3,341,856 GE students plus the 
2011-2012 total of 3,094,950 GE students).
    We estimate that 89 percent of the total enrollment in GE programs 
will be at for-profit institutions, 2 percent will be at private non-
profit institutions, and 9 percent will be at public institutions. As 
indicated in connection with the 2011 Final Rules (75 FR 66933), we 
estimate that 16 percent of students enrolled in GE programs will 
complete their course of study. Therefore, we estimate that there will 
be 916,601 students who complete their programs at for-profit 
institutions (6,436,806 students times 89 percent of total enrollment 
at for-profit institutions times 16 percent, the percentage of students 
who complete programs) during the two-year cohort period.
    On average, we estimate that it will take for-profit institutional 
staff 0.17 hours (10 minutes) per student to review the list to 
determine whether a student should be included or excluded under Sec.  
668.404(e) and, if included, whether the student's identity information 
requires correction, and then to obtain the evidence to substantiate 
any inclusion, exclusion, or correction, increasing burden by 155,822 
hours (916,601 students times .17 hours) under OMB 1845-0123.
    We estimate that there will be 20,598 students who complete their 
programs at private non-profit institutions (6,436,806 students times 2 
percent of total enrollment at private non-profit institutions times 16 
percent, the percentage of students who complete programs) during the 
two-year cohort period.
    On average, we estimate that it will take private non-profit 
institutional staff 0.17 hours (10 minutes) per student to review the 
list to determine whether a student should be included or excluded 
under Sec.  668.404(e) and, if included, whether the student's identity 
information requires correction, and then to obtain the evidence to 
substantiate any inclusion, exclusion, or correction, increasing burden 
by 3,502 hours (20,598 students times .17 hours) under OMB 1845-0123.
    We estimate that there will be 92,690 students who complete their 
programs at public institutions (6,436,806 students times 9 percent of 
the total enrollment at public institutions times 16 percent, the 
percentage of students who complete programs) during the two-year 
cohort period.
    On average, we estimate that it will take public institutional 
staff 0.17 hours (10 minutes) per student to review the list to 
determine whether a student should be included or excluded under Sec.  
668.404(e) and, if included, whether the student's identity information 
requires correction, and then to obtain the evidence to substantiate 
any inclusion, exclusion, or correction, increasing burden by 15,757 
hours (92,690 students times .17 hours) under OMB 1845-0123.
    Collectively, the total number of students who complete their 
programs and who will be included on the lists that will be provided to 
institutions to review for accuracy is a projected 1,029,889 students, 
thus increasing burden by 175,081 hours under OMB Control Number 1845-
0123.
    Requirements: Under Sec.  668.405(d), after finalizing the list of 
students, the Secretary will obtain from SSA the mean and median 
earnings, in aggregate form, of those students on the list whom SSA has 
matched to its earnings data for the most recently completed calendar 
year for which SSA has validated earnings information. SSA will not 
provide to the Secretary individual data on these students; rather, SSA 
will advise the Secretary of the number of students it could not, for 
any reason, match against its records of earnings. In the D/E rates 
calculation, the Secretary will exclude from the loan debts of the 
students on the list the same number of loan debts as SSA non-matches, 
starting with the highest loan debt. The remaining debts will then be 
used to calculate the median debt for the program for the listed 
students. The Secretary will calculate draft D/E rates using the higher 
of the mean or median annual earnings reported by SSA under Sec.  
668.405(e), notify the institution of the GE program's draft D/E rates, 
and provide the institution with the individual loan data on which the 
rates were calculated.
    Under Sec.  668.405(f), the institution will have the opportunity, 
within 45 days of the Secretary's notice of the draft D/E rates, to 
challenge the accuracy of the rates, under procedures established by 
the Secretary. The Secretary will notify the institution whether a 
proposed challenge is accepted and use any corrected information from 
the challenge to recalculate the GE program's draft D/E rates.
    Burden Calculation: There are 8,895 programs that will be evaluated 
under the regulations. Our analysis estimates that of those 8,895 
programs, with respect to the D/E rates measure, 6,913 programs will be 
passing, 1,253 programs will be in the zone, and 729 programs will 
fail.
    We estimate that the number of students at for-profit institutions 
who complete programs that are in the zone will be 77,693 (485,583 
students enrolled in zone programs times 16 percent, the percentage of 
students who complete programs) and the number who complete failing 
programs at for-profit institutions will be 66,200 (413,747 students 
enrolled in failing programs times 16 percent, the percentage of 
students who complete programs), for a total of 143,893 students 
(77,693 students plus 66,200 students).
    We estimate that it will take institutional staff an average of 
0.25 hours (15 minutes) per student to examine the loan data and 
determine whether to select a record for challenge, resulting in a 
burden increase of 35,973 hours (143,893 students times .25 hours) in 
OMB Control Number 1845-0123.

[[Page 64995]]

    We estimate that the number of students at private non-profit 
institutions who complete programs that are in the zone will be 760 
(4,747 students enrolled in zone programs times 16 percent, the 
percentage of students who complete programs) and the number who 
complete failing programs at private non-profit institutions will be 
272 (1,701 students enrolled in failing programs times 16 percent, the 
percentage of students who complete programs), for a total of 1,032 
students (760 students plus 272 students).
    We estimate that it will take institutional staff an average of 
0.25 hours (15 minutes) per student to examine the loan data and 
determine whether to select a record for challenge, resulting in a 
burden increase of 258 hours (1,032 students times .25 hours) in OMB 
Control Number 1845-0123.
    We estimate that the number of students at public institutions who 
complete programs that are in the zone will be 109 (684 students 
enrolled in zone programs times 16 percent, the percentage of students 
who complete programs) and the number who complete failing programs at 
public institutions will be 84 (523 students enrolled in failing 
programs times 16 percent, the percentage of students who complete 
programs), for a total of 193 students (109 students plus 84 students).
    We estimate that it will take institutional staff an average of 
0.25 hours (15 minutes) per student to examine the loan data and 
determine whether to select a record for challenge, resulting in a 
burden increase of 48 hours (193 students times .25 hours) in OMB 
Control Number 1845-0123.
    Collectively, the burden for institutions to examine loan records 
and to determine whether to make a draft D/E rates challenge will 
increase burden by 36,279 hours under OMB Control Number 1845-0123.
    The total increase in burden for Sec.  668.405 will be 211,360 
hours under OMB Control Number 1845-0123.

Section 668.406 D/E Rates Alternate Earnings Appeals

Alternate Earnings Appeals

    Requirements: The regulations will allow an institution to submit 
to the Secretary an alternate earnings appeal if, using data obtained 
from SSA, the Secretary determined that the program was failing or in 
the zone under the D/E rates measure. In submitting an alternate 
earnings appeal, the institution will seek to demonstrate that the 
earnings of students who completed the GE program in the applicable 
cohort period are sufficient to pass the D/E rates measure. The 
institution will base its appeal on alternate earnings evidence from 
either a survey conducted in accordance with standards included on an 
Earnings Survey Form developed by NCES or from State-sponsored data 
systems.
    In either instance, the alternate earnings data will be from the 
same calendar year for which the Secretary obtained earnings data from 
SSA for use in the D/E rates calculations.
    An institution with a GE program that is failing or in the zone 
that wishes to submit alternate earnings appeal information must notify 
the Secretary of its intent to do so no earlier than the date that the 
Secretary provides the institution with its draft D/E rates and no 
later than 14 business days after the date the Secretary issues the 
notice of determination of the program's D/E rates. No later than 60 
days after the date the Secretary issues the notice of determination, 
the institution must submit its appeal information under procedures 
established by the Secretary. The appeal information must include all 
supporting documentation related to recalculating the D/E rates using 
alternate earnings data.
    Survey: An institution that wishes to submit an appeal by providing 
survey data must include in its survey all the students who completed 
the program during the same cohort period that the Secretary used to 
calculate the final D/E rates under Sec.  668.404 or a comparable 
cohort period, provided that the institution may elect to exclude from 
the survey population all or some of the students excluded from the D/E 
rates calculation under Sec.  668.404(e).
    The Secretary will publish in the Federal Register an Earnings 
Survey Form developed by NCES. The Earnings Survey Form will be a 
pilot-tested universe survey that may be used by an institution in 
accordance with the survey standards, such as a required response rate 
or subsequent non-response bias analysis that the institution must meet 
to guarantee the validity and reliability of the results. Although use 
of the pilot-tested universe survey will not be required and the 
Earnings Survey Form will be provided by NCES only as a service to 
institutions, an institution that chooses not to use the Earnings 
Survey Form will be required to conduct its survey in accordance with 
the published NCES standards, including presenting to the survey 
respondent, in the same order and in the same manner, the same survey 
items included in the NCES Earnings Survey Form.
    Under the regulations, the institution will certify that the survey 
was conducted in accordance with the standards of the NCES Earnings 
Survey Form and submit an examination-level attestation engagement 
report prepared by an independent public accountant or independent 
governmental auditor, as appropriate. The attestation will be conducted 
in accordance with the attestation standards contained in the GAO's 
Government Auditing Standards promulgated by the Comptroller General of 
the United States and with procedures for attestations contained in 
guides developed by, and available from, the Department's Office of 
Inspector General.
    Burden Calculation: We estimate that for-profit institutions will 
have 1,225 gainful employment programs in the zone and that 718 
programs will be failing for a total of 1,943 programs. We expect that 
most institutions will determine that SSA data reflect accurately the 
earnings of students and will therefore not elect to conduct the 
survey. Accordingly, we estimate that for-profit institutions will 
submit alternate earnings appeals under the survey appeal option for 10 
percent of those programs, which will equal 194 appeals annually. We 
estimate that conducting the survey, providing the institutional 
certification, and obtaining the examination-level attestation 
engagement report will total, on average, 100 hours of increased 
burden, therefore burden will increase 19,400 hours (194 survey appeals 
times 100 hours) under OMB Control Number 1845-0122.
    We estimate that private-non-profit institutions will have 20 
gainful employment programs in the zone and that 8 programs will be 
failing for a total of 28 programs. We expect that most institutions 
will determine that SSA data reflect accurately the earnings of 
students and will therefore not elect to conduct the survey.
    Accordingly, we estimate that private non-profit institutions will 
submit alternate earnings appeals under the survey appeal option for 10 
percent of those programs, which will equal 3 appeals annually. We 
estimate that conducting the survey, providing the institutional 
certification, and obtaining the examination-level attestation 
engagement report will total, on average, 100 hours of increased 
burden, therefore burden will increase 300 hours (3 survey appeals 
times 100 hours) under OMB Control Number 1845-0122.
    We estimate that public institutions will have 8 gainful employment 
programs in the zone and that 3 programs will be failing for a total of 
11 programs. We expect that most

[[Page 64996]]

institutions will determine that SSA data reflect accurately the 
earnings of students and will therefore not elect to conduct the 
survey. Accordingly, we estimate that public institutions will submit 
alternate earnings appeals under the survey appeal option for 10 
percent of those programs, which will equal 1 appeal annually. We 
estimate that conducting the survey, providing the institutional 
certification, and obtaining the examination-level attestation 
engagement report will total, on average, 100 hours of increased 
burden, therefore burden will increase 100 hours (1 survey appeals 
times 100 hours) under OMB Control Number 1845-0122.
    Collectively, the projected burden associated with conducting an 
alternative earnings survey will increase burden by 19,800 hours under 
OMB Control Number 1845-0122.

State Data Systems

    An institution that wishes to submit an appeal by providing State 
data will include in the list it submits to the State or States all the 
students who completed the program during the same cohort period that 
the Secretary used to calculate the final D/E rates under Sec.  668.404 
or a comparable cohort period, provided that the institution may elect 
to exclude from the survey population all or some of the students 
excluded from the D/E rates calculated under Sec.  668.404(e). The 
earnings information obtained from the State or States must match 50 
percent of the total number of students included on the institution's 
list, and the number matched must be 30 or more.
    Burden Calculation: We estimate that there will be 718 failing GE 
programs at for-profit institutions and 1,225 programs in the zone, for 
a total of 1,943 programs. We expect that most institutions will 
determine that SSA data reflect accurately the earnings of students who 
completed a program and will therefore not elect to submit earnings 
data from a State-sponsored system. Accordingly, we estimate that in 10 
percent of those cases, institutions will obtain earnings data from a 
State-sponsored system, resulting in approximately 194 appeals.
    We estimate that, on average, each appeal will take 20 hours, 
including execution of an agreement for data sharing and privacy 
protection under the Family Educational Rights and Privacy Act (20 
U.S.C. 1232g) (FERPA) between the institution and a State agency (when 
the State agency is located in a State other than the State in which 
the institution resides), preparing the list(s), submitting the list(s) 
to the appropriate State agency, reviewing the results, calculating the 
revised D/E rates, and submitting those results to the Secretary. 
Therefore, burden will increase by 3,880 hours (194 State system 
appeals times 20 hours) under OMB Control Number 1845-0122.
    We estimate that there will be 8 failing GE programs at private 
non-profit institutions and 20 programs in the zone, for a total of 28 
programs. We expect that most institutions will determine that SSA data 
reflect accurately the earnings of students who completed a program and 
will therefore not elect to submit earnings data from a State-sponsored 
system. Accordingly, we estimate that in 10 percent of those cases, 
institutions will obtain earnings data from a State-sponsored system, 
resulting in 3 appeals.
    We estimate that, on average, each appeal will take 20 hours, 
including execution of an agreement for data sharing and privacy 
protection under FERPA between the institution and a State agency (when 
the State agency is located in a State other than the State in which 
the institution resides), preparing the list(s), submitting the list(s) 
to the appropriate State agency, reviewing the results, calculating the 
revised D/E rates, and submitting those results to the Secretary. 
Therefore burden will increase by 60 hours (3 State system appeals 
times 20 hours) under OMB Control Number 1845-0122.
    We estimate that there will be 3 failing GE programs at public 
institutions and 8 programs in the zone, for a total of 11 programs. We 
expect that most institutions will determine that SSA data reflect 
accurately the earnings of students who completed a program and will 
therefore not elect to submit earnings data from a State-sponsored 
system. Accordingly, we estimate that in 10 percent of those cases 
institutions will obtain earnings data from a State-sponsored system, 
resulting in approximately 1 appeal. We estimate that, on average, each 
appeal will take 20 hours, including execution of an agreement for data 
sharing and privacy protection under FERPA between the institution and 
a State agency (when the State agency is located in a State other than 
the State in which the institution resides), preparing the list(s), 
submitting the list(s) to the appropriate State agency, reviewing the 
results, calculating the revised D/E rates, and submitting those 
results to the Secretary. Therefore, burden will increase by 20 hours 
(1 State system appeal times 20 hours) under OMB Control Number 1845-
0122.
    Collectively, the projected burden associated with conducting an 
alternative earnings based on State data systems will increase burden 
by 3,960 hours under OMB Control Number 1845-0122.
    Requirements: Under the regulations, to pursue an alternate 
earnings appeal, the institution must notify the Secretary of its 
intent to submit an appeal. This notification must be made no earlier 
than the date the Secretary provides the institution with draft D/E 
rates and no later than 14 business days after the Secretary issues the 
final D/E rates.
    Burden Calculation: We estimated above that for-profit institutions 
will have 194 alternate earnings survey appeals and 194 State-sponsored 
data system appeals, for a total of 388 appeals per year. We estimate 
that completing and submitting a notice of intent to submit an appeal 
will take, on average, 0.25 hours per submission or 97 hours (388 
submissions times 0.25 hours) under OMB Control 1845-0122.
    We estimated above that private non-profit institutions will have 3 
alternate earnings survey appeals and 3 State-sponsored data system 
appeals, for a total of 6 appeals per year. We estimate that completing 
and submitting a notice of intent to submit an appeal will take, on 
average, 0.25 hours per submission or 2 hours (6 submissions times 0.25 
hours) under OMB Control 1845-0122.
    We estimated above that public institutions will have 1 alternate 
earnings survey appeal and 1 State-sponsored data system appeal, for a 
total of 2 appeals per year. We estimate that completing and submitting 
a notice of intent to submit an appeal will take, on average, 0.25 
hours per submission or 1 hour (2 submissions times 0.25 hours) under 
OMB Control 1845-0122.
    Collectively, the projected burden associated with completing and 
submitting a notice of intent will increase burden by 100 hours under 
OMB Control Number 1845-0122.
    The total increase in burden for Sec.  668.406 will be 23,860 hours 
under OMB Control Number 1845-0122.

Section 668.410 Consequences of the D/E Rates Measure

    Requirements: Under Sec.  668.410(a), we require institutions to 
provide warnings to students and prospective students in any year for 
which the Secretary notifies an institution that the program could 
become ineligible based on its final D/E rates measure for the next 
award year. Within 30 days after the date of the Secretary's notice of 
determination under Sec.  668.409, the institution must provide a 
written warning directly to each student enrolled in the program. To 
the extent practicable, an institution must provide this warning in 
other

[[Page 64997]]

languages for enrolled students for whom English is not their first 
language.
    In the warning, an institution must describe the options available 
to the student to continue his or her education in the event that the 
program loses its eligibility for title IV, HEA program funds. 
Specifically, the warning will inform the student of academic and 
financial options available to continue his or her education at the 
institution; whether the institution will allow the student to transfer 
to another program at the institution; continue to provide instruction 
in the program to allow the student to complete the program; whether 
the student's earned credits could be transferred to another 
institution; or refund the tuition, fees, and other required charges 
paid by, or on behalf of, the student to enroll in the program.
    Under Sec.  668.410(a)(5), an affected institution must provide a 
written warning by hand-delivering it individually or as part of a 
group presentation, or via email.
    Burden Calculation: We estimate that the written warnings will be 
hand-delivered to 10 percent of the affected students, delivered 
through a group presentation to another 10 percent of the affected 
students, and delivered through the student's primary email address 
used by the institution to the remaining 80 percent. Based upon 2009-
2010 reported data, 2,703,851 students were enrolled at for-profit 
institutions. Of that number, we estimate that 327,468 students were 
enrolled in zone programs and 844,488 students were enrolled in failing 
programs at for-profit institutions. Thus, the warnings will have to be 
provided to 1,171,956 students (327,468 students plus 844,488 students) 
enrolled in GE programs at for-profit institutions.
    Of the 1,171,956 projected number of warnings to be provided to 
enrolled students at for-profit institutions, we estimate that 117,196 
students (1,171,956 students times 10 percent) will receive the warning 
individually and that it will take on average 0.17 hours (10 minutes) 
per warning to print the warning, locate the student, and deliver the 
warning to each affected student. This will increase burden by 19,923 
hours (117,196 students times 0.17 hours) under OMB Control Number 
1845-0123.
    Of the 1,171,956 projected warnings to be provided to enrolled 
students at for-profit institutions, we estimate that 117,196 students 
(1,171,956 students times 10 percent) will receive the warning at a 
group presentation and that it will take on average 0.33 hours (20 
minutes) per warning to print the warning, conduct the presentation, 
and answer questions about the warning to each affected student. This 
will increase burden by 38,675 hours (117,196 times 0.33 hours) under 
OMB Control Number 1845-0123.
    Of the 1,171,956 projected warnings to be provided to enrolled 
students at for-profit institutions, we estimate that 937,564 students 
(1,171,956 students times 80 percent) will receive the warning via 
email and that it will take on average 0.017 hours (1 minute) per 
warning to send the warning to each affected student. This will 
increase burden by 15,939 hours (937,565 students times 0.017 hours) 
under OMB Control Number 1845-0123.
    Based upon 2009-2010 reported data, 57,700 students were enrolled 
at private non-profit institutions. Of that number of students, we 
estimate that 2,308 students will be enrolled in zone programs and 
5,423 students will be enrolled in failing programs at private non-
profit institutions. Thus, the warnings will have to be provided to 
7,731 students (2,308 students plus 5,423 students) enrolled in GE 
programs at private non-profit institutions.
    Of the 7,731 projected number of warnings to be provided to 
enrolled students at non-profit institutions, we estimate that 773 
students (7,731 students times 10 percent) will receive the warning 
individually and that it will take on average 0.17 hours (10 minutes) 
per warning to print the warning, locate the student, and deliver the 
warning to each affected student. This will increase burden by 131 
hours (773 students times 0.17 hours) under OMB Control Number 1845-
0123.
    Of the 7,731 projected warnings to be provided to enrolled students 
at non-profit institutions, we estimate that 773 students (7,731 
students times 10 percent) will receive the warning at a group 
presentation and that it will take on average 0.33 hours (20 minutes) 
per warning to print the warning, conduct the presentation, and answer 
questions about the warning to each affected student. This will 
increase burden by 255 hours (773 times 0.33 hours) under OMB Control 
Number 1845-0123.
    Of the 7,731 projected warnings to be provided to enrolled students 
at non-profit institutions, we estimate that 6,185 students (7,731 
students times 80 percent) will receive the warning via email and that 
it will take on average 0.017 hours (1 minute) per warning to send the 
warning to each affected student. This will increase burden by 105 
hours (6,185 students times 0.017 hours) under OMB Control Number 1845-
0123.
    Based upon 2009-2010 reported data, 276,234 students were enrolled 
at public institutions. Of that number of students, we estimate that 
628 students will be enrolled in zone programs and 13,178 students will 
be enrolled in failing programs at public institutions. Thus, the 
warnings will have to be provided to 13,806 students (628 students plus 
13,178 students) enrolled in GE programs at public institutions.
    Of the 13,806 projected number of warnings to be provided to 
enrolled students at public institutions, we estimate that 1,381 
students (13,806 students times 10 percent) will receive the warning 
individually and that it will take on average 0.17 hours (10 minutes) 
per warning to print the warning, locate the student, and deliver the 
warning to each affected student. This will increase burden by 235 
hours (1,381 students times 0.17 hours) under OMB Control Number 1845-
0123.
    Of the 13,806 projected warnings to be provided to enrolled 
students at public institutions, we estimate that 1,381 students 
(13,806 students times 10 percent) will receive the warning at a group 
presentation and that it will take on average 0.33 hours (20 minutes) 
per warning to print the warning, conduct the presentation, and answer 
questions about the warning to each affected student. This will 
increase burden by 456 hours (1,381 times 0.33 hours) under OMB Control 
Number 1845-0123.
    Of the 13,806 projected warnings to be provided to enrolled 
students at public institutions, we estimate that 11,044 students 
(13,806 students times 80 percent) will receive the warning via email 
and that it will take on average 0.017 hours (1 minute) per warning to 
send the warning to each affected student. This will increase burden by 
188 hours (11,044 students times 0.017 hours) under OMB Control Number 
1845-0123.
    Collectively, providing the warnings will increase burden by 75,907 
hours under OMB Control Number 1845-0123.
    Students will also be affected by the warnings. On average, given 
the alternatives available to institutions, we estimate that it will 
take each student 0.17 hours (10 minutes) to read the warning and ask 
any questions.
    Burden will increase by 199,233 hours (1,171,956 students times 
0.17 hours) for the students who will receive warnings from for-profit 
institutions under one of the three delivery options, under OMB Control 
Number 1845-0123.
    Burden will increase by 1,314 hours (7,731 students times 0.17 
hours) for the students who will receive warnings from private non-
profit institutions

[[Page 64998]]

under one of the three delivery options, under OMB Control Number 1845-
0123.
    Burden will increase by 2,347 hours (13,806 students times 0.17 
hours) for the students who will receive warnings from public 
institutions under one of the three delivery options, under OMB Control 
Number 1845-0123.
    Collectively, students reading the warning will increase burden by 
202,894 hours under OMB Control Number 1845-0123.
    Requirements: Under Sec.  668.410(a)(6)(ii), institutions must 
provide a warning about a possible loss of eligibility for title IV, 
HEA program funds directly to prospective students prior to their 
signing an enrollment agreement, registering, or making any financial 
commitment to the institution. The warning may be hand-delivered as a 
separate warning, or as part of a group presentation, or sent via email 
to the primary email address used by the institution for communicating 
with prospective students. To the extent practicable, an institution 
will have to provide this warning in other languages for those students 
and prospective students for whom English is not their first language.
    Burden Calculation: Most institutions will have to contact, or be 
contacted by, a larger number of prospective students to yield 
institutions' desired net enrollments. The magnitude of this activity 
will be different depending on the type and control of the institution, 
as detailed below.
    We estimate that the number of prospective students that must 
contact or be contacted by for-profit institutions will be 6 times the 
number of expected enrollments. As noted above, we estimate that 
1,171,956 students (327,468 students enrolled in zone programs plus 
844,488 students enrolled in failing programs) will be enrolled in 
programs at for-profit institutions that require a warning to students 
and prospective students. Therefore, for-profit institutions will be 
required to provide 7,031,736 warnings (1,171,956 times 6), with an 
estimated per student time of 0.10 hours (6 minutes) to deliver, 
increasing burden by 703,174 hours (7,031,736 prospective students 
times 0.10 hours) under OMB Control Number 1845-0123.
    We estimate that the number of prospective students that must 
contact or be contacted by private non-profit institutions will be 1.8 
times the number of expected enrollments. As noted above, we estimate 
that 7,731 students (2,308 students enrolled in zone programs plus 
5,423 students enrolled in failing programs) will be enrolled in 
programs at private non-profit institutions that require a warning to 
students and prospective students. Therefore, private non-profit 
institutions will be required to provide 13,916 warnings (7,731 
students times 1.8), with an estimated per student time of 0.10 hours 
(6 minutes) to deliver, increasing burden by 1,392 hours (13,916 
prospective students times 0.10 hours) under OMB Control Number 1845-
0123.
    We estimate that the number of prospective students that must 
contact or be contacted by public institutions will be 1.5 times the 
number of expected enrollments. As noted above, we estimate that 13,806 
students (628 students enrolled in zone programs plus 13,178 students 
enrolled in failing programs) will be enrolled in programs at public 
institutions that require a warning to students and prospective 
students. Therefore, public institutions will be required to provide 
20,709 warnings (13,806 students times 1.5), with an estimated per 
student time of 0.10 hours (6 minutes) to deliver, increasing burden by 
2,071 hours (20,709 prospective students times 0.10 hours) under OMB 
Control Number 1845-0123.
    Collectively, burden will increase by 706,637 hours under OMB 
Control Number 1845-0123.
    The prospective students will also be affected by the warnings. On 
average, given the alternatives available to institutions, we estimate 
that it will take each student 0.08 hours (5 minutes) to read the 
warning and ask any questions.
    Burden will increase by 562,539 hours (7,031,736 times 0.08 hours) 
for the prospective students who will receive warnings from for-profit 
institutions, under OMB Control Number 1845-0123.
    Burden will increase by 1,113 hours (13,916 times 0.08 hours) for 
the prospective students who will receive warnings from private non-
profit institutions, under OMB Control Number 1845-0123.
    Burden will increase by 1,657 hours (20,709 times 0.08 hours) for 
the prospective students who will receive warnings from public 
institutions, under OMB Control Number 1845-0123.
    Collectively, prospective students reading the warning will 
increase burden by 565,309 hours under OMB Control Number 1845-0123.
    Requirements: Under Sec.  668.410(a)(6)(ii)(B)(2), if more than 30 
days have passed from the date the initial warning is provided, the 
prospective student must be provided an additional written warning and 
may not enroll until three business days later.
    Burden Calculation: We estimate that 50 percent of students 
enrolling in a failing program will do so more than 30 days after 
receiving the initial prospective student warning. Burden for 
institutions will increase by 281,269 hours for the 3,515,868 students 
(7,031,736 prospective students times 50 percent times .08 hours) for 
whom for-profit institutions must provide subsequent warnings.
    Burden will increase by 557 hours for the 6,958 students (13,916 
prospective students times 50 percent times .08 hours) for whom private 
non-profit institutions will provide subsequent warnings.
    Burden will increase by 828 hours for the 10,355 students (20,709 
prospective students times 50 percent times .08 hours) for whom public 
institutions will provide subsequent warnings.
    Collectively, subsequent warning notices will increase burden by 
282,654 hours under OMB Control Number 1845-0123.
    Similarly, it will take the recipients of subsequent warnings time 
to read the second warning. Burden for students will increase by 
281,269 hours for the 3,515,868 students (7,031,736 prospective 
students times 50 percent times .08 hours) to read the subsequent 
warnings from for-profit institutions, OMB Control Number 1845-0123.
    Burden will increase by 557 hours for the 6,958 students (13,916 
prospective students times 50 percent times .08 hours) to read the 
subsequent warnings from private non-profit institutions.
    Burden will increase by 828 hours for the 10,355 students (20,709 
prospective students times 50 percent times .08 hours) to read the 
subsequent warnings from public institutions.
    Collectively, burden to students to read the subsequent warnings 
will increase by 282,654 hours under OMB Control Number 1845-0123.
    The total increase in burden for Sec.  668.410 will be 2,116,055 
hours under OMB Control Number 1845-0123.

Section 668.411 Reporting Requirements for GE Programs

    Requirements: Under Sec.  668.411, institutions will report, for 
each student enrolled in a GE program during an award year who received 
title IV, HEA program funds for enrolling in that program: (1) 
Information needed to identify the student and the institution the 
student attended; (2) the name, CIP code, credential level, and length 
of the GE program; (3) whether the GE program is a medical or dental 
program whose students are required to complete an internship or 
residency; (4) the date the student initially enrolled in the GE

[[Page 64999]]

program; (5) the student's attendance dates and attendance status in 
the GE program during the award year; and (6) the student's enrollment 
status as of the first day of the student's enrollment in the GE 
program.
    Further, if the student completed or withdrew from the GE program 
during the award year, the institution will report: (1) The date the 
student completed or withdrew; (2) the total amount the student 
received from private education loans for enrollment in the GE program 
that the institution is, or should reasonably be, aware of; (3) the 
total amount of institutional debt the student owes any party after 
completing or withdrawing from the GE program; (4) the total amount for 
tuition and fees assessed the student for the student's entire 
enrollment in the program; and (5) the total amount of allowances for 
books, supplies, and equipment included in the student's title IV, Cost 
of Attendance for each award year in which the student was enrolled in 
the program, or a higher amount if assessed by the institution to the 
student.
    By July 31 of the year the regulations take effect, institutions 
will be required to report this information for the second through 
seventh award years prior to that date. For medical and dental programs 
that require an internship or residency, institutions will need to 
include the eighth award year no later than July 31. For all subsequent 
award years, institutions will report not later than October 1, 
following the end of the award year, unless the Secretary establishes a 
different date in a notice published in the Federal Register. The 
regulations give the Secretary the flexibility to identify additional 
reporting items, or to specify a reporting deadline different than 
October 1, in a notice published in the Federal Register.
    Finally, the regulations will require institutions to provide the 
Secretary with an explanation of why any missing information is not 
available.
    Burden Calculation: There are 2,526 for-profit institutions that 
offer one or more GE programs. We estimate that, on average, it will 
take 6 hours for each of those institutions to modify or develop manual 
or automated systems for reporting under Sec.  668.411. Therefore 
burden will increase for these institutions by 15,156 hours (2,526 
institutions times 6 hours).
    There are 318 private non-profit institutions that offer one or 
more GE programs. We estimate that, on average, it will take 6 hours 
for each of those institutions to modify or develop manual or automated 
systems for reporting under Sec.  668.411. Therefore burden will 
increase for these institutions by 1,908 hours (318 institutions times 
6 hours).
    There are 1,117 public institutions that offer one or more GE 
programs. We estimate that, on average, it will take 6 hours for each 
of those institutions to modify or develop manual or automated systems 
for reporting under Sec.  668.411. Therefore burden will increase for 
these institutions by 6,702 hours (1,117 institutions times 6 hours).
    Collectively, burden to develop systems for reporting will increase 
by 23,766 hours (under OMB Control Number 1845-0123.
    Requirements: Under Sec.  668.411(a)(3), if an institution is 
required by its accrediting agency or State to calculate a placement 
rate for either the institution or the program, or both, the 
institution is required to report to the Department the required 
placement rate, using the required methodology, and to report the name 
of the accrediting agency or State.
    Burden Calculation: The Department will be developing a database to 
collect this data. Therefore, under the Paperwork Reduction Act, the 
Department will construct an information collection (IC) closer to the 
time of system development which the public will have an opportunity to 
provide comment prior to the IC's submission to OMB for approval.
    Requirements: Section 668.411(b) requires that, by no later than 
July 31 of the year the regulations take effect, institutions report 
the information required by Sec.  668.411(a) for the second through 
seventh award years prior to that date. For medical and dental programs 
that require an internship or residency, institutions will need to 
include the eighth completed award year prior to July 31.
    Burden Calculation: According to our analysis of previously 
reported GE program enrollment data, there were 2,703,851 students 
enrolled in GE programs offered by for-profit institutions during the 
2009-2010 award year. Based on budget baseline estimates as provided in 
the general background information, we estimate that enrollment in GE 
programs at for-profit institutions for 2008-2009 was 2,219,280. Going 
forward, we estimate that enrollment in GE programs at for-profit 
institutions for 2010-2011 was 2,951,154, for 2011-2012 enrollment was 
2,669,084, for 2012-2013 enrollment was 2,426,249, and for 2013-2014 
enrollment will be 2,227,230. This results in a total of 15,196,848 
enrollments.
    We estimate that, on average, the reporting of GE program 
information by for-profit institutions will take 0.03 hours (2 minutes) 
per student as we anticipate that, for most for-profit institutions, 
reporting will be an automated process. Therefore, GE reporting by for-
profit institutions will increase burden by 455,905 hours (15,196,848 
students times .03 hours) in OMB Control Number 1845-0123.
    According to our analysis of previously reported GE program 
enrollment data, there were 57,700 students enrolled in GE programs 
offered by private non-profit institutions during the 2009-2010 award 
year. Based on budget baseline estimates as provided in the general 
background information, we estimate that enrollment in GE programs at 
private non-profit institutions for 2008-2009 was 49,316. Going 
forward, we estimate that enrollment in GE programs at private non-
profit institutions for 2010-2011 was 67,509, for 2011-2012 enrollment 
was 73,585, for 2012-2013 enrollment was 70,641, and for 2013-2014 
enrollment will be 65,697. This results in a total of 384,448 
enrollments.
    We estimate that, on average, the reporting of GE program 
information by private non-profit institutions will take 0.03 hours (2 
minutes) per student as we anticipate that, for most private non-profit 
institutions, reporting will be an automated process. Therefore, GE 
reporting by private non-profit institutions will increase burden by 
11,533 hours (384,448 students times .03 hours) in OMB Control Number 
1845-0123.
    According to our analysis of previously reported GE program 
enrollment data, there were 276,234 students enrolled in GE programs 
offered by public institutions during the 2009-2010 award year. Based 
on budget baseline estimates as provided in the general background 
information, we estimate that enrollment in GE programs at public 
institutions for 2008-2009 was 236,097. Going forward, we estimate that 
enrollment in GE programs at public institutions for 2010-2011 was 
323,194, for 2011-2012 enrollment was 352,281, for 2012-2013 enrollment 
was 338,190, and for 2013-2014 enrollment will be 314,517. This results 
in a total of 1,840,513 enrollments.
    We estimate that, on average, the reporting of GE program 
information by public institutions will take 0.03 hours (2 minutes) per 
student as we anticipate that, for most public institutions, reporting 
will be an automated process. Therefore, GE reporting by public 
institutions will increase burden by 55,215 hours (1,840,513 students 
times .03 hours) in OMB Control Number 1845-0123.

[[Page 65000]]

    Collectively, we estimate that burden upon institutions to meet the 
initial reporting requirements under Sec.  668.411 will increase burden 
by 522,653 hours in OMB Control Number 1845-0123.
    The total increase in burden for Sec.  668.411 will be 546,419 
hours under OMB Control Number 1845-0123.

Section 668.412 Disclosure Requirements for GE Programs

    Requirements: Section 668.412 requires institutions to disclose 
items, using the disclosure template provided by the Secretary. Under 
Sec.  668.412, the Department has flexibility to tailor the disclosure 
in a way that will be most useful to students and minimize burden to 
institutions.
    These disclosure items could include items described in Sec.  
668.412(a)(1) through (16).
    The Secretary will conduct consumer testing to determine how to 
make the disclosures as meaningful as possible. After we have the 
results of the consumer testing, each year the Secretary will identify 
which of these items institutions must include in their disclosures, 
along with any other information that must be included, and publish 
those requirements in a notice in the Federal Register.
    Institutions must update their GE program disclosure information 
annually. They must make it prominently available in their promotional 
materials and make it prominent, readily accessible, clear, 
conspicuous, and directly available on any Web page containing 
academic, cost, financial aid, or admissions information about a GE 
program.
    An institution that offers a GE program in more than one program 
length must publish a separate disclosure template for each length of 
the program.
    Burden Calculation: We estimate that of the 37,589 GE programs that 
reported enrollments in the past, 12,250 programs will be offered by 
for-profit institutions. We estimate that, annually, the amount of time 
it will take to collect the data from institutional records, from 
information provided by the Secretary, and from the institution's 
accreditor or State, and the amount of time it will take to ensure that 
promotional materials either include the disclosure information or 
provide a Web address or direct link to the information will be, on 
average, 4 hours per program. Additionally, we estimate that revising 
the institution's Web pages used to disseminate academic, cost, 
financial aid, or admissions information to also contain the disclosure 
information about the program will, on average, increase burden by an 
additional 1 hour per program. Therefore, burden will increase by 5 
hours per program for a total of 61,250 hours of increased burden 
(12,250 programs times 5 hours per program) under OMB Control Number 
1845-0123.
    We estimate that of the 37,589 GE programs that reported 
enrollments in the past, 2,343 programs will be offered by private non-
profit institutions. We estimate that, annually, the amount of time it 
will take to collect the data from institutional records, from 
information provided by the Secretary, and from the institution's 
accreditor or State, and the amount of time it will take to ensure that 
promotional materials either include the disclosure information or 
provide a Web address or direct link to the information will be, on 
average, 4 hours per program. Additionally, we estimate that revising 
the institution's Web pages used to disseminate academic, cost, 
financial aid, or admissions information about the program to also 
contain the disclosure information will, on average, increase burden by 
an additional 1 hour per program. Therefore, burden will increase by 5 
hours per program for a total of 11,715 hours of increased burden 
(2,343 programs times 5 hours per program) under OMB Control Number 
1845-0123.
    We estimate that of the 37,589 GE programs that reported 
enrollments in the past, 22,996 programs will be offered by public 
institutions. We estimate that the amount of time it will take to 
collect the data from institutional records, from information provided 
by the Secretary, and from the institution's accreditor or State, and 
the amount of time it will take to ensure that promotional materials 
either include the disclosure information or provide a Web address or 
direct link to the information will be, on average, 4 hours per 
program. Additionally, we estimate that revising the institution's Web 
pages used to disseminate academic, cost, financial aid, and admissions 
information about the program to also contain the disclosure 
information will, on average, increase burden by an additional 1 hour 
per program. Therefore, on average, burden will increase by 5 hours per 
program for a total of 114,980 hours of increased burden (22,996 
programs times 5 hours per program) under OMB Control Number 1845-0123.
    Collectively, we estimate that burden will increase by 187,945 
hours in OMB Control Number 1845-0123.
    Under Sec.  668.412(e), an institution must provide, as a separate 
document, a copy of the disclosure information to a prospective 
student. Before a prospective student signs an enrollment agreement, 
completes registration at, or makes a financial commitment to the 
institution, the institution must obtain written acknowledgement from 
the prospective student that he or she received the copy of the 
disclosure information.
    We estimate that the enrollment in the 12,250 GE programs offered 
by for-profit institutions for 2013-2014 included 2,227,230 prospective 
students. As noted earlier, most institutions will have to contact, or 
be contacted by, a larger number of prospective students to yield 
institutions' desired net enrollments.
    We estimate that the number of prospective students that must 
contact or be contacted by for-profit institutions will be 6 times the 
number of expected enrollment. As noted above, we estimate that 
13,363,380 (2,227,230 students for 2013-2014 times 6) students will be 
enrolled in GE programs at for-profit institutions. Therefore, for-
profit institutions will be required to provide 13,363,380 disclosures 
to prospective students. On average, we estimate that it will take 
institutional staff 0.03 hours (2 minutes) per prospective student to 
provide a copy of the disclosure information which can be hand-
delivered, delivered as part of a group presentation, or by sending the 
disclosure template via the institution's primary email address (used 
to communicate with students and prospective students). We also 
estimate that, on average, it will take institutional staff 0.10 hours 
(6 minutes) to obtain written acknowledgement and answer any questions 
from each prospective student. Therefore, we estimate that the total 
burden associated with providing the disclosure information and 
obtaining written acknowledgement by for-profit institutions will be 
0.13 hours (8 minutes) per prospective student. Burden will increase by 
1,737,239 hours for for-profit institutions (13,363,380 prospective 
students times 0.13 hours) under OMB Control Number 1845-0123.
    We estimate that the burden on each prospective student will be 
0.08 hours (5 minutes) to read the disclosure information and provide 
written acknowledgement of receipt. Burden will increase by 1,069,070 
hours for prospective students at for-profit institutions (13,363,380 
prospective students times 0.08 hours) under OMB Control Number 1845-
0123.
    We estimate that the enrollment in the 2,343 GE programs offered by 
private non-profit institutions for 2013-2014 included 65,697 
prospective students. As noted earlier, most institutions will

[[Page 65001]]

have to contact, or be contacted by, a larger number of prospective 
students to yield their enrollments.
    We estimate that the number of prospective students that must 
contact or be contacted by private non-profit institutions will be 1.8 
times the number of expected enrollment. As noted above we estimate 
that 65,697 students will be enrolled in GE programs at private non-
profit institutions. Therefore, private non-profit institutions will be 
required to provide 118,255 disclosures (65,697 times 1.8) to 
prospective students. On average, we estimate that it will take 
institutional staff 0.03 hours (2 minutes) per prospective student to 
provide a copy of the disclosure information which can be hand-
delivered, delivered as a part of a group presentation, or by sending 
the disclosure template via the institution's primary email address 
(used to communicate with students and prospective students). We also 
estimate that, on average, it will take institutional staff 0.10 hours 
(6 minutes) to obtain written acknowledgement and answer any questions 
from each prospective student. Therefore, we estimate that the total 
burden associated with providing the disclosure information and 
obtaining written acknowledgement by private-non-profit institutions 
will be 0.13 hours (8 minutes) per prospective student. Burden will 
increase by 15,373 hours for private non-profit institutions (118,255 
prospective students times 0.13 hours) under OMB Control Number 1845-
0123.
    We estimate that the burden on each prospective student will be 
0.08 hours (5 minutes) to read the disclosure information and provide 
written acknowledgement of receipt. Burden will increase by 9,460 hours 
for prospective students at private non-profit institutions (118,255 
prospective students times 0.08 hours) under OMB Control Number 1845-
0123.
    We estimate that the enrollment in the 22,996 GE programs offered 
by public institutions for 2013-2014 included 314,517 prospective 
students. As noted earlier, most institutions will have to contact, or 
be contacted by, a larger number of prospective students to yield their 
enrollments.
    We estimate that the number of prospective students that must 
contact or be contacted by public institutions will be 1.5 times the 
number of expected enrollment. As noted above, we estimate that 314,517 
students will be enrolled in GE programs at public institutions. 
Therefore, public institutions will be required to provide 471,776 
disclosures (314,517 times 1.5) to prospective students. On average, we 
estimate that it will take institutional staff 0.03 hours (2 minutes) 
per prospective student to provide a copy of the disclosure information 
which can be hand-delivered, delivered as part of a group presentation, 
or by sending the disclosure template via the institution's primary 
email address (used to communicate to students and prospective 
students). We also estimate that, on average, it will take 
institutional staff 0.10 hours (6 minutes) to obtain written 
acknowledgement and answer any questions from each prospective student. 
Therefore, we estimate that the total burden associated with providing 
the disclosure information and obtaining written acknowledgement by 
public institutions will be 0.13 hours (8 minutes) per prospective 
student. Burden will increase by 61,331 hours for public institutions 
(471,776 prospective students times 0.13 hours) under OMB Control 
Number 1845-0123.
    We estimate that the burden on each prospective student will be 
0.08 hours (5 minutes) to read the disclosure information and provide 
written acknowledgement of receipt. Burden will increase by 37,742 
hours for prospective students at public institutions (471,776 
prospective students times 0.08 hours) under OMB Control Number 1845-
0123.
    Collectively, burden will increase by 2,930,215 hours under OMB 
Control Number 1845-0123.
    The total increase in burden for Sec.  668.412 will be 3,118,160 
hours under OMB Control Number 1845-0123.

Section 668.413 Calculating, Issuing, and Challenging Completion Rates, 
Withdrawal Rates, Repayment Rates, Median Loan Debt, Median Earnings, 
and Program Cohort Default Rate

    Requirements: As discussed in connection with Sec.  668.412, an 
institution will be required to disclose, among other information, 
completion and withdrawal rates, repayment rates, and median loan debt 
and median earnings for a GE program. Using the procedures in Sec.  
668.413 and based partially on the information that an institution will 
report under Sec.  668.411, the Secretary will calculate and make 
available to the institution for disclosure: Completion rates, 
withdrawal rates, repayment rates, median loan debt, and median 
earnings for a GE program.
    An institution will have an opportunity to correct the list of 
students who withdrew from a GE program and the list of students who 
completed or withdrew from a GE program prior to the Secretary sending 
the lists to SSA for earnings information.
    For the median earnings calculation under Sec. Sec.  668.413(b)(9) 
and (b)(10), after the Secretary provides a list of the relevant 
students to the institution, the institution may provide evidence 
showing that a student should be included on the list or removed from 
the list as a result of meeting the definitions of an exclusion under 
Sec.  668.413(b)(11). The institution may also correct or update a 
student's identity information or attendance information on the list.
    Burden Calculation: For the 12,250 GE programs at for-profit 
institutions, we estimate, on average, that it will take institutional 
staff 2 hours to review each of the two lists to determine whether a 
student should be included or excluded under Sec.  668.413(b)(11) and, 
if included, whether the student's identity information or attendance 
information requires correction, and then to obtain the evidence to 
substantiate any inclusion, exclusion, or correction. Burden will 
increase by 49,000 hours (12,250 programs times 2 lists times 2 hours) 
under OMB Control Number 1845-0123.
    For the 2,343 GE programs at private non-profit institutions, we 
estimate, on average, that it will take institutional staff 2 hours to 
review each of the two lists to determine whether a student should be 
included or excluded and, if included, whether the student's identity 
information or attendance information requires correction, and then to 
obtain the evidence to substantiate any inclusion, exclusion, or 
correction. Burden will increase by 9,372 hours (2,343 programs times 2 
lists times 2 hours) under OMB Control Number 1845-0123.
    For the 22,996 GE programs at public institutions, we estimate, on 
average, that it will take institutional staff 2 hours to review each 
of the two lists to determine whether a student should be included or 
excluded and, if included, whether the student's identity information 
or attendance information requires correction, and then to obtain the 
evidence to substantiate any inclusion, exclusion, or correction. 
Burden will increase by 91,984 hours (22,996 programs times 2 lists 
times 2 hours) under OMB Control Number 1845-0123.
    Collectively, burden will increase by 150,356 hours under OMB 
Control Number 1845-0123.
    Under Sec.  668.413(d)(1), an institution may challenge the 
Secretary's calculation of the draft completion rates, withdrawal 
rates, repayment rates, and median loan debt.

[[Page 65002]]

    The Secretary will develop the completion rates, withdrawal rates, 
repayment rates, and median loan debt calculations for each of the 
estimated 12,250 GE programs at for-profit institutions. For the 
purpose of challenging the completion, withdrawal, and repayment rates 
and median loan debt we estimate that, on average, it will take 
institutional staff 20 hours per program to review the calculations, 
compare the data to institutional records, and determine whether 
challenges need to be made to the calculations. Therefore, burden will 
increase by 245,000 hours (12,250 programs times 20 hours) under OMB 
Control Number 1845-0123.
    The Secretary will develop the completion rates, withdrawal rates, 
repayment rates, and median loan debt calculations for each of the 
estimated 2,343 GE programs at private non-profit institutions. For the 
purpose of challenging the completion, withdrawal, and repayment rates 
and median loan debt we estimate that, on average, it will take 
institutional staff 20 hours per program to review the calculations, 
compare the data to institutional records, and determine whether 
challenges need to be made to the calculations. Therefore, burden will 
increase by 46,860 hours (2,343 programs times 20 hours) under OMB 
Control Number 1845-0123.
    The Secretary will develop the completion rates, withdrawal rates, 
repayment rates, and median loan debt calculations for each of the 
estimated 22,996 GE programs at public institutions. For the purpose of 
challenging the completion, withdrawal, and repayment rates and median 
loan debt we estimate that, on average, it will take institutional 
staff 20 hours per program to review the calculations, compare the data 
to institutional records, and determine whether challenges need to be 
made to the calculations. Therefore, burden will increase by 459,920 
hours (22,996 times 20 hours) under OMB Control Number 1845-0123.
    Collectively, burden will increase by 751,780 under OMB Control 
Number 1845-0123.
    The total increase in burden for Sec.  668.413 will be 902,136 
under OMB Control Number 1845-0123.

Section 668.414 Certification Requirements for GE Programs

    Requirements: Under Sec.  668.414(a) each institution participating 
in the title IV, HEA programs will be required to provide a 
''transitional certification'' to supplement its current program 
participation agreement (PPA). The transitional certification will be 
submitted no later than December 31 of the year in which the 
regulations take effect. The transitional certification will be signed 
by the institution's most senior executive officer that each of its 
currently eligible GE programs included on its Eligibility and 
Certification Approval Report meets the GE program eligibility 
certification requirements of this section and will update within 10 
days if there are any changes in the approvals for a program, or other 
changes that make an existing certification inaccurate. Under Sec.  
668.414(d), the certification will provide that each GE program meets 
certain requirements (PPA certification requirements), specifically 
that each GE program is:
    1. Approved by a recognized accrediting agency, is included in the 
institution's accreditation, or is approved by a recognized State 
agency for the approval of public postsecondary vocational education in 
lieu of accreditation;
    2. Programmatically accredited, if required by a Federal 
governmental entity or required by a governmental entity in the State 
in which the institution is located or in which the institution is 
otherwise required to obtain State approval under 34 CFR 600.9; and
    3. Satisfies licensure or certification requirements in the State 
where the institution is located or in which the institution is 
otherwise required to obtain State approval, each eligible program it 
offers satisfies the applicable educational prerequisites for 
professional licensure or certification requirements in that State so 
that the student who completes the program and seeks employment in that 
State qualifies to take any licensure or certification exam that is 
needed for the student to practice or find employment in an occupation 
that the program prepares students to enter.
    A program is substantially similar to another program if the two 
programs share the same four-digit CIP code. The Secretary presumes a 
program is not substantially similar to another program if the two 
programs have different four-digit CIP codes, but the institution must 
provide an explanation of how the new program is not substantially 
similar to an ineligible or voluntarily discontinued program with its 
certification under Sec.  668.414.
    Burden Calculation: We estimate that it will take the 2,526 for-
profit institutions that offer GE programs 0.5 hours to draft a 
certification statement and obtain the signature of the institution's 
senior executive for submission to the Department and, when applicable, 
provide an explanation of how a new program is not substantially 
similar to an ineligible or voluntarily discontinued program. This will 
increase burden by 1,263 hours (2,526 institutions times 0.5 hours) 
under OMB Control Number 1845-0123.
    We estimate that it will take the 318 private non-profit 
institutions that offer GE programs 0.5 hours to draft a certification 
statement and obtain the signature of the institution's senior 
executive for submission to the Department and, when applicable, 
provide an explanation of how a new program is not substantially 
similar to an ineligible or voluntarily discontinued program. This will 
increase burden by 159 hours (318 institutions times 0.5 hours) under 
OMB Control Number 1845-0123.
    We estimate that it will take the 1,117 public institutions that 
offer GE programs 0.5 hours to draft a certification statement and 
obtain the signature of the institution's senior executive for 
submission to the Department and, when applicable, provide an 
explanation of how a new program is not substantially similar to an 
ineligible or voluntarily discontinued program. This will increase 
burden by 559 hours (1,117 institutions times 0.5 hours) under OMB 
Control Number 1845-0123.
    The total increase in burden for Sec.  668.414 will be 1,981 hours 
under OMB Control Number 1845-0123.

Subpart R--Program Cohort Default Rates

    Requirements: Under subpart R, the Secretary will calculate a GE 
program's cohort default rate using a structure that will generally 
mirror the structure of the iCDR regulations in subpart N of part 668 
of the regulations. Thus, depending on the pCDR of a program, an 
institution will have the opportunity to submit a challenge, request an 
adjustment, or appeal the pCDR. Detailed information about each of 
these opportunities and our burden assessments follow. For all requests 
for challenges, adjustments, or appeals, institutions will receive a 
loan record detail report (LRDR) provided by the Department.
    Burden Calculation: The pCDR regulations in subpart R, although 
specific to programs, generally mirror the structure of the 
institutional cohort default rate (iCDR) regulations in subpart N of 
part 668 of the regulations. However, because pCDR is used as a 
potential disclosure, and not as a standard for assessing eligibility 
(as with iCDR), the available appeals are

[[Page 65003]]

limited to factual corrections and challenges and the burden 
assessments that follow recognize that, although institutions will have 
the option of submitting challenges, requests for adjustments, and 
certain appeals for all of their GE programs in every year for which we 
calculate a pCDR, institutions will in all likelihood exercise those 
rights only in those instances in which we calculate a pCDR rate of 20 
percent or higher.
    Of the 6,815 GE programs that we estimate will be evaluated for 
pCDR, we estimate that 943 programs will have rates of 30 percent or 
more and therefore have the highest likelihood of having pCDR 
challenges, adjustments, or appeals. In addition, we estimate that half 
of the 1,840 GE programs with a pCDR rate of 20 percent to 29.9 percent 
will also make challenges, request adjustments, or submit appeals, 
adding another 920 programs to the 943 that had rates of 30 percent or 
more for a total of 1,863 programs. We estimate that 92 percent of the 
1,863 will be GE programs at for-profit institutions, 3 percent will be 
GE programs at private non-profit institutions, and 5 percent will be 
GE programs at public institutions.
    We used an analysis of the FY 2011 iCDR data to estimate the 
percentage of the possible 1,863 programs where a challenge, adjustment 
request, or appeal may be submitted. Those percentages varied by the 
type of challenge, adjustment, or appeal, as indicated in each of the 
regulatory sections that follow and are used to project the 
distribution of pCDR challenges, adjustments, and appeals.

Section 668.504 Draft Cohort Program Default Rates and Your Ability To 
Challenge Before Official Program Cohort Default Rates Are Issued

    Requirements: Incorrect Data Challenges: Under Sec.  668.504(b), 
the institution may challenge the accuracy of the data included on the 
LRDR by sending an incorrect data challenge to the relevant data 
manager(s) within 45 days of receipt of the LRDR from the Department. 
The challenge will include a description of the information in the LRDR 
that the institution believes is incorrect along with supporting 
documentation.
    Burden Calculation: Based upon FY 2011 submissions, there were 353 
iCDR challenges for incorrect data of a total of 510 challenges, 
requests for adjustments, and appeals, a 69 percent submission rate. 
Therefore 69 percent of the projected 1,863 challenges, adjustments, 
and appeals, or 1,285, are projected to be challenges for incorrect 
data.
    We estimate that out of the likely 1,285 submissions, 1,182 (92 
percent) will be from for-profit institutions. We estimate that the 
average institutional staff time needed to review a GE program's LRDR 
for each of these 1,182 programs and to gather and prepare incorrect 
data challenges will be 4 hours (1.5 hours for list review and 2.5 
hours for documentation submission). This will increase burden by 4,728 
hours (1,182 programs times 4 hours) under OMB Control Number 1845-
0121.
    We estimate that out of the likely 1,285 submissions, 39 (3 
percent) will be from private non-profit institutions. We estimate that 
the average institutional staff time needed to review a GE program's 
LRDR for each of these 39 programs and to gather and prepare the 
challenges will be 4 hours (1.5 hours for list review and 2.5 hours for 
documentation submission). This will increase burden by 156 hours (39 
programs times 4 hours) under OMB Control Number 1845-0121.
    We estimate that, out of the likely 1,285 submissions, 64 (5 
percent) will be from public institutions. We estimate that the average 
institutional staff time needed to review a GE program's LRDR for each 
of these 64 programs and to gather and prepare the challenges will be 4 
hours (1.5 hours for list review and 2.5 hours for documentation 
submission). This will increase burden by 256 hours (64 programs times 
4 hours) under OMB Control Number 1845-0121.
    The total increase in burden for Sec.  668.504 will be 5,140 hours 
under OMB Control Number 1845-0121.

Section 668.509 Uncorrected Data Adjustments

    Requirements: An institution may request an uncorrected data 
adjustment for the most recent cohort of borrowers used to calculate a 
GE program's most recent official pCDR, if in response to the 
institution's incorrect data challenge, a data manager agreed correctly 
to change data but the changes were not reflected in the official pCDR.
    Burden Calculation: Based upon FY 2011 submissions, there were 116 
uncorrected data adjustments of the total 510 challenges, requests for 
adjustments, and appeals. Therefore, 23 percent of the projected 943 
challenges, adjustments, and appeals or 217 are projected to be 
uncorrected data adjustments.
    We estimate that the average institutional staff time needed is 1 
hour for list review and 0.5 hours for documentation submission, for a 
total of 1.5 hours.
    We estimate that 200 (92 percent) of the 217 projected uncorrected 
data adjustments will be from for-profit institutions. Therefore, 
burden will increase at for-profit institutions by 300 hours (200 
adjustments times 1.5 hours) under OMB Control Number 1845-0121.
    We estimate that 6 (3 percent) of the 217 projected uncorrected 
data adjustments will be from private non-profit institutions. 
Therefore, burden will increase at private non-profit institutions by 9 
hours (6 adjustments times 1.5 hours) under OMB Control Number 1845-
0121.
    We estimate that 11 (5 percent) of the 217 projected uncorrected 
data adjustments will be from public institutions. Therefore, burden 
will increase at public institutions by 17 hours (11 adjustments times 
1.5 hours) under OMB Control Number 1845-0121.
    The total increase in burden for Sec.  668.509 will be 326 hours 
under OMB Control Number 1845-0121.

Section 668.510 New Data Adjustments

    Requirements: An institution could request a new data adjustment 
for the most recent cohort of borrowers used to calculate the most 
recent official pCDR for a GE program, if a comparison of the LRDR for 
the draft rates and the LRDR for the official rates shows that data 
have been newly included, excluded, or otherwise changed and the errors 
are confirmed by the data manager.
    Burden Calculation: Based upon FY 2011 submissions, there were 12 
new data adjustments of the total 510 challenges, requests for 
adjustments, and appeals. Therefore, 2 percent of the projected 943 
challenges, adjustments, and appeals or 19 are projected to be new data 
adjustments. We estimate that the average institutional staff time 
needed is 3 hours for list review and 1 hour for documentation 
submission, for a total of 4 hours.
    We estimate that 17 (92 percent) of the 19 projected new data 
adjustments will be from for-profit institutions. Therefore, burden 
will increase at for-profit institutions by 68 hours (17 adjustments 
times 4 hours) under OMB Control Number 1845-0121.
    We estimate that 1 (3 percent) of the 19 projected new data 
adjustments will be from private non-profit institutions. Therefore, 
burden will increase at private non-profit institutions by 4 hours (1 
adjustment times 4 hours) under OMB Control Number 1845-0121.
    We estimate that 1 (5 percent) of the 19 projected new data 
adjustments will be from public institutions. Therefore,

[[Page 65004]]

burden will increase at public institutions by 4 hours (1 adjustment 
times 4 hours) under OMB Control Number 1845-0121.
    The total increase in burden for Sec.  668.510 will be 76 hours 
under OMB Control Number 1845-0121.

Section 668.511 Erroneous Data Appeals

    Requirements: An institution could appeal the calculation of a pCDR 
if it disputes the accuracy of data that was previously challenged 
under Sec.  668.504(b) (challenge for incorrect data) or if a 
comparison of the LRDR that we provided for the draft rate and the 
official rate shows that data have been newly included, excluded, or 
otherwise changed, and the accuracy of the data has been disputed. The 
institution must send a request for verification of data to the 
applicable data manager(s) within 15 days of receipt of the notice of 
the official pCDR, and it must include a description of the incorrect 
information and all supporting documentation to demonstrate the error.
    Burden Calculation: Based upon the fact that in FY 2011 there were 
no iCDR erroneous data appeals, we have no basis to establish erroneous 
data appeals burden for pCDRs.

Section 668.512 Loan Servicing Appeals

    Requirements: An institution could appeal the calculation of a pCDR 
on the basis of improper loan servicing or collection.
    Burden Calculation: Based upon FY 2011 submissions, there were 19 
loan servicing appeals of the total 510 challenges, requests for 
adjustments, and appeals. Therefore, 4 percent or 38 of the projected 
943 challenges, adjustments, and appeals are projected to be loan 
servicing appeals. We estimate that, on average, to gather, analyze, 
and submit the necessary documentation, each appeal will take 3 hours.
    We estimate that 35 (92 percent) of the 38 projected loan servicing 
appeals will be from for-profit institutions. Therefore, burden will 
increase at for-profit institutions by 105 hours (35 servicing appeals 
times 3 hours) under OMB Control Number 1845-0121.
    We estimate that 1 (3 percent) of the 38 projected loan servicing 
appeals will be from private non-profit institutions. Therefore, burden 
will increase at private non-profit institutions by 3 hours (1 
servicing appeal times 3 hours) under OMB Control Number 1845-0121.
    We estimate that 2 (5 percent) of the 38 projected loan servicing 
appeals will be from public institutions. Therefore, burden will 
increase at public institutions by 6 hours (2 servicing appeals times 3 
hours) under OMB Control Number 1845-0121.
    The total increase in burden for Sec.  668.512 will be 114 hours 
under OMB Control Number 1845-0121.
    Consistent with the discussion above, the following chart describes 
the sections of the regulations involving information collections, the 
information being collected, the collections that the Department will 
submit to OMB for approval and public comment under the PRA, and the 
estimated costs associated with the information collections. The 
monetized net costs of the increased burden on institutions and 
borrowers, using wage data developed using BLS data, available at 
www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is $209,247,305, as shown in the 
chart below. This cost was based on an hourly rate of $36.55 for 
institutions and $16.30 for students.

                                            Collection of Information
----------------------------------------------------------------------------------------------------------------
                                                                       OMB Control No. and
           Regulatory section              Information collection        estimated burden       Estimated costs
----------------------------------------------------------------------------------------------------------------
668.405--Issuing and challenging D/E     The regulations provide    OMB 1845-0123 This will           $7,725,208
 rates.                                   institutions an            be a new collection. We
                                          opportunity to correct     estimate that the burden
                                          information about          will increase by 211,360
                                          students who have          hours.
                                          completed their programs
                                          and who are on the list
                                          provided by the
                                          Department to the
                                          institution.
668.406--D/E rates alternate earnings    The regulations will       OMB 184-0122 This will be            872,083
 appeals.                                 allow institutions to      a new collection. We
                                          make an alternate          estimate that the burden
                                          earnings appeal to the D/  will increase by 23,860
                                          E rates, when the final    hours.
                                          D/E rates are failing or
                                          in the zone under the D/
                                          E rates measure.
668.410--Consequences of the D/E rates   The regulations provide    OMB 1845-0123 This will           56,061,956
 measure.                                 that for any year the      be a new collection. We
                                          Secretary notifies the     estimate that the burden
                                          institution that a GE      for institutions will
                                          program could become       increase by 1,065,198
                                          ineligible based on its    hours. We estimate that
                                          D/E rates for the next     burden will increase for
                                          award year the             individuals by 1,050,857
                                          institution must provide   hours.
                                          student warnings.
668.411--Reporting requirements for GE   The regulations will       OMB 1845-0123 This will           19,971,614
 programs.                                require institutions to    be a new collection. We
                                          report to the Department   estimate that the burden
                                          information about          will increase by 546,419
                                          students in GE programs.   hours.
668.412--Disclosure requirements for GE  The regulations will       OMB 1845-0123 This will           91,364,240
 programs.                                require certain            be a new collection. We
                                          information about GE       estimate that the burden
                                          programs to be disclosed   for institutions will
                                          by institutions to         increase by 2,001,888
                                          enrolled and prospective   hours. We estimate that
                                          students.                  the burden for
                                                                     individuals will
                                                                     increase by 1,116,272
                                                                     hours.
668.413--Calculating, issuing, and       The regulations allow      OMB 1845-0123 This will           32,973,071
 challenging completion rates,            institutions to            be a new collection. We
 withdrawal rates, repayment rates,       challenge the rates and    estimate that the burden
 median loan debt, and median earnings,   median earnings            will increase by 902,136
 and program cohort default rates.        calculated by the          hours.
                                          Department.

[[Page 65005]]

 
668.414--Certification requirements for  The regulations will add   OMB 1845-0123 This will               72,406
 GE programs.                             a requirement that an      be a new collection. We
                                          institution certify that   estimate that the burden
                                          GE programs it offers      will increase by 1,981
                                          are approved or            hours.
                                          accredited by an
                                          accrediting agency or
                                          the State.
                                         The regulations also add
                                          a requirement that the
                                          institution must provide
                                          an explanation of how a
                                          new GE program is not
                                          substantially similar to
                                          an ineligible or
                                          voluntarily discontinued
                                          program.
668.504--Draft program cohort default    The regulations will       OMB 1845-0121 This will              187,867
 rates and challenges.                    allow an institution to    be a new collection. We
                                          challenge the draft        estimate that the burden
                                          program cohort default     will increase by 5,140
                                          rates.                     hours.
668.509--Uncorrected data adjustments..  The regulations will       OMB 1845-0121 This will               11,915
                                          allow institutions to      be a new collection. We
                                          request a data             estimate that the burden
                                          adjustment when agreed-    will increase by 326
                                          upon data changes were     hours.
                                          not reflected in the
                                          official program cohort
                                          default rate.
668.510--New data adjustments..........  The regulations will       OMB 1845-0121 This will                2,778
                                          allow institutions to      be a new collection. We
                                          request a new data         estimate that the burden
                                          adjustment if a            will increase by 76
                                          comparison of the draft    hours.
                                          and final LRDR show that
                                          data have been included,
                                          excluded, or otherwise
                                          changed and the errors
                                          are confirmed by the
                                          data manager.
668.511--Erroneous data appeals........  The regulations will       OMB 1845-0121 This will                    0
                                          allow an institution to    be a new collection. We
                                          appeal the program         estimate that the burden
                                          cohort default rate        will increase by 0 hours.
                                          calculation when the
                                          accuracy was previously
                                          challenged on the basis
                                          of incorrect data.
668.512--Loan Servicing Appeal.........  The regulations will       OMB 1845-0121 This will                4,167
                                          allow an institution to    be a new collection. We
                                          appeal on the basis of     estimate that the burden
                                          improper loan servicing    will increase by 114
                                          or collection where the    hours.
                                          institution can prove
                                          that the servicer failed
                                          to perform required
                                          servicing or collections
                                          activities.
----------------------------------------------------------------------------------------------------------------

    The total burden hours and change in burden hours associated with 
each OMB Control number affected by the regulations follows:

------------------------------------------------------------------------
                                      Total current     Change in burden
            Control No.                burden hours          hours
------------------------------------------------------------------------
1845-0123.........................                  0         +6,896,111
1845-0122.........................                  0             23,860
1845-0121.........................                  0              5,656
                                   -------------------------------------
    Total.........................                  0          6,925,627
------------------------------------------------------------------------

Assessment of Educational Impact

    In the NPRM we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: 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 via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site 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). To use PDF 
you must have Adobe Acrobat Reader, which is available free at the 
site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.


[[Page 65006]]


(Catalog of Federal Domestic Assistance Numbers: 84.007 FSEOG; 
84.032 Federal Family Education Loan Program; 84.033 Federal Work-
Study Program; 84.038 Federal Perkins Loan Program; 84.063 Federal 
Pell Grant Program; 84.069A LEAP; 84.268 William D. Ford Federal 
Direct Loan Program; 84.376 ACG/Smart; 84.379 TEACH Grant Program; 
84.069B Grants for Access and Persistence Program)

List of Subjects

34 CFR Part 600

    Colleges and universities, Foreign relations, Grant programs--
education, Loan programs--education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

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: October 23, 2014.
Arne Duncan,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary of 
Education amends parts 600 and 668 of title 34 of the Code of Federal 
Regulations as follows:

PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT 
OF 1965, AS AMENDED

0
1. The authority citation for part 600 continues to read as follows:

    Authority: 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, 
and 1099c, unless otherwise noted.


0
2. Section 600.2 is amended by:
0
A. Revising the definition of ``Recognized occupation.''
0
B. Revising the authority citation at the end of the section.
    The revisions read as follows:


Sec.  600.2  Definitions.

* * * * *
    Recognized occupation: An occupation that is--
    (1) Identified by a Standard Occupational Classification (SOC) code 
established by the Office of Management and Budget (OMB) or an 
Occupational Information Network O*Net-SOC code established by the 
Department of Labor, which is available at www.onetonline.org or its 
successor site; or
    (2) Determined by the Secretary in consultation with the Secretary 
of Labor to be a recognized occupation.
* * * * *

(Authority: 20 U.S.C. 1001, 1002, 1071, et seq., 1078-2, 1088, 1091, 
1094, 1099b, 1099c, 1141; 26 U.S.C. 501(c))



0
3. Section 600.10 is amended by:
0
A. Revising paragraphs (c)(1), (c)(2), and (c)(3)(i).
0
B. Revising the authority citation at the end of the section.
    The revisions read as follows:


Sec.  600.10  Date, extent, duration, and consequence of eligibility.

* * * * *
    (c) Educational programs. (1) An eligible institution that seeks to 
establish the eligibility of an educational program must--
    (i) For a gainful employment program under 34 CFR part 668, subpart 
Q of this chapter, update its application under Sec.  600.21, and meet 
any time restrictions that prohibit the institution from establishing 
or reestablishing the eligibility of the program as may be required 
under 34 CFR 668.414;
    (ii) Pursuant to a requirement regarding additional programs 
included in the institution's program participation agreement under 34 
CFR 668.14, obtain the Secretary's approval; and
    (iii) For a direct assessment program under 34 CFR 668.10, and for 
a comprehensive transition and postsecondary program under 34 CFR 
668.232, obtain the Secretary's approval.
    (2) Except as provided under Sec.  600.20(c), an eligible 
institution does not have to obtain the Secretary's approval to 
establish the eligibility of any program that is not described in 
paragraph (c)(1)(i), (ii), or (iii) of this section.
    (3) * * *
    (i) Fails to comply with the requirements in paragraph (c)(1) of 
this section; or
* * * * *

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, and 1141)



0
4. Section 600.20 is amended by:
0
A. Revising the introductory text of paragraph (c)(1).
0
B. Revising the authority citation at the end of the section.
    The revisions read as follows:


Sec.  600.20  Notice and application procedures for establishing, 
reestablishing, maintaining, or expanding institutional eligibility and 
certification.

* * * * *
    (c) * * *
    (1) Add an educational program or a location at which the 
institution offers or will offer 50 percent or more of an educational 
program if one of the following conditions applies, otherwise it must 
report to the Secretary under Sec.  600.21:
* * * * *

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, and 1099c)



0
5. Section 600.21 is amended by:
0
A. Adding paragraph (a)(11).
0
B. Revising the authority citation at the end of the section.
    The addition and revision read as follows:


Sec.  600.21  Updating application information.

    (a) * * *
    (11) For any gainful employment program under 34 CFR part 668, 
subpart Q--
    (i) Establishing the eligibility or reestablishing the eligibility 
of the program;
    (ii) Discontinuing the program's eligibility under 34 CFR 668.410;
    (iii) Ceasing to provide the program for at least 12 consecutive 
months;
    (iv) Losing program eligibility under Sec.  600.40;
    (v) Changing the program's name, CIP code, as defined in 34 CFR 
668.402, or credential level; or
    (vi) Updating the certification pursuant to Sec.  668.414(b).
* * * * *

(Authority: 20 U.S.C. 1094, 1099b)

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

0
6. The authority citation for part 668 continues to read as follows:

    Authority: 20 U.S.C. 1001, 1002, 1003, 1088, 1091, 1094, 1099b, 
and 1099c, unless otherwise noted.


0
7. Section 668.6 is amended by:
0
A. Removing and reserving paragraph (a).
0
B. Adding a new paragraph (d).
0
C. Revising the authority citation at the end of the section.
    The addition and revision read as follows:


Sec.  668.6  Reporting and disclosure requirements for programs that 
prepare students for gainful employment in a recognized occupation.

* * * * *
    (d) Sunset provisions. Institutions must comply with the 
requirements of this section through December 31, 2016.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.7  [Removed and Reserved]

0
8. Remove and reserve Sec.  668.7.


Sec.  668.8  [Amended]

0
9. Section 668.8 is amended by:

[[Page 65007]]


0
A. In paragraph (d)(2)(iii), removing the reference to ``Sec.  668.6'' 
and adding, in its place, a reference to ``subpart Q of this part''.
0
B. In paragraph (d)(3)(iii), removing the reference to ``Sec.  668.6'' 
and adding, in its place, a reference to ``subpart Q of this part''.
0
10. Section 668.14 is amended by revising paragraph (a)(26) to read as 
follows:


Sec.  668.14  Program participation agreement.

    (a) * * *
    (26) If an educational program offered by the institution is 
required to prepare a student for gainful employment in a recognized 
occupation, the institution must--
    (i) Demonstrate a reasonable relationship between the length of the 
program and entry level requirements for the recognized occupation for 
which the program prepares the student. The Secretary considers the 
relationship to be reasonable if the number of clock hours provided in 
the program does not exceed by more than 50 percent the minimum number 
of clock hours required for training in the recognized occupation for 
which the program prepares the student, as established by the State in 
which the institution is located, if the State has established such a 
requirement, or as established by any Federal agency;
    (ii) Establish the need for the training for the student to obtain 
employment in the recognized occupation for which the program prepares 
the student; and
    (iii) Provide for that program the certification required in Sec.  
668.414.
* * * * *

Subpart P--[Added and Reserved]

0
11. Add and reserve subpart P.
0
12. Add subpart Q to read as follows:
Subpart Q--Gainful Employment (GE) Programs
Sec.
668.401 Scope and purpose.
668.402 Definitions.
668.403 Gainful employment framework.
668.404 Calculating D/E rates.
668.405 Issuing and challenging D/E rates.
668.406 D/E rates alternate earnings appeals.
668.407 [Reserved].
668.408 [Reserved].
668.409 Final determination of the D/E rates measure.
668.410 Consequences of the D/E rates measure.
668.411 Reporting requirements for GE programs.
668.412 Disclosure requirements for GE programs.
668.413 Calculating, issuing, and challenging completion rates, 
withdrawal rates, repayment rates, median loan debt, median 
earnings, and program cohort default rate.
668.414 Certification requirements for GE programs.
668.415 Severability.

Subpart Q--Gainful Employment (GE) Programs


Sec.  668.401  Scope and purpose.

    This subpart applies to an educational program offered by an 
eligible institution that prepares students for gainful employment in a 
recognized occupation, and establishes the rules and procedures under 
which--
    (a) The Secretary determines that the program is eligible for title 
IV, HEA program funds;
    (b) An institution reports information about the program to the 
Secretary; and
    (c) An institution discloses information about the program to 
students and prospective students.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1231a)

Sec.  668.402  Definitions.

    The following definitions apply to this subpart.
    Annual earnings rate. The percentage of a GE program's annual loan 
payment compared to the annual earnings of the students who completed 
the program, as calculated under Sec.  668.404.
    Classification of instructional program (CIP) code. A taxonomy of 
instructional program classifications and descriptions developed by the 
U.S. Department of Education's National Center for Education Statistics 
(NCES). The CIP code for a program is six digits.
    Cohort period. The two-year cohort period or the four-year cohort 
period, as applicable, during which those students who complete a 
program are identified in order to assess their loan debt and earnings. 
The Secretary uses the two-year cohort period when the number of 
students completing the program is 30 or more. The Secretary uses the 
four-year cohort period when the number of students completing the 
program in the two-year cohort period is less than 30 and when the 
number of students completing the program in the four-year cohort 
period is 30 or more.
    Credential level. The level of the academic credential awarded by 
an institution to students who complete the program. For the purposes 
of this subpart, the undergraduate credential levels are: Undergraduate 
certificate or diploma, associate degree, bachelor's degree, and post-
baccalaureate certificate; and the graduate credential levels are 
graduate certificate (including a postgraduate certificate), master's 
degree, doctoral degree, and first-professional degree (e.g., MD, DDS, 
JD).
    Debt-to-earnings rates (D/E rates). The discretionary income rate 
and annual earnings rate as calculated under Sec.  668.404.
    Discretionary income rate. The percentage of a GE program's annual 
loan payment compared to the discretionary income of the students who 
completed the program, as calculated under Sec.  668.404.
    Four-year cohort period. The cohort period covering four 
consecutive award years that are--
    (1) The third, fourth, fifth, and sixth award years prior to the 
award year for which the D/E rates are calculated pursuant to Sec.  
668.404. For example, if D/E rates are calculated for award year 2014-
2015, the four-year cohort period is award years 2008-2009, 2009-2010, 
2010-2011, and 2011-2012; or
    (2) For a program whose students are required to complete a medical 
or dental internship or residency, the sixth, seventh, eighth, and 
ninth award years prior to the award year for which the D/E rates are 
calculated. For example, if D/E rates are calculated for award year 
2014-2015, the four-year cohort period is award years 2005-2006, 2006-
2007, 2007-2008, and 2008-2009. For this purpose, a required medical or 
dental internship or residency is a supervised training program that--
    (i) Requires the student to hold a degree as a doctor of medicine 
or osteopathy, or a doctor of dental science;
    (ii) Leads to a degree or certificate awarded by an institution of 
higher education, a hospital, or a health care facility that offers 
post-graduate training; and
    (iii) Must be completed before the student may be licensed by a 
State and board certified for professional practice or service.
    Gainful employment program (GE program). An educational program 
offered by an institution under Sec.  668.8(c)(3) or (d) and identified 
by a combination of the institution's six-digit Office of Postsecondary 
Education ID (OPEID) number, the program's six-digit CIP code as 
assigned by the institution or determined by the Secretary, and the 
program's credential level.
    Length of the program. The amount of time in weeks, months, or 
years that is specified in the institution's catalog, marketing 
materials, or other official publications for a student to complete the 
requirements needed to obtain the degree or credential offered by the 
program.
    Metropolitan Statistical Area (MSA). The Metropolitan Statistical 
Area as

[[Page 65008]]

published by the U.S. Office of Management and Budget and available at 
www.census.gov/population/metro/ or its successor site.
    Poverty Guideline. The Poverty Guideline for a single person in the 
continental United States as published by the U.S. Department of Health 
and Human Services and available at http://aspe.hhs.gov/poverty or its 
successor site.
    Prospective student. An individual who has contacted an eligible 
institution for the purpose of requesting information about enrolling 
in a GE program or who has been contacted directly by the institution 
or by a third party on behalf of the institution about enrolling in a 
GE program.
    Student. An individual who received title IV, HEA program funds for 
enrolling in the GE program.
    Title IV loan. A loan authorized under the Federal Perkins Loan 
Program (Perkins Loan), the Federal Family Education Loan Program (FFEL 
Loan), or the William D. Ford Direct Loan Program (Direct Loan).
    Two-year cohort period. The cohort period covering two consecutive 
award years that are--
    (1) The third and fourth award years prior to the award year for 
which the D/E rates are calculated pursuant to Sec.  668.404. For 
example, if D/E rates are calculated for award year 2014-2015, the two-
year cohort period is award years 2010-2011 and 2011-2012; or
    (2) For a program whose students are required to complete a medical 
or dental internship or residency, the sixth and seventh award years 
prior to the award year for which the D/E rates are calculated. For 
example, if D/E rates are calculated for award year 2014-2015, the two-
year cohort period is award years 2007-2008 and 2008-2009. For this 
purpose, a required medical or dental internship or residency is a 
supervised training program that--
    (i) Requires the student to hold a degree as a doctor of medicine 
or osteopathy, or as a doctor of dental science;
    (ii) Leads to a degree or certificate awarded by an institution of 
higher education, a hospital, or a health care facility that offers 
post-graduate training; and
    (iii) Must be completed before the student may be licensed by a 
State and board certified for professional practice or service.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.403  Gainful employment program framework.

    (a) General. A program provides training that prepares students for 
gainful employment in a recognized occupation if the program--
    (1) Satisfies the applicable certification requirements in Sec.  
668.414; and
    (2) Is not an ineligible program under the D/E rates measure.
    (b) Debt-to-earnings rates (D/E rates). For each award year and for 
each eligible GE program offered by an institution, the Secretary 
calculates two D/E rates, the discretionary income rate and the annual 
earnings rate, using the procedures in Sec. Sec.  668.404 through 
668.406.
    (c) Outcomes of the D/E rates measure. (1) A GE program is 
``passing'' the D/E rates measure if--
    (i) Its discretionary income rate is less than or equal to 20 
percent; or
    (ii) Its annual earnings rate is less than or equal to eight 
percent.
    (2) A GE program is ``failing'' the D/E rates measure if--
    (i) Its discretionary income rate is greater than 30 percent or the 
income for the denominator of the rate (discretionary earnings) is 
negative or zero; and
    (ii) Its annual earnings rate is greater than 12 percent or the 
denominator of the rate (annual earnings) is zero.
    (3) A GE program is ``in the zone'' for the purpose of the D/E 
rates measure if it is not a passing GE program and its--
    (i) Discretionary income rate is greater than 20 percent but less 
than or equal to 30 percent; or
    (ii) Annual earnings rate is greater than eight percent but less 
than or equal to 12 percent.
    (4) For the purpose of the D/E rates measure, subject to paragraph 
(c)(5) of this section, a GE program becomes ineligible if the program 
either--
    (i) Is failing the D/E rates measure in two out of any three 
consecutive award years for which the program's D/E rates are 
calculated; or
    (ii) Has a combination of zone and failing D/E rates for four 
consecutive award years for which the program's D/E rates are 
calculated.
    (5) If the Secretary does not calculate or issue D/E rates for a 
program for an award year, the program receives no result under the D/E 
rates measure for that award year and remains in the same status under 
the D/E rates measure as the previous award year; provided that if the 
Secretary does not calculate D/E rates for the program for four or more 
consecutive award years, the Secretary disregards the program's D/E 
rates for any award year prior to the four-year period in determining 
the program's eligibility.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.404  Calculating D/E rates.

    (a) General. Except as provided in paragraph (f) of this section, 
for each award year, the Secretary calculates D/E rates for a GE 
program as follows:
    (1) Discretionary income rate = annual loan payment/(the higher of 
the mean or median annual earnings-(1.5 x Poverty Guideline)). For the 
purposes of this paragraph, the Secretary applies the Poverty Guideline 
for the calendar year immediately following the calendar year for which 
annual earnings are obtained under paragraph (c) of this section.
    (2) Annual earnings rate = annual loan payment/the higher of the 
mean or median annual earnings.
    (b) Annual loan payment. The Secretary calculates the annual loan 
payment for a GE program by--
    (1)(i) Determining the median loan debt of the students who 
completed the program during the cohort period, based on the lesser of 
the loan debt incurred by each student as determined under paragraph 
(d)(1) of this section and the total amount for tuition and fees and 
books, equipment, and supplies for each student as determined under 
paragraph (d)(2) of this section;
    (ii) Removing, if applicable, the appropriate number of highest 
loan debts as described in Sec.  668.405(e)(2); and
    (iii) Calculating the median of the remaining amounts.
    (2) Amortizing the median loan debt--
    (i)(A) Over a 10-year repayment period for a program that leads to 
an undergraduate certificate, a post-baccalaureate certificate, an 
associate degree, or a graduate certificate;
    (B) Over a 15-year repayment period for a program that leads to a 
bachelor's degree or a master's degree; or
    (C) Over a 20-year repayment period for a program that leads to a 
doctoral or first-professional degree; and
    (ii) Using an annual interest rate that is the average of the 
annual statutory interest rates on Federal Direct Unsubsidized Loans 
that were in effect during--
    (A) The three-year period prior to the end of the cohort period, 
for undergraduate certificate programs, post-baccalaureate certificate 
programs, and associate degree programs. For these programs, the 
Secretary uses the Federal Direct Unsubsidized Loan interest rate 
applicable to undergraduate students;
    (B) The three-year period prior to the end of the cohort period, 
for graduate

[[Page 65009]]

certificate programs and master's degree programs. For these programs, 
the Secretary uses the Federal Direct Unsubsidized Loan interest rate 
applicable to graduate students;
    (C) The six-year period prior to the end of the cohort period, for 
bachelor's degree programs. For these programs, the Secretary uses the 
Federal Direct Unsubsidized Loan interest rate applicable to 
undergraduate students; and
    (D) The six-year period prior to the end of the cohort period, for 
doctoral programs and first professional degree programs. For these 
programs, the Secretary uses the Federal Direct Unsubsidized Loan 
interest rate applicable to graduate students.

    Note to paragraph (b)(2)(ii):  For example, for an undergraduate 
certificate program, if the two-year cohort period is award years 
2010-2011 and 2011-2012, the interest rate would be the average of 
the interest rates for the years from 2009-2010 through 2011-2012.

    (c) Annual earnings. (1) The Secretary obtains from the Social 
Security Administration (SSA), under Sec.  668.405, the most currently 
available mean and median annual earnings of the students who completed 
the GE program during the cohort period and who are not excluded under 
paragraph (e) of this section; and
    (2) The Secretary uses the higher of the mean or median annual 
earnings to calculate the D/E rates.
    (d) Loan debt and assessed charges. (1) In determining the loan 
debt for a student, the Secretary includes--
    (i) The amount of title IV loans that the student borrowed (total 
amount disbursed less any cancellations or adjustments) for enrollment 
in the GE program (Federal PLUS Loans made to parents of dependent 
students, Direct PLUS Loans made to parents of dependent students, and 
Direct Unsubsidized Loans that were converted from TEACH Grants are not 
included);
    (ii) Any private education loans as defined in 34 CFR 601.2, 
including private education loans made by the institution, that the 
student borrowed for enrollment in the program and that were required 
to be reported by the institution under Sec.  668.411; and
    (iii) The amount outstanding, as of the date the student completes 
the program, on any other credit (including any unpaid charges) 
extended by or on behalf of the institution for enrollment in any GE 
program attended at the institution that the student is obligated to 
repay after completing the GE program, including extensions of credit 
described in clauses (1) and (2) of the definition of, and excluded 
from, the term ``private education loan'' in 34 CFR 601.2;
    (2) The Secretary attributes all of the loan debt incurred by the 
student, and attributes the amount reported for the student under Sec.  
668.411(a)(2)(iv) and (v), for enrollment in any--
    (i) Undergraduate GE program at the institution to the highest 
credentialed undergraduate GE program subsequently completed by the 
student at the institution as of the end of the most recently completed 
award year prior to the calculation of the draft D/E rates under this 
section; and
    (ii) Graduate GE program at the institution to the highest 
credentialed graduate GE program completed by the student at the 
institution as of the end of the most recently completed award year 
prior to the calculation of the draft D/E rates under this section; and
    (3) The Secretary excludes any loan debt incurred by the student 
for enrollment in programs at other institutions. However, the 
Secretary may include loan debt incurred by the student for enrollment 
in GE programs at other institutions if the institution and the other 
institutions are under common ownership or control, as determined by 
the Secretary in accordance with 34 CFR 600.31.
    (e) Exclusions. The Secretary excludes a student from both the 
numerator and the denominator of the D/E rates calculation if the 
Secretary determines that--
    (1) One or more of the student's title IV loans were in a military-
related deferment status at any time during the calendar year for which 
the Secretary obtains earnings information under paragraph (c) of this 
section;
    (2) One or more of the student's title IV loans are under 
consideration by the Secretary, or have been approved, for a discharge 
on the basis of the student's total and permanent disability, under 34 
CFR 674.61, 682.402, or 685.212;
    (3) The student was enrolled in any other eligible program at the 
institution or at another institution during the calendar year for 
which the Secretary obtains earnings information under paragraph (c) of 
this section;
    (4) For undergraduate GE programs, the student completed a higher 
credentialed undergraduate GE program at the institution subsequent to 
completing the program as of the end of the most recently completed 
award year prior to the calculation of the draft D/E rates under this 
section;
    (5) For graduate GE programs, the student completed a higher 
credentialed graduate GE program at the institution subsequent to 
completing the program as of the end of the most recently completed 
award year prior to the calculation of the draft D/E rates under this 
section; or
    (6) The student died.
    (f) D/E rates not issued. The Secretary does not issue draft or 
final D/E rates for a GE program under Sec.  668.405 if--
    (1) After applying the exclusions in paragraph (e) of this section, 
fewer than 30 students completed the program during the two-year cohort 
period and fewer than 30 students completed the program during the 
four-year cohort period; or
    (2) SSA does not provide the mean and median earnings for the 
program as provided under paragraph (c) of this section.
    (g) Transition period. (1) The transition period is determined by 
the length of the GE program for which the Secretary calculates D/E 
rates under this subpart. The transition period is--
    (i) The first five award years for which the Secretary calculates 
D/E rates under this subpart if the length of the program is one year 
or less;
    (ii) The first six award years for which the Secretary calculates 
D/E rates under this subpart if the length of the program is between 
one and two years; and
    (iii) The first seven award years for which the Secretary 
calculates D/E rates if the length of the program is more than two 
years.
    (2) If a GE program is failing or in the zone based on its draft D/
E rates for any award year during the transition period, the Secretary 
calculates transitional draft D/E rates for that award year by using--
    (i) The median loan debt of the students who completed the program 
during the most recently completed award year; and
    (ii) The earnings used to calculate the draft D/E rates under 
paragraph (c) of this section.
    (3) For any award year for which the Secretary calculates 
transitional draft D/E rates for a program, the Secretary determines 
the final D/E rates for the program based on the lower of the draft or 
transitional draft D/E rates.
    (4) An institution may challenge or appeal the draft or 
transitional draft D/E rates, or both, under the procedures in Sec.  
668.405 and Sec.  668.406, respectively.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)

Sec.  668.405  Issuing and challenging D/E rates.

    (a) Overview. For each award year, the Secretary determines the D/E 
rates for a GE program at an institution by--
    (1) Creating a list of the students who completed the program 
during the cohort period and providing the list to

[[Page 65010]]

the institution, as provided in paragraph (b) of this section;
    (2) Allowing the institution to correct the information about the 
students on the list, as provided in paragraph (c) of this section;
    (3) Obtaining from SSA the mean and median annual earnings of the 
students on the list, as provided in paragraph (d) of this section;
    (4) Calculating draft D/E rates and providing them to the 
institution, as provided in paragraph (e) of this section;
    (5) Allowing the institution to challenge the median loan debt used 
to calculate the draft D/E rates, as provided in paragraph (f) of this 
section;
    (6) Calculating final D/E rates and providing them to the 
institution, as provided in paragraph (g) of this section; and
    (7) Allowing the institution to appeal the final D/E rates as 
provided in Sec.  668.406.
    (b) Creating the list of students. (1) The Secretary selects the 
students to be included on the list by--
    (i) Identifying the students who completed the program during the 
cohort period from the data provided by the institution under Sec.  
668.411; and
    (ii) Indicating which students would be removed from the list under 
Sec.  668.404(e) and the specific reason for the exclusion.
    (2) The Secretary provides the list to the institution and states 
which cohort period was used to select the students.
    (c) Institutional corrections to the list. (1) The Secretary 
presumes that the list of students and the identity information for 
those students are correct unless, as set forth in procedures 
established by the Secretary, the institution provides evidence to the 
contrary satisfactory to the Secretary. The institution bears the 
burden of proof that the list is incorrect.
    (2) No later than 45 days after the date the Secretary provides the 
list to the institution, the institution may--
    (i) Provide evidence showing that a student should be included on 
or removed from the list pursuant to Sec.  668.404(e); or
    (ii) Correct or update a student's identity information and the 
student's program attendance information.
    (3) After the 45-day period expires, the institution may no longer 
seek to correct the list of students or revise the identity or program 
information of those students included on the list.
    (4) The Secretary considers the evidence provided by the 
institution and either accepts the correction or notifies the 
institution of the reasons for not accepting the correction. If the 
Secretary accepts the correction, the Secretary uses the corrected 
information to create the final list. The Secretary provides the 
institution with the final list and indicates the cohort period or 
cohort periods used to create the final list.
    (d) Obtaining earnings data. The Secretary submits the final list 
to SSA. For the purposes of this section, SSA returns to the 
Secretary--
    (1) The mean and median annual earnings of the students on the list 
whom SSA has matched to SSA earnings data, in aggregate and not in 
individual form; and
    (2) The number, but not the identities, of students on the list 
that SSA could not match.
    (e) Calculating draft D/E rates. (1)(i) If the SSA earnings data 
includes reports from records of earnings on at least 30 students, the 
Secretary uses the higher of the mean or median annual earnings 
provided by SSA to calculate draft D/E rates for a GE program, as 
provided in Sec.  668.404.
    (ii) If the SSA earnings data includes reports from records of 
earnings on fewer than 30 but at least 10 students, the Secretary uses 
the earnings provided by SSA only for the purpose of disclosure under 
Sec.  668.412(a)(13).
    (2) If SSA reports that it was unable to match one or more of the 
students on the final list, the Secretary does not include in the 
calculation of the median loan debt the same number of students with 
the highest loan debts as the number of students whose earnings SSA did 
not match. For example, if SSA is unable to match three students out of 
100 students, the Secretary orders by amount the debts of the 100 
listed students and excludes from the D/E rates calculation the three 
largest loan debts.
    (3)(i) The Secretary notifies the institution of the draft D/E 
rates for the program and provides the mean and median annual earnings 
obtained from SSA and the individual student loan information used to 
calculate the rates, including the loan debt that was used in the 
calculation for each student.
    (ii) The draft D/E rates and the data described in paragraphs (b) 
through (e) of this section are not considered public information.
    (f) Institutional challenges to draft D/E rates. (1) The Secretary 
presumes that the loan debt information used to calculate the median 
loan debt for the program under Sec.  668.404 is correct unless the 
institution provides evidence satisfactory to the Secretary, as 
provided in paragraph (f)(2) of this section, that the information is 
incorrect. The institution bears the burden of proof to show that the 
loan debt information is incorrect and to show how it should be 
corrected.
    (2) No later than 45 days after the Secretary notifies an 
institution of the draft D/E rates for a program, the institution may 
challenge the accuracy of the loan debt information that the Secretary 
used to calculate the median loan debt for the program under Sec.  
668.404 by submitting evidence, in a format and through a process 
determined by the Secretary, that demonstrates that the median loan 
debt calculated by the Secretary is incorrect.
    (3) In a challenge under this section, the Secretary does not 
consider--
    (i) Any objection to the mean or median annual earnings that SSA 
provided to the Secretary;
    (ii) More than one challenge to the student-specific data on which 
draft D/E rates are based for a program for an award year; or
    (iii) Any challenge that is not timely submitted.
    (4) The Secretary considers the evidence provided by an institution 
challenging the median loan debt and notifies the institution of 
whether the challenge is accepted or the reasons why the challenge is 
not accepted.
    (5) If the information from an accepted challenge changes the 
median loan debt of the program, the Secretary recalculates the 
program's draft D/E rates.
    (6) Except as provided under Sec.  668.406, an institution that 
does not timely challenge the draft D/E rates for a program waives any 
objection to those rates.
    (g) Final D/E rates. (1) After expiration of the 45-day period and 
subject to resolution of any challenge under paragraph (f) of this 
section, a program's draft D/E rates constitute its final D/E rates.
    (2) The Secretary informs the institution of the final D/E rates 
for each of its GE programs by issuing the notice of determination 
described in Sec.  668.409(a).
    (3) After the Secretary provides the notice of determination to the 
institution, the Secretary may publish the final D/E rates for the 
program.
    (h) Conditions for corrections and challenges. An institution must 
ensure that any material that it submits to make any correction or 
challenge under this section is complete, timely, accurate, and in a 
format acceptable to the Secretary and consistent with any instructions 
provided to the institution with the notice of its draft D/E rates and 
the notice of determination.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)


[[Page 65011]]




Sec.  668.406  D/E rates alternate earnings appeals.

    (a) General. If a GE program is failing or in the zone under the D/
E rates measure, an institution may file an alternate earnings appeal 
to request recalculation of the program's most recent final D/E rates 
issued by the Secretary. The alternate earnings must be from the same 
calendar year for which the Secretary obtained earnings data from SSA 
to calculate the final D/E rates under Sec.  668.404.
    (b) Basis for appeals. (1) The institution may use alternate 
earnings from an institutional survey conducted under paragraph (c) of 
this section, or from a State-sponsored data system under paragraph (d) 
of this section, to recalculate the program's final D/E rates and file 
an appeal if by using the alternate earnings--
    (i) For a program that was failing the D/E rates measure, the 
program is passing or in the zone with respect to the D/E rates 
measure; or
    (ii) For a program that was in the zone for the purpose of the D/E 
rates measure, the program is passing the D/E rates measure.
    (2) When submitting its appeal of the final D/E rates, the 
institution must--
    (i) Use the annual loan payment used in the calculation of the 
final D/E rates; and
    (ii) Use the higher of the mean or median alternate earnings.
    (3) The institution must include in its appeal the alternate 
earnings of all the students who completed the program during the same 
cohort period that the Secretary used to calculate the final D/E rates 
under Sec.  668.404 or a comparable cohort period, provided that the 
institution may elect--
    (i) If conducting an alternate earnings survey, to exclude from the 
survey, in accordance with the standards established by NCES, all or 
some of the students excluded from the D/E rates calculation under 
Sec.  668.404(e); or
    (ii) If obtaining annual earnings data from one or more State-
sponsored data systems, and in accordance with paragraph (d)(2) of this 
section, to exclude from the list of students submitted to the 
administrator of the State-administered data system all or some of the 
students excluded from the D/E rates calculation under Sec.  
668.404(e).
    (c) Survey requirements for appeals. An institution must--
    (1) In accordance with the standards included on an Earnings Survey 
Form developed by NCES, conduct a survey to obtain annual earnings 
information of the students described in paragraph (b)(3) of this 
section. The Secretary will publish in the Federal Register the 
Earnings Survey Form that will include a pilot-tested universe survey 
as well as the survey standards. An institution is not required to use 
the Earnings Survey Form but, in conducting a survey under this 
section, must adhere to the survey standards and present to the survey 
respondent in the same order and same manner the same survey items, 
included in the Earnings Survey Form; and
    (2) Submit to the Secretary as part of its appeal--
    (i) A certification signed by the institution's chief executive 
officer attesting that the survey was conducted in accordance with the 
survey standards in the Earnings Survey Form, and that the mean or 
median earnings used to recalculate the D/E rates was accurately 
determined from the survey results;
    (ii) An examination-level attestation engagement report prepared by 
an independent public accountant or independent governmental auditor, 
as appropriate, that the survey was conducted in accordance with the 
requirements set forth in the NCES Earnings Survey Form. The 
attestation must be conducted in accordance with the attestation 
standards contained in the Government Accountability Office's 
Government Auditing Standards promulgated by the Comptroller General of 
the United States (available at www.gao.gov/yellowbook/overview or its 
successor site), and with procedures for attestations contained in 
guides developed by and available from the Department of Education's 
Office of Inspector General; and
    (iii) Supporting documentation requested by the Secretary.
    (d) State-sponsored data system requirements for appeals. An 
institution must--
    (1) Obtain annual earnings data from one or more State-sponsored 
data systems by submitting a list of the students described in 
paragraph (b)(3) of this section to the administrator of each State-
sponsored data system used for the appeal;
    (2) Demonstrate that annual earnings data were obtained for more 
than 50 percent of the number of students in the cohort period not 
excluded pursuant to paragraph (b)(3) of this section, and that number 
of students must be 30 or more; and
    (3) Submit as part of its appeal--
    (i) A certification signed by the institution's chief executive 
officer attesting that it accurately used the State-provided earnings 
data to recalculate the D/E rates; and
    (ii) Supporting documentation requested by the Secretary.
    (e) Appeals procedure. (1) For any appeal under this section, in 
accordance with procedures established by the Secretary and provided in 
the notice of draft D/E rates under Sec.  668.405 and the notice of 
determination under Sec.  668.409, the institution must--
    (i) Notify the Secretary of its intent to submit an appeal no 
earlier than the date that the Secretary provides the institution the 
draft D/E rates under Sec.  668.405(e)(3), but no later than 14 days 
after the date the Secretary issues the notice of determination under 
Sec.  668.409(a) informing the institution of the final D/E rates under 
Sec.  668.405(g); and
    (ii) Submit the recalculated D/E rates, all certifications, and 
specified supporting documentation related to the appeal no later than 
60 days after the date the Secretary issues the notice of 
determination.
    (2) An institution that timely submits an appeal that meets the 
requirements of this section is not subject to any consequences under 
Sec.  668.410 based on the D/E rates under appeal while the Secretary 
considers the appeal. If the Secretary has published final D/E rates 
under Sec.  668.405(g), the program's final D/E rates will be annotated 
to indicate that they are under appeal.
    (3) An institution that does not submit a timely appeal waives its 
right to appeal the GE program's failing or zone D/E rates for the 
relevant award year.
    (f) Appeals determinations. (1) Appeals denied. If the Secretary 
denies an appeal, the Secretary notifies the institution of the reasons 
for denying the appeal, and the program's final D/E rates previously 
issued in the notice of determination under Sec.  668.409(a) remain the 
final D/E rates for the program for the award year.
    (2) Appeals granted. If the Secretary grants the appeal, the 
Secretary notifies the institution that the appeal is granted, that the 
recalculated D/E rates are the new final D/E rates for the program for 
the award year, and of any consequences of the recalculated rates under 
Sec.  668.410. If the Secretary has published final D/E rates under 
Sec.  668.405(g), the program's published rates will be updated to 
reflect the new final D/E rates.
    (g) Conditions for alternate earnings appeals. An institution must 
ensure that any material that it submits to make an appeal under this 
section is complete, timely, accurate, and in a format acceptable to 
the Secretary and consistent with any instructions provided to the 
institution with the notice of determination.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)


[[Page 65012]]




Sec.  668.407  [Reserved].


Sec.  668.408  [Reserved].


Sec.  668.409  Final determination of the D/E rates measure.

    (a) Notice of determination. For each award year for which the 
Secretary calculates a D/E rates measure for a GE program, the 
Secretary issues a notice of determination informing the institution of 
the following:
    (1) The final D/E rates for the program as determined under Sec.  
668.404, Sec.  668.405, and, if applicable, Sec.  668.406;
    (2) The final determination by the Secretary of whether the program 
is passing, failing, in the zone, or ineligible, as described in Sec.  
668.403, and the consequences of that determination;
    (3) Whether the program could become ineligible based on its final 
D/E rates for the next award year for which D/E rates are calculated 
for the program;
    (4) Whether the institution is required to provide the student 
warning under Sec.  668.410(a); and
    (5) If the program's final D/E rates are failing or in the zone, 
instructions on how it may make an alternate earnings appeal pursuant 
to Sec.  668.406.
    (b) Effective date of Secretary's final determination. The 
Secretary's determination as to the D/E rates measure is effective on 
the date that is specified in the notice of determination. The 
determination, including, as applicable, the determination with respect 
to an appeal under Sec.  668.406, constitutes the final decision of the 
Secretary with respect to the D/E rates measure and the Secretary 
provides for no further appeal of that determination.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)

Sec.  668.410  Consequences of the D/E rates measure.

    (a) Student warning--(1) Events requiring a warning to students and 
prospective students. The institution must provide a warning with 
respect to a GE program to students and to prospective students for any 
year for which the Secretary notifies an institution that the program 
could become ineligible based on its final D/E rates measure for the 
next award year.
    (2) Content of warning. Unless otherwise specified by the Secretary 
in a notice published in the Federal Register, the warning must--
    (i) State that: ``This program has not passed standards established 
by the U.S. Department of Education. The Department based these 
standards on the amounts students borrow for enrollment in this program 
and their reported earnings. If in the future the program does not pass 
the standards, students who are then enrolled may not be able to use 
federal student grants or loans to pay for the program, and may have to 
find other ways, such as private loans, to pay for the program.''; and
    (ii) Refer students and prospective students to (and include a link 
for) College Navigator, its successor site, or another similar Federal 
resource, for information about other similar programs.
    (iii) For warnings provided to enrolled students--
    (A) Describe the academic and financial options available to 
students to continue their education in another program at the 
institution, including whether the students could transfer credits 
earned in the program to another program at the institution and which 
course credits would transfer, in the event that the program loses 
eligibility for title IV, HEA program funds;
    (B) Indicate whether or not the institution will--
    (1) Continue to provide instruction in the program to allow 
students to complete the program; and
    (2) Refund the tuition, fees, and other required charges paid to 
the institution by, or on behalf of, students for enrollment in the 
program; and
    (C) Explain whether the students could transfer credits earned in 
the program to another institution.
    (3) Consumer testing. The Secretary will conduct consumer testing 
to determine how to make the student warning as meaningful as possible.
    (4) Alternative languages. To the extent practicable, the 
institution must provide alternatives to the English-language student 
warning for those students and prospective students for whom English is 
not their first language.
    (5) Delivery to students. (i) An institution must provide the 
warning required under this section in writing to each student enrolled 
in the program no later than 30 days after the date of the Secretary's 
notice of determination under Sec.  668.409 by--
    (A) Hand-delivering the warning as a separate document to the 
student individually or as part of a group presentation; or
    (B) Sending the warning to the primary email address used by the 
institution for communicating with the student about the program.
    (ii) If the institution sends the warning by email, the institution 
must--
    (A) Ensure that the warning is the only substantive content in the 
email;
    (B) Receive electronic or other written acknowledgement from the 
student that the student has received the email;
    (C) Send the warning using a different address or method of 
delivery if the institution receives a response that the email could 
not be delivered; and
    (D) Maintain records of its efforts to provide the warnings 
required by this section.
    (6) Delivery to prospective students -- (i) General. An institution 
must provide any warning required under this section to each 
prospective student or to each third party acting on behalf of the 
prospective student at the first contact about the program between the 
institution and the student or the third party acting on behalf of the 
student by--
    (A) Hand-delivering the warning as a separate document to the 
prospective student or third party individually, or as part of a group 
presentation;
    (B) Sending the warning to the primary email address used by the 
institution for communicating with the prospective student or third 
party about the program;
    (C) Providing the prospective student or third party a copy of the 
disclosure template as required by Sec.  668.412(e) that includes the 
student warning required by this section; or
    (D) Providing the warning orally to the student or third party if 
the contact is by telephone.
    (ii) Special warning requirements before enrolling a prospective 
student. (A) Before an institution enrolls, registers, or enters into a 
financial commitment with a prospective student with respect to the 
program, the institution must provide any warning required under this 
section to the prospective student in the manner prescribed in 
paragraph (a)(6)(i)(A) through (C) of this section.
    (B) An institution may not enroll, register, or enter into a 
financial commitment with the prospective student with respect to the 
program earlier than--
    (1) Three business days after the institution first provides the 
student warning to the prospective student; or
    (2) If more than 30 days have passed from the date the institution 
first provided the student warning to the prospective student, three 
business days after the institution provides another warning as 
required by this paragraph.
    (iii) Email delivery and acknowledgement. If the institution sends 
the warning to the prospective student or the third party by email, 
including by providing the prospective student or third party an 
electronic copy of the disclosure template, the institution must--
    (A) Ensure that the warning is the only substantive content in the 
email;
    (B) Receive electronic or other written acknowledgement from the 
prospective

[[Page 65013]]

student or third party that the student or third party has received the 
email;
    (C) Send the warning using a different address or method of 
delivery if the institution receives a response that the email could 
not be delivered; and
    (D) Maintain records of its efforts to provide the warning required 
under this section.
    (7) Disclosure template. Within 30 days of receiving notice from 
the Secretary that the institution must provide a student warning for 
the program, the institution must update the disclosure template 
described in Sec.  668.412 to include the warning in paragraph (a)(2) 
of this section or such other warning specified by the Secretary in a 
notice published in the Federal Register.
    (b) Restrictions--(1) Ineligible program. Except as provided in 
Sec.  668.26(d), an institution may not disburse title IV, HEA program 
funds to students enrolled in an ineligible program.
    (2) Period of ineligibility. (i) An institution may not seek to 
reestablish the eligibility of a failing or zone program that it 
discontinued voluntarily, reestablish the eligibility of a program that 
is ineligible under the D/E rates measure, or establish the eligibility 
of a program that is substantially similar to the discontinued or 
ineligible program, until three years following the date specified in 
the notice of determination informing the institution of the program's 
ineligibility or the date the institution discontinued the failing or 
zone program.
    (ii) An institution may not seek to reestablish the eligibility of 
a program that it discontinued voluntarily after receiving draft D/E 
rates that are failing or in the zone, or establish the eligibility of 
a program that is substantially similar to the discontinued program, 
until--
    (A) Final D/E rates that are passing are issued for the program for 
that award year; or
    (B) If the final D/E rates for the program for that award year are 
failing or in the zone, three years following the date the institution 
discontinued the program.
    (iii) For the purposes of this section, an institution voluntarily 
discontinues a program on the date the institution provides written 
notice to the Secretary that it relinquishes the title IV, HEA program 
eligibility of that program.
    (iv) For the purposes of this subpart, a program is substantially 
similar to another program if the two programs share the same four-
digit CIP code. The Secretary presumes a program is not substantially 
similar to another program if the two programs have different four-
digit CIP codes but the institution must provide an explanation of how 
the new program is not substantially similar to the ineligible or 
voluntarily discontinued program with its certification under Sec.  
668.414.
    (3) Restoring eligibility. An ineligible program, or a failing or 
zone program that an institution voluntarily discontinues, remains 
ineligible until the institution establishes the eligibility of that 
program under Sec.  668.414(c).

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, 1099c)

Sec.  668.411  Reporting requirements for GE programs.

    (a) In accordance with procedures established by the Secretary, an 
institution must report--
    (1) For each student enrolled in a GE program during an award year 
who received title IV, HEA program funds for enrolling in that 
program--
    (i) Information needed to identify the student and the institution;
    (ii) The name, CIP code, credential level, and length of the 
program;
    (iii) Whether the program is a medical or dental program whose 
students are required to complete an internship or residency, as 
described in Sec.  668.402;
    (iv) The date the student initially enrolled in the program;
    (v) The student's attendance dates and attendance status (e.g., 
enrolled, withdrawn, or completed) in the program during the award 
year; and
    (vi) The student's enrollment status (e.g., full-time, three-
quarter time, half-time, less than half-time) as of the first day of 
the student's enrollment in the program;
    (2) If the student completed or withdrew from the GE program during 
the award year--
    (i) The date the student completed or withdrew from the program;
    (ii) The total amount the student received from private education 
loans, as described in Sec.  668.404(d)(1)(ii), for enrollment in the 
program that the institution is, or should reasonably be, aware of;
    (iii) The total amount of institutional debt, as described in Sec.  
668.404(d)(1)(iii), the student owes any party after completing or 
withdrawing from the program;
    (iv) The total amount of tuition and fees assessed the student for 
the student's entire enrollment in the program; and
    (v) The total amount of the allowances for books, supplies, and 
equipment included in the student's title IV Cost of Attendance (COA) 
for each award year in which the student was enrolled in the program, 
or a higher amount if assessed the student by the institution;
    (3) If the institution is required by its accrediting agency or 
State to calculate a placement rate for either the institution or the 
program, or both, the placement rate for the program, calculated using 
the methodology required by that accrediting agency or State, and the 
name of that accrediting agency or State; and
    (4) As described in a notice published by the Secretary in the 
Federal Register, any other information the Secretary requires the 
institution to report.
    (b)(1) An institution must report the information required under 
paragraphs (a)(1) and (2) of this section no later than--
    (i) July 31, following the date these regulations take effect, for 
the second through seventh award years prior to that date;
    (ii) For medical and dental programs that require an internship or 
residency, July 31, following the date these regulations take effect 
for the second through eighth award years prior to that date; and
    (iii) For subsequent award years, October 1, following the end of 
the award year, unless the Secretary establishes different dates in a 
notice published in the Federal Register.
    (2) An institution must report the information required under 
paragraph (a)(3) of this section on the date and in the manner 
prescribed by the Secretary in a notice published in the Federal 
Register.
    (3) For any award year, if an institution fails to provide all or 
some of the information in paragraph (a) of this section to the extent 
required, the institution must provide to the Secretary an explanation, 
acceptable to the Secretary, of why the institution failed to comply 
with any of the reporting requirements.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1231a)

Sec.  668.412  Disclosure requirements for GE programs.

    (a) Disclosure template. An institution must use the disclosure 
template provided by the Secretary to disclose information about each 
of its GE programs to enrolled and prospective students. The Secretary 
will conduct consumer testing to determine how to make the disclosure 
template as meaningful as possible. The Secretary identifies the 
information that must be included in the template in a notice published 
in the Federal Register. That information may include, but is not 
limited to:
    (1) The primary occupations (by name and SOC code) that the program 
prepares students to enter, along with

[[Page 65014]]

links to occupational profiles on O*NET (www.onetonline.org) or its 
successor site.
    (2) As calculated by the Secretary under Sec.  668.413, the 
program's completion rates for full-time and less-than-full-time 
students and the program's withdrawal rates.
    (3) The length of the program in calendar time (i.e., weeks, 
months, years).
    (4) The number of clock or credit hours or equivalent, as 
applicable, in the program.
    (5) The total number of individuals enrolled in the program during 
the most recently completed award year.
    (6) As calculated by the Secretary under Sec.  668.413, the loan 
repayment rate for any one or all of the following groups of students 
who entered repayment on title IV loans during the two-year cohort 
period:
    (i) All students who enrolled in the program.
    (ii) Students who completed the program.
    (iii) Students who withdrew from the program.
    (7) The total cost of tuition and fees, and the total cost of 
books, supplies, and equipment, that a student would incur for 
completing the program within the length of the program.
    (8) The placement rate for the program, if the institution is 
required by its accrediting agency or State to calculate a placement 
rate either for the program or the institution, or both, using the 
required methodology of that accrediting agency or State.
    (9) Of the individuals enrolled in the program during the most 
recently completed award year, the percentage who received a title IV 
loan or a private loan for enrollment in the program.
    (10) As calculated by the Secretary, the median loan debt as 
determined under Sec.  668.413 of any one or all of the following 
groups:
    (i) Those students who completed the program during the most 
recently completed award year.
    (ii) Those students who withdrew from the program during the most 
recently completed award year.
    (iii) All of the students described in paragraphs (a)(10)(i) and 
(ii) of this section.
    (11) As provided by the Secretary, the mean or median earnings of 
any one or all of the following groups of students:
    (i) Students who completed the program during the cohort period 
used by the Secretary to calculate the most recent D/E rates for the 
program under this subpart.
    (ii) Students who were in withdrawn status at the end of the cohort 
period used by the Secretary to calculate the most recent D/E rates for 
the program under this subpart.
    (iii) All of the students described in paragraph (a)(11)(i) and 
(ii) of this section.
    (12) As calculated by the Secretary under Sec.  668.413, the most 
recent program cohort default rate.
    (13) As calculated by the Secretary under Sec.  668.404, the most 
recent annual earnings rate.
    (14)(i) Whether the program does or does not satisfy--
    (A) The applicable educational prerequisites for professional 
licensure or certification in each State within the institution's MSA; 
and
    (B) The applicable educational prerequisites for professional 
licensure or certification in any other State for which the institution 
has made a determination regarding such requirements.
    (ii) For any States not described in paragraph (a)(14)(i) of this 
section, a statement that the institution has not made a determination 
with respect to the licensure or certification requirements of those 
States.
    (15) Whether the program is programmatically accredited and the 
name of the accrediting agency.
    (16) A link to the U.S. Department of Education's College Navigator 
Web site, or its successor site, or other similar Federal resource.
    (b) Disclosure updates. (1) In accordance with procedures and 
timelines established by the Secretary, the institution must update at 
least annually the information contained in the disclosure template 
with the most recent data available for each of its GE programs.
    (2) The institution must update the disclosure template to include 
any student warning as required under Sec.  668.410(a)(7).
    (c) Program Web pages. (1) On any Web page containing academic, 
cost, financial aid, or admissions information about a GE program 
maintained by or on behalf of an institution, the institution must 
provide the disclosure template for that program or a prominent, 
readily accessible, clear, conspicuous, and direct link to the 
disclosure template for that program.
    (2) The Secretary may require the institution to modify a Web page 
if it provides a link to the disclosure template and the link is not 
prominent, readily accessible, clear, conspicuous, and direct.
    (d) Promotional materials. (1) All promotional materials made 
available by or on behalf of an institution to prospective students 
that identify a GE program by name or otherwise promote the program 
must include--
    (i) The disclosure template in a prominent manner; or
    (ii) Where space or airtime constraints would preclude the 
inclusion of the disclosure template, the Web address (URL) of, or the 
direct link to, the disclosure template, provided that the URL or link 
is prominent, readily accessible, clear, conspicuous, and direct and 
the institution identifies the URL or link as ``Important Information 
about the educational debt, earnings, and completion rates of students 
who attended this program'' or as otherwise specified by the Secretary 
in a notice published in the Federal Register.
    (2) Promotional materials include, but are not limited to, an 
institution's catalogs, invitations, flyers, billboards, and 
advertising on or through radio, television, print media, the Internet, 
and social media.
    (3) The institution must ensure that all promotional materials, 
including printed materials, about a GE program are accurate and 
current at the time they are published, approved by a State agency, or 
broadcast.
    (e) Direct distribution to prospective students. (1) Before a 
prospective student signs an enrollment agreement, completes 
registration, or makes a financial commitment to the institution, the 
institution must provide the prospective student or a third party 
acting on behalf of the prospective student, as a separate document, a 
copy of the disclosure template.
    (2) The disclosure template may be provided to the prospective 
student or third party by--
    (i) Hand-delivering the disclosure template to the prospective 
student or third party individually or as part of a group presentation; 
or
    (ii) Sending the disclosure template to the primary email address 
used by the institution for communicating with the prospective student 
or third party about the program.
    (3) If the institution hand-delivers the disclosure template to the 
prospective student or third party, it must obtain written confirmation 
from the prospective student or third party that the prospective 
student or third party received a copy of the disclosure template.
    (4) If the institution sends the disclosure template to the 
prospective student or third party by email, the institution must--
    (i) Ensure that the disclosure template is the only substantive 
content in the email;
    (ii) Receive electronic or other written acknowledgement from the 
prospective

[[Page 65015]]

student or third party that the prospective student or third party 
received the email;
    (iii) Send the disclosure template using a different address or 
method of delivery if the institution receives a response that the 
email could not be delivered; and
    (iv) Maintain records of its efforts to provide the disclosure 
template required under this section.
    (f) Disclosure templates by program length, location, or format. 
(1) An institution that offers a GE program in more than one program 
length must publish a separate disclosure template for each length of 
the program. The institution must ensure that each disclosure template 
clearly identifies the applicable length of the program.
    (2) An institution that offers a GE program in more than one 
location or format (e.g., full-time, part-time, accelerated) may 
publish a separate disclosure template for each location or format if 
doing so would result in clearer disclosures under paragraph (a) of 
this section. An institution that chooses to publish separate 
disclosure templates for each location or format must ensure that each 
disclosure template clearly identifies the applicable location or 
format.
    (3) If an institution publishes a separate disclosure template for 
each length, or for each location or format, of the program, the 
institution must disaggregate, by length of the program, location, or 
format, those disclosures set forth in paragraphs (a)(4) and (5), 
(a)(7) through (9), and (a)(14) and as otherwise provided by the 
Secretary in a notice published in the Federal Register.
    (g) Privacy considerations. An institution may not include on the 
disclosure template any of the disclosures described in paragraphs 
(a)(2), (a)(5), and (a)(6) or paragraphs (a)(8) through (13) of this 
section if they are based on fewer than 10 students.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.413  Calculating, issuing, and challenging completion rates, 
withdrawal rates, repayment rates, median loan debt, median earnings, 
and program cohort default rate.

    (a)(1) General. Under the procedures in this section, the Secretary 
determines the completion rates, withdrawal rates, repayment rates, 
median loan debt, median earnings, and program cohort default rate an 
institution must disclose under Sec.  668.412 for each of its GE 
programs, notifies the institution of that information, and provides 
the institution an opportunity to challenge the calculations.
    (2) Enrollment cohort. (i) Subject to paragraph (a)(2)(ii) of this 
section, for the purpose of calculating the completion and withdrawal 
rates under paragraph (b) of this section, the enrollment cohort is 
comprised of all the students who began enrollment in a GE program 
during an award year. For example, the students who began enrollment in 
a GE program during the 2014-2015 award year constitute the enrollment 
cohort for that award year.
    (ii) A student is excluded from the enrollment cohort for the 
purpose of calculating the completion and withdrawal rates under 
paragraph (b) of this section if, while enrolled in the program, the 
student died or became totally and permanently disabled and was unable 
to continue enrollment on at least a half-time basis, as determined 
under the standards in 34 CFR 685.213.
    (b) Calculating completion rates, withdrawal rates, repayment 
rates, median loan debt, median earnings, and program cohort default 
rate-- (1) Completion rates. For each enrollment cohort, the Secretary 
calculates the completion rates of a GE program as follows:
    (i) For students whose enrollment status is full-time on the first 
day of the student's enrollment in the program:
[GRAPHIC] [TIFF OMITTED] TR31OC14.065

    (ii) For students whose enrollment status is less than full-time on 
the first day of the student's enrollment in the program:

[[Page 65016]]

[GRAPHIC] [TIFF OMITTED] TR31OC14.066

    (2) Withdrawal rate. For each enrollment cohort, the Secretary 
calculates two withdrawal rates for a GE program as follows:
    (i) The percentage of students in the enrollment cohort who 
withdrew from the program within 100 percent of the length of the 
program;
    (ii) The percentage of students in the enrollment cohort who 
withdrew from the program within 150 percent of the length of the 
program.
    (3) Loan repayment rate. For an award year, the Secretary 
calculates a loan repayment rate for borrowers not excluded under 
paragraph (b)(3)(vi) of this section who enrolled in a GE program as 
follows:
[GRAPHIC] [TIFF OMITTED] TR31OC14.067

    (i) Number of borrowers entering repayment. The total number of 
borrowers who entered repayment during the two-year cohort period on 
FFEL or Direct Loans received for enrollment in the program.
    (ii) Number of borrowers paid in full. Of the number of borrowers 
entering repayment, the number who have fully repaid all FFEL or Direct 
Loans received for enrollment in the program.
    (iii) Number of borrowers in active repayment. Of the number of 
borrowers entering repayment, the number who, during the most recently 
completed award year, made loan payments sufficient to reduce by at 
least one dollar the outstanding balance of each of the borrower's FFEL 
or Direct Loans received for enrollment in the program, including 
consolidation loans that include a FFEL or Direct Loan received for 
enrollment in the program, by comparing the outstanding balance of each 
loan at the beginning and end of the award year.
    (iv) Loan defaults. A borrower who defaulted on a FFEL or Direct 
Loan is not included in the numerator of the loan repayment rate 
formula even if that loan has been paid in full or meets the definition 
of being in active repayment.
    (v) Repayment rates for borrowers who completed or withdrew. The 
Secretary may modify the formula in this paragraph to calculate 
repayment rates for only those borrowers who completed the program or 
for only those borrowers who withdrew from the program.
    (vi) Exclusions. For the award year the Secretary calculates the 
loan repayment rate for a program, the Secretary excludes a borrower 
from the repayment rate calculation if the Secretary determines that--
    (A) One or more of the borrower's FFEL or Direct loans were in a 
military-related deferment status at any time during the most recently 
completed award year;
    (B) One or more of the borrower's FFEL or Direct loans are either 
under consideration by the Secretary, or have been approved, for a 
discharge on the basis of the borrower's total and permanent 
disability, under 34 CFR 682.402 or 685.212;
    (C) The borrower was enrolled in any other eligible program at the 
institution or at another institution during the most recently 
completed award year; or
    (D) The borrower died.
    (4) Median loan debt for students who completed the GE program. For 
the most recently completed award year, the

[[Page 65017]]

Secretary calculates a median loan debt for the students described in 
Sec.  668.412(a)(10)(i) who completed the GE program during the award 
year. The median is calculated on debt described in Sec.  
668.404(d)(1).
    (5) Median loan debt for students who withdrew from the GE program. 
For the most recently completed award year, the Secretary calculates a 
median loan debt for the students described in Sec.  668.412(a)(10)(ii) 
who withdrew from the program during the award year. The median is 
calculated on debt described in Sec.  668.404(d)(1).
    (6) Median loan debt for students who completed and withdrew from 
the GE program. For the most recently completed award year, the 
Secretary calculates a median loan debt for the students described in 
Sec.  668.412(a)(10)(iii) who completed the GE program during the award 
year and those students who withdrew from the GE program during the 
award year. The median is calculated on debt described in Sec.  
668.404(d)(1).
    (7) Median earnings. The Secretary calculates the median earnings 
of a GE program as described in paragraphs (b)(8) through (b)(12) of 
this section.
    (8) Median earnings for students who completed the GE program. (i) 
The Secretary determines the median earnings for the students who 
completed the GE program during the cohort period by--
    (A) Creating a list of the students who completed the program 
during the cohort period and providing it to the institution, as 
provided in paragraph (b)(8)(ii) of this section;
    (B) Allowing the institution to correct the information about the 
students on the list, as provided in paragraph (b)(8)(iii) of this 
section;
    (C) Obtaining from SSA the median annual earnings of the students 
on the list, as provided in paragraph (b)(8)(iv) of this section; and
    (D) Notifying the institution of the median annual earnings for the 
students on the list.
    (ii) Creating the list of students. (A) The Secretary selects the 
students to be included on the list by--
    (1) Identifying the students who were enrolled in the program and 
completed the program during the cohort period from the data provided 
by the institution under Sec.  668.411; and
    (2) Indicating which students would be removed from the list under 
paragraph (b)(11) of this section and the specific reason for the 
exclusion.
    (B) The Secretary provides the list to the institution and states 
which cohort period was used to select the students.
    (iii) Institutional corrections to the list. (A) The Secretary 
presumes that the list of students and the identity information for 
those students are correct unless the institution provides evidence to 
the contrary that is satisfactory to the Secretary. The institution 
bears the burden of proof that the list is incorrect.
    (B) No later than 45 days after the date the Secretary provides the 
list to the institution, the institution may--
    (1) Provide evidence showing that a student should be included on 
or removed from the list pursuant to paragraph (b)(11) of this section 
or otherwise; or
    (2) Correct or update a student's identity information and the 
student's program attendance information.
    (C) After the 45-day period expires, the institution may no longer 
seek to correct the list of students or revise the identity or program 
information of those students included on the list.
    (D) The Secretary considers the evidence provided by the 
institution and either accepts the correction or notifies the 
institution of the reasons for not accepting the correction. If the 
Secretary accepts the correction, the Secretary uses the corrected 
information to create the final list. The Secretary notifies the 
institution which students are included on the final list and the 
cohort period used to create the list.
    (iv) Obtaining earnings data. If the final list includes 10 or more 
students, the Secretary submits the final list to SSA. For the purposes 
of this section, SSA returns to the Secretary--
    (A) The median earnings of the students on the list whom SSA has 
matched to SSA earnings data, in aggregate and not in individual form; 
and
    (B) The number, but not the identities, of students on the list 
that SSA could not match.
    (9) Median earnings for students who withdrew from the program. (i) 
The Secretary determines the median earnings for the students who 
withdrew from the program during the cohort period by--
    (A) Creating a list of the students who were enrolled in the 
program but withdrew from the program during the cohort period and 
providing it to the institution, as provided in paragraph (b)(9)(ii) of 
this section;
    (B) Allowing the institution to correct the information about the 
students on the list, as provided in paragraph (b)(9)(iii) of this 
section;
    (C) Obtaining from SSA the median annual earnings of the students 
on the list, as provided in paragraph (b)(9)(iv) of this section; and
    (D) Notifying the institution of the median annual earnings for the 
students on the list.
    (ii) Creating the list of students. (A) The Secretary selects the 
students to be included on the list by--
    (1) Identifying the students who were enrolled in the program but 
withdrew from the program during the cohort period from the data 
provided by the institution under Sec.  668.411; and
    (2) Indicating which students would be removed from the list under 
paragraph (b)(11) of this section and the specific reason for the 
exclusion.
    (B) The Secretary provides the list to the institution and states 
which cohort period was used to select the students.
    (iii) Institutional corrections to the list. (A) The Secretary 
presumes that the list of students and the identity information for 
those students are correct unless the institution provides evidence to 
the contrary that is satisfactory to the Secretary, in a format and 
process determined by the Secretary. The institution bears the burden 
of proof that the list is incorrect.
    (B) No later than 45 days after the date the Secretary provides the 
list to the institution, the institution may--
    (1) Provide evidence showing that a student should be included on 
or removed from the list pursuant to paragraph (b)(11) of this section 
or otherwise; or
    (2) Correct or update a student's identity information and the 
student's program attendance information.
    (C) After the 45-day period expires, the institution may no longer 
seek to correct the list of students or revise the identity or program 
information of those students included on the list.
    (D) The Secretary considers the evidence provided by the 
institution and either accepts the correction or notifies the 
institution of the reasons for not accepting the correction. If the 
Secretary accepts the correction, the Secretary uses the corrected 
information to create the final list. The Secretary notifies the 
institution which students are included on the final list and the 
cohort period used to create the list.
    (iv) Obtaining earnings data. If the final list includes 10 or more 
students, the Secretary submits the final list to SSA. For the purposes 
of this section SSA returns to the Secretary--
    (A) The median earnings of the students on the list whom SSA has 
matched to SSA earnings data, in aggregate and not in individual form; 
and
    (B) The number, but not the identities, of students on the list 
that SSA could not match.

[[Page 65018]]

    (10) Median earnings for students who completed and withdrew from 
the program. The Secretary calculates the median earnings for both the 
students who completed the program during the cohort period and 
students who withdrew from the program during the cohort period in 
accordance with paragraphs (b)(8) and (9) of this section.
    (11) Exclusions from median earnings calculations. The Secretary 
excludes a student from the calculation of the median earnings of a GE 
program if the Secretary determines that--
    (i) One or more of the student's title IV loans were in a military-
related deferment status at any time during the calendar year for which 
the Secretary obtains earnings information under this section;
    (ii) One or more of the student's title IV loans are under 
consideration by the Secretary, or have been approved, for a discharge 
on the basis of the student's total and permanent disability, under 34 
CFR 674.61, 682.402 or 685.212;
    (iii) The student was enrolled in any other eligible program at the 
institution or at another institution during the calendar year for 
which the Secretary obtains earnings information under this section; or
    (iv) The student died.
    (12) Median earnings not calculated. The Secretary does not 
calculate the median earnings for a GE program if SSA does not provide 
the median earnings for the program.
    (13) Program cohort default rate. The Secretary calculates the 
program cohort default rate using the methodology and procedures set 
forth in subpart R of this part.
    (c) Notification to institutions. The Secretary notifies the 
institution of the--
    (1) Draft completion, withdrawal, and repayment rates calculated 
under paragraph (b)(1) through (3) of this section and the information 
the Secretary used to calculate those rates.
    (2) Median loan debt of the students who completed the program, as 
described in paragraph (b)(4) of this section, the students who 
withdrew from the program, as described in paragraph (b)(5) of this 
section, and both the students who completed and withdrew from the 
program, as described in paragraph (b)(6) of this section, in each case 
during the cohort period.
    (3) Median earnings of the students who completed the program, as 
described in paragraph (b)(8) of this section, the students who 
withdrew from the program, as described in paragraph (b)(9) of this 
section, or both the students who completed the program and the 
students who withdrew from the program, as described in paragraph 
(b)(10) of this section, in each case during the cohort period.
    (4) Draft program cohort default rate, as described in paragraph 
(b)(13) of this section.
    (d) Challenges to completion rates, withdrawal rates, repayment 
rates, median loan debt, median earnings, and program cohort default 
rate--(1) Completion rates, withdrawal rates, repayment rates, and 
median loan debt. (i) No later than 45 days after the Secretary 
notifies an institution of a GE program's draft completion rate, 
withdrawal rate, repayment rate, and median loan debt, the institution 
may challenge the accuracy of the information that the Secretary used 
to calculate the draft rates and the draft median loan debt by 
submitting, in a form prescribed by the Secretary, evidence 
satisfactory to the Secretary demonstrating that the information was 
incorrect.
    (ii) The Secretary considers any evidence provided by the 
institution challenging the accuracy of the information the Secretary 
used to calculate the rates and the median loan debt and notifies the 
institution whether the challenge is accepted or the reasons the 
challenge is not accepted. If the Secretary accepts the challenge, the 
Secretary uses the corrected data to calculate the rates or median loan 
debt.
    (iii) An institution may challenge the Secretary's calculation of 
the completion rates, withdrawal rates, repayment rates, and median 
loan debt only once for an award year. An institution that does not 
timely challenge the rates or median loan debt waives any objection to 
the rates or median loan debt as stated in the notice.
    (2) Median earnings. The Secretary does not consider any challenges 
to the median earnings calculated under this section.
    (3) Program cohort default rate. The Secretary considers any 
challenges to the program cohort default rate under the procedures for 
challenges set forth in subpart R of this part.
    (e) Final calculations--(1) Completion rates, withdrawal rates, 
repayment rates, and median loan debt. (i) After expiration of the 45-
day period, and subject to resolution of any challenge under paragraph 
(d)(1) of this section, a program's draft completion rate, withdrawal 
rate, repayment rate, and median loan debt constitute the final rates 
and median loan debt for that program.
    (ii) The Secretary informs the institution of the final completion 
rate, withdrawal rate, repayment rate, and median loan debt for each of 
its GE programs by issuing a notice of determination.
    (iii) Unless paragraph (g) of this section applies, after the 
Secretary provides the notice of determination, the Secretary may 
publish the final completion rate, withdrawal rate, repayment rate, and 
median loan debt.
    (2) Median earnings. The median earnings of a program calculated by 
the Secretary under this section constitute the final median earnings 
for that program. After the Secretary provides the institution with the 
notice in paragraph (c) of this section, the Secretary may publish the 
final median earnings for the program.
    (3) Program cohort default rate. Subject to resolution of any 
challenge under subpart R of this part, a program's program cohort 
default rate calculated by the Secretary under subpart R constitutes 
the official program cohort default rate for that program. After the 
Secretary provides the notice of determination, the Secretary may 
publish the official program cohort default rate.
    (f) Conditions for challenges. An institution must ensure that any 
material that it submits to make any corrections or challenge under 
this section is--
    (1) Complete, timely, accurate, and in a format acceptable to the 
Secretary as described in this subpart and, with respect to program 
cohort default rate, in subpart R of this part; and
    (2) Consistent with any instructions provided to the institution 
with the notice of its draft completion, withdrawal, and repayment 
rates, median loan debt, or program cohort default rate.
    (g) Privacy considerations. The Secretary does not publish a 
determination described in paragraphs (b)(1) through (6), (b)(8) 
through (b)(10), and(b)(13) of this section, and an institution may not 
disclose a determination made by the Secretary or make any disclosures 
under those paragraphs, if the determination is based on fewer than 10 
students.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094)

Sec.  668.414  Certification requirements for GE programs.

    (a) Transitional certification for existing programs. (1) Except as 
provided in paragraph (a)(2) of this section, an institution must 
provide to the Secretary no later than December 31 of the year in which 
this regulation takes effect, in accordance with procedures established 
by the Secretary, a certification signed by its most senior

[[Page 65019]]

executive officer that each of its currently eligible GE programs 
included on its Eligibility and Certification Approval Report meets the 
requirements of paragraph (d) of this section. The Secretary accepts 
the certification as an addendum to the institution's program 
participation agreement with the Secretary under Sec.  668.14.
    (2) If an institution makes the certification in its program 
participation agreement pursuant to paragraph (b) of this section 
between July 1 and December 31 of the year in which this regulation 
takes effect, it is not required to provide the transitional 
certification under this paragraph.
    (b) Program participation agreement certification. As a condition 
of its continued participation in the title IV, HEA programs, an 
institution must certify in its program participation agreement with 
the Secretary under Sec.  668.14 that each of its currently eligible GE 
programs included on its Eligibility and Certification Approval Report 
meets the requirements of paragraph (d) of this section. An institution 
must update the certification within 10 days if there are any changes 
in the approvals for a program, or other changes for a program that 
make an existing certification no longer accurate.
    (c) Establishing eligibility and disbursing funds. (1) An 
institution establishes the eligibility for title IV, HEA program funds 
of a GE program by updating the list of the institution's eligible 
programs maintained by the Department to include that program, as 
provided under 34 CFR 600.21(a)(11)(i). By updating the list of the 
institution's eligible programs, the institution affirms that the 
program satisfies the certification requirements in paragraph (d) of 
this section. Except as provided in paragraph (c)(2) of this section, 
after the institution updates its list of eligible programs, the 
institution may disburse title IV, HEA program funds to students 
enrolled in that program.
    (2) An institution may not update its list of eligible programs to 
include a GE program, or a GE program that is substantially similar to 
a failing or zone program that the institution voluntarily discontinued 
or became ineligible as described in Sec.  668.410(b)(2), that was 
subject to the three-year loss of eligibility under Sec.  
668.410(b)(2), until that three-year period expires.
    (d) GE program eligibility certifications. An institution certifies 
for each eligible program included on its Eligibility and Certification 
Approval Report, at the time and in the form specified in this section, 
that--
    (1) Each eligible GE program it offers is approved by a recognized 
accrediting agency or is otherwise included in the institution's 
accreditation by its recognized accrediting agency, or, if the 
institution is a public postsecondary vocational institution, the 
program is approved by a recognized State agency for the approval of 
public postsecondary vocational education in lieu of accreditation;
    (2) Each eligible GE program it offers is programmatically 
accredited, if such accreditation is required by a Federal governmental 
entity or by a governmental entity in the State in which the 
institution is located or in which the institution is otherwise 
required to obtain State approval under 34 CFR 600.9;
    (3) For the State in which the institution is located or in which 
the institution is otherwise required to obtain State approval under 34 
CFR 600.9, each eligible program it offers satisfies the applicable 
educational prerequisites for professional licensure or certification 
requirements in that State so that a student who completes the program 
and seeks employment in that State qualifies to take any licensure or 
certification exam that is needed for the student to practice or find 
employment in an occupation that the program prepares students to 
enter; and
    (4) For a program for which the institution seeks to establish 
eligibility for title IV, HEA program funds, the program is not 
substantially similar to a program offered by the institution that, in 
the prior three years, became ineligible for title IV, HEA program 
funds under the D/E rates measure or was failing, or in the zone with 
respect to, the D/E rates measure and was voluntarily discontinued by 
the institution. The institution must include with its certification an 
explanation of how the new program is not substantially similar to any 
such ineligible or discontinued program.

(Authority: 20 U.S.C. 1001, 1002, 1088, 1094, 1099c)

Sec.  668.415  Severability.

    If any provision of this subpart or its application to any person, 
act, or practice is held invalid, the remainder of the subpart or the 
application of its provisions to any person, act, or practice shall not 
be affected thereby.

(Authority: 20 U.S.C. 1001, 1002, 1088)


0
13. Add subpart R to read as follows:
Subpart R--Program Cohort Default Rate
Sec.
668.500 Purpose of this subpart.
668.501 Definitions of terms used in this subpart.
668.502 Calculating and applying program cohort default rates.
668.503 Determining program cohort default rates for GE programs at 
institutions that have undergone a change in status.
668.504 Draft program cohort default rates and your ability to 
challenge before official program cohort default rates are issued.
668.505 Notice of the official program cohort default rate of a GE 
program.
668.506 [Reserved]
668.507 Preventing evasion of program cohort default rates.
668.508 General requirements for adjusting and appealing official 
program cohort default rates.
668.509 Uncorrected data adjustments.
668.510 New data adjustments.
668.511 Erroneous data appeals.
668.512 Loan servicing appeals.
668.513 [Reserved]
668.514 [Reserved]
668.515 [Reserved]
668.516 Fewer-than-ten-borrowers determinations.

Subpart R--Program Cohort Default Rate


Sec.  668.500  Purpose of this subpart.

    General. The program cohort default rate is a measure of a GE 
program offered by the institution. This subpart describes how program 
cohort default rates are calculated, and how you may request changes to 
your program cohort default rates or appeal the rate. Under this 
subpart, you submit a ``challenge'' after you receive your draft 
program cohort default rate, and you request an ``adjustment'' or 
``appeal'' after your official program cohort default rate is 
published.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.501  Definitions of terms used in this subpart.

    We use the following definitions in this subpart:
    Cohort. Your cohort is a group of borrowers used to determine your 
program cohort default rate. The method for identifying the borrowers 
in a cohort is provided in Sec.  668.502(b).
    Data manager.
    (1) For FFELP loans held by a guaranty agency or lender, the 
guaranty agency is the data manager.
    (2) For FFELP loans that we hold, we are the data manager.
    (3) For Direct Loan Program loans, the Secretary's servicer is the 
data manager.
    Days. In this subpart, ``days'' means calendar days.
    Default. A borrower is considered to be in default for program 
cohort default rate purposes under the rules in Sec.  668.502(c).
    Draft program cohort default rate. Your draft program cohort 
default rate is a rate we issue, for your review, before we issue your 
official program cohort

[[Page 65020]]

default rate. A draft program cohort default rate is used only for the 
purposes described in Sec.  668.504.
    Entering repayment. (1) Except as provided in paragraphs (2) and 
(3) of this definition, loans are considered to enter repayment on the 
dates described in 34 CFR 682.200 (under the definition of ``repayment 
period'') and in 34 CFR 685.207, as applicable.
    (2) A Federal SLS Loan is considered to enter repayment--
    (i) At the same time the borrower's Federal Stafford Loan enters 
repayment, if the borrower received the Federal SLS Loan and the 
Federal Stafford Loan during the same period of continuous enrollment; 
or
    (ii) In all other cases, on the day after the student ceases to be 
enrolled at an institution on at least a half-time basis in an 
educational program leading to a degree, certificate, or other 
recognized educational credential.
    (3) For the purposes of this subpart, a loan is considered to enter 
repayment on the date that a borrower repays it in full, if the loan is 
paid in full before the loan enters repayment under paragraphs (1) or 
(2) of this definition.
    Fiscal year. A fiscal year begins on October 1 and ends on the 
following September 30. A fiscal year is identified by the calendar 
year in which it ends.
    GE program. An educational program offered by an institution under 
Sec.  668.8(c)(3) or (d) and identified by a combination of the 
institution's six-digit Office of Postsecondary Education ID (OPEID) 
number, the program's six-digit CIP code as assigned by the institution 
or determined by the Secretary, and the program's credential level, as 
defined in Sec.  668.402.
    Loan record detail report. The loan record detail report is a 
report that we produce. It contains the data used to calculate your 
draft or official program cohort default rate.
    Official program cohort default rate. Your official program cohort 
default rate is the program cohort default rate that we publish for you 
under Sec.  668.505.
    We. We are the Department, the Secretary, or the Secretary's 
designee.
    You. You are an institution. We consider each reference to ``you'' 
to apply separately to the institution with respect to each of its GE 
programs.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.502  Calculating program cohort default rates.

    (a) General. This section describes the four steps that we follow 
to calculate your program cohort default rate for a fiscal year:
    (1) First, under paragraph (b) of this section, we identify the 
borrowers in your GE program's cohort for the fiscal year. If the total 
number of borrowers in that cohort is fewer than 10, we also include 
the borrowers in your cohorts for the two most recent prior fiscal 
years for which we have data that identifies those borrowers who 
entered repayment during those fiscal years.
    (2) Second, under paragraph (c) of this section, we identify the 
borrowers in the cohort (or cohorts) who are considered to be in 
default by the end of the second fiscal year following the fiscal year 
those borrowers entered repayment. If more than one cohort will be used 
to calculate your program cohort default rate, we identify defaulted 
borrowers separately for each cohort.
    (3) Third, under paragraph (d) of this section, we calculate your 
program cohort default rate.
    (4) Fourth, we apply your program cohort default rate to your 
program at all of your locations--
    (i) As you exist on the date you receive the notice of your 
official program cohort default rate; and
    (ii) From the date on which you receive the notice of your official 
program cohort default rate until you receive our notice that the 
program cohort default rate no longer applies.
    (b) Identify the borrowers in a cohort. (1) Except as provided in 
paragraph (b)(3) of this section, your cohort for a fiscal year 
consists of all of your current and former students who, during that 
fiscal year, entered repayment on any Federal Stafford Loan, Federal 
SLS Loan, Direct Subsidized Loan, or Direct Unsubsidized Loan that they 
received to attend the GE program, or on the portion of a loan made 
under the Federal Consolidation Loan Program or the Federal Direct 
Consolidation Loan Program that is used to repay those loans.
    (2) A borrower may be included in more than one of your cohorts and 
may be included in the cohorts of more than one institution in the same 
fiscal year.
    (3) A TEACH Grant that has been converted to a Federal Direct 
Unsubsidized Loan is not considered for the purpose of calculating and 
applying program cohort default rates.
    (c) Identify the borrowers in a cohort who are in default. (1) 
Except as provided in paragraph (c)(2) of this section, a borrower in a 
cohort for a fiscal year is considered to be in default if, before the 
end of the second fiscal year following the fiscal year the borrower 
entered repayment--
    (i) The borrower defaults on any FFELP loan that was used to 
include the borrower in the cohort or on any Federal Consolidation Loan 
Program loan that repaid a loan that was used to include the borrower 
in the cohort (however, a borrower is not considered to be in default 
on a FFELP loan unless a claim for insurance has been paid on the loan 
by a guaranty agency or by us);
    (ii) The borrower fails to make an installment payment, when due, 
on any Direct Loan Program loan that was used to include the borrower 
in the cohort or on any Federal Direct Consolidation Loan Program loan 
that repaid a loan that was used to include the borrower in the cohort, 
and the borrower's failure persists for 360 days;
    (iii) You or your owner, agent, contractor, employee, or any other 
affiliated entity or individual make a payment to prevent a borrower's 
default on a loan that is used to include the borrower in that cohort; 
or
    (iv) The borrower fails to make an installment payment, when due, 
on a Federal Stafford Loan that is held by the Secretary or a Federal 
Consolidation Loan that is held by the Secretary and that was used to 
repay a Federal Stafford Loan, if such Federal Stafford Loan or Federal 
Consolidation Loan was used to include the borrower in the cohort, and 
the borrower's failure persists for 360 days.
    (2) A borrower is not considered to be in default based on a loan 
that is, before the end of the second fiscal year following the fiscal 
year in which it entered repayment--
    (i) Rehabilitated under 34 CFR 682.405 or 34 CFR 685.211(e); or
    (ii) Repurchased by a lender because the claim for insurance was 
submitted or paid in error.
    (d) Calculate the program cohort default rate. Except as provided 
in Sec.  668.503, if there are--
    (1)(i) Ten or more borrowers in your cohort for a fiscal year, your 
program cohort default rate is the percentage that is calculated by--
    (ii) Dividing the number of borrowers in the cohort who are in 
default, as determined under paragraph (c) of this section, by the 
number of borrowers in the cohort, as determined under paragraph (b) of 
this section.
    (2) Fewer than 10 borrowers in your cohort for a fiscal year, your 
program cohort default rate is the percentage that is calculated by--
    (i) For the first two years we attempt to calculate program cohort 
default rates under this part for a program, dividing the total number 
of borrowers in that program's cohort and in the two most recent prior 
cohorts for which we have data to identify the individuals comprising 
the cohort who are in default, as determined for each program's cohort 
under paragraph (c) of this section, by the total number of

[[Page 65021]]

borrowers in that program cohort and the two most recent prior cohorts 
for which we have data to identify the individuals comprising the 
cohort, as determined for each program cohort under paragraph (b) of 
this section.
    (ii) For other fiscal years, by dividing the total number of 
borrowers in that program cohort and in the two most recent prior 
program cohorts who are in default, as determined for each program 
cohort under paragraph (c) of this section, by the total number of 
borrowers in that program cohort and the two most recent prior program 
cohorts as determined for each program cohort under paragraph (b) of 
this section.
    (iii) If we identify a total of fewer than ten borrowers under 
paragraph (d)(2) of this section, we do not calculate a draft program 
cohort default rate for that fiscal year.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.503  Determining program cohort default rates for GE programs 
at institutions that have undergone a change in status.

    (a) General. (1) If you undergo a change in status identified in 
this section, the program cohort default rate of a GE program you offer 
is determined under this section.
    (2) In determining program cohort default rates under this section, 
the date of a merger, acquisition, or other change in status is the 
date the change occurs.
    (3) [Reserved]
    (4) If the program cohort default rate of a program offered by 
another institution is applicable to you under this section with 
respect to a program you offer, you may challenge, request an 
adjustment, or submit an appeal for the program cohort default rate 
under the same requirements that would be applicable to the other 
institution under Sec. Sec.  668.504 and 668.508.
    (b) Acquisition or merger of institutions. If you offer a GE 
program and your institution acquires, or was created by the merger of, 
one or more institutions that participated independently in the title 
IV, HEA programs immediately before the acquisition or merger and that 
offered the same GE program, as identified by its 6-digit CIP code and 
credential level--
    (1) Those program cohort default rates published for a GE program 
offered by any of these institutions before the date of the acquisition 
or merger are attributed to the GE program after the merger or 
acquisition; and
    (2) Beginning with the first program cohort default rate published 
after the date of the acquisition or merger, the program cohort default 
rates for that GE program are determined by including in the 
calculation under Sec.  668.502 the borrowers who were enrolled in that 
GE program from each institution that offered that program and that was 
involved in the acquisition or merger.
    (c) [Reserved]
    (d) Branches or locations becoming institutions. If you are a 
branch or location of an institution that is participating in the title 
IV, HEA programs, and you become a separate, new institution for the 
purposes of participating in those programs--
    (1) The program cohort default rates published for a GE program 
before the date of the change for your former parent institution are 
also applicable to you when you offer that program;
    (2) Beginning with the first program cohort default rate published 
after the date of the change, the program cohort default rates for a GE 
program for the next three fiscal years are determined by including the 
applicable borrowers who were enrolled in the GE program from your 
institution and from your former parent institution (including all of 
its locations) in the calculation under Sec.  668.502.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.504  Draft program cohort default rates and your ability to 
challenge before official program cohort default rates are issued.

    (a) General. (1) We notify you of the draft program cohort default 
rate of a GE program before the official program cohort default rate of 
the GE program is calculated. Our notice includes the loan record 
detail report for the draft program cohort default rate.
    (2) Except as provided in Sec.  668.502(d)(2)(i), regardless of the 
number of borrowers included in the program cohort, the draft program 
cohort default rate of a GE program is always calculated using data for 
that fiscal year alone, using the method described in Sec.  
668.502(d)(1).
    (3) The draft program cohort default rate of a GE program and the 
loan record detail report are not considered public information and may 
not be otherwise voluntarily released to the public by a data manager.
    (4) Any challenge you submit under this section and any response 
provided by a data manager must be in a format acceptable to us. This 
acceptable format is described in materials that we provide to you. If 
your challenge does not comply with these requirements, we may deny 
your challenge.
    (b) Incorrect data challenges. (1) You may challenge the accuracy 
of the data included on the loan record detail report by sending a 
challenge to the relevant data manager, or data managers, within 45 
days after you receive the data. Your challenge must include--
    (i) A description of the information in the loan record detail 
report that you believe is incorrect; and
    (ii) Documentation that supports your contention that the data are 
incorrect.
    (2) Within 30 days after receiving your challenge, the data manager 
must send you and us a response that--
    (i) Addresses each of your allegations of error; and
    (ii) Includes the documentation that supports the data manager's 
position.
    (3) If your data manager concludes that draft data in the loan 
record detail report are incorrect, and we agree, we use the corrected 
data to calculate your program cohort default rate.
    (4) If you fail to challenge the accuracy of data under this 
section, you cannot contest the accuracy of those data in an 
uncorrected data adjustment under Sec.  668.509, or in an erroneous 
data appeal, under Sec.  668.511.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.505  Notice of the official program cohort default rate of a 
GE program.

    (a) We notify you of the official program cohort default rate of a 
GE program after we calculate it. After we send our notice to you, we 
publish a list of GE program cohort default rates for all institutions.
    (b) If one or more borrowers who were enrolled in a GE program 
entered repayment in the fiscal year for which the rate is calculated, 
you will receive a loan record detail report as part of your 
notification package for that program.
    (c) You have five business days, from the date of our notification, 
as posted on the Department's Web site, to report any problem with 
receipt of the notification package.
    (d) Except as provided in paragraph (e), timelines for submitting, 
adjustments, and appeals begin on the sixth business day following the 
date of the notification package that is posted on the Department's Web 
site.
    (e) If you timely report a problem with receipt of your 
notification package under paragraph (c) of this section and the 
Department agrees that the problem was not caused by you, the 
Department will extend the challenge, appeal, and adjustment deadlines 
and timeframes to account for a re-notification package.

(Authority: 20 U.S.C. 1001, 1002, 1088)


[[Page 65022]]




Sec.  668.506  [Reserved]


Sec.  668.507  Preventing evasion of program cohort default rates.

    In calculating the program cohort default rate of a GE program, the 
Secretary may include loan debt incurred by the borrower for enrolling 
in GE programs at other institutions if the institution and the other 
institutions are under common ownership or control, as determined by 
the Secretary in accordance with 34 CFR 600.31.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.508  General requirements for adjusting and appealing 
official program cohort default rates.

    (a) [Reserved]
    (b) Limitations on your ability to dispute a program cohort default 
rate. (1) You may not dispute the calculation of a program cohort 
default rate except as described in this subpart.
    (2) You may not request an adjustment, or appeal a program cohort 
default rate, under Sec.  668.509, Sec.  668.510, Sec.  668.511, or 
Sec.  668.512, more than once.
    (c) Content and format of requests for adjustments and appeals. We 
may deny your request for adjustment or appeal if it does not meet the 
following requirements:
    (1) All appeals, notices, requests, independent auditor's opinions, 
management's written assertions, and other correspondence that you are 
required to send under this subpart must be complete, timely, accurate, 
and in a format acceptable to us. This acceptable format is described 
in materials that we provide to you.
    (2) Your completed request for adjustment or appeal must include--
    (i) All of the information necessary to substantiate your request 
for adjustment or appeal; and
    (ii) A certification by your chief executive officer, under penalty 
of perjury, that all the information you provide is true and correct.
    (d) Our copies of your correspondence. Whenever you are required by 
this subpart to correspond with a party other than us, you must send us 
a copy of your correspondence within the same time deadlines. However, 
you are not required to send us copies of documents that you received 
from us originally.
    (e) Requirements for data managers' responses. (1) Except as 
otherwise provided in this subpart, if this subpart requires a data 
manager to correspond with any party other than us, the data manager 
must send us a copy of the correspondence within the same time 
deadlines.
    (2) If a data manager sends us correspondence under this subpart 
that is not in a format acceptable to us, we may require the data 
manager to revise that correspondence's format, and we may prescribe a 
format for that data manager's subsequent correspondence with us.
    (f) Our decision on your request for adjustment or appeal. (1) We 
determine whether your request for an adjustment or appeal is in 
compliance with this subpart.
    (2) In making our decision for an adjustment, under Sec.  668.509 
or Sec.  668.510, or an appeal, under Sec.  668.511 or Sec.  668.512--
    (i) We presume that the information provided to you by a data 
manager is correct unless you provide substantial evidence that shows 
the information is not correct; and
    (ii) If we determine that a data manager did not provide the 
necessary clarifying information or legible records in meeting the 
requirements of this subpart, we presume that the evidence that you 
provide to us is correct unless it is contradicted or otherwise proven 
to be incorrect by information we maintain.
    (3) Our decision is based on the materials you submit under this 
subpart. We do not provide an oral hearing.
    (4) We notify you of our decision before we notify you of your next 
official program cohort default rate.
    (5) You may not seek judicial review of our determination of a 
program cohort default rate until we issue our decision on all pending 
requests for adjustments or appeals for that program cohort default 
rate.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.509  Uncorrected data adjustments.

    (a) Eligibility. You may request an uncorrected data adjustment for 
a GE program's most recent cohort of borrowers used to calculate the 
most recent official program cohort default rate if, in response to 
your challenge under Sec.  668.504(b), a data manager agreed correctly 
to change the data, but the changes are not reflected in your official 
program cohort default rate.
    (b) Deadlines for requesting an uncorrected data adjustment. You 
must send us a request for an uncorrected data adjustment, including 
all supporting documentation, within 30 days after you receive your 
loan record detail report from us.
    (c) Determination. We recalculate your program cohort default rate, 
based on the corrected data, and correct the rate that is publicly 
released, if we determine that--
    (1) In response to your challenge under Sec.  668.504(b), a data 
manager agreed to change the data;
    (2) The changes described in paragraph (c)(1) are not reflected in 
your official program cohort default rate; and
    (3) We agree that the data are incorrect.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.510  New data adjustments.

    (a) Eligibility. You may request a new data adjustment for the most 
recent program cohort of borrowers, used to calculate the most recent 
official program cohort default rate for a GE program, if--
    (1) A comparison of the loan record detail reports that we provide 
to you for the draft and official program cohort default rates shows 
that the data have been newly included, excluded, or otherwise changed; 
and
    (2) You identify errors in the data described in paragraph (a)(1) 
that are confirmed by the data manager.
    (b) Deadlines for requesting a new data adjustment. (1) You must 
send to the relevant data manager, or data managers, and us a request 
for a new data adjustment, including all supporting documentation, 
within 15 days after you receive your loan record detail report from 
us.
    (2) Within 20 days after receiving your request for a new data 
adjustment, the data manager must send you and us a response that--
    (i) Addresses each of your allegations of error; and
    (ii) Includes the documentation used to support the data manager's 
position.
    (3) Within 15 days after receiving a guaranty agency's notice that 
we hold an FFELP loan about which you are inquiring, you must send us 
your request for a new data adjustment for that loan. We respond to 
your request as set forth under paragraph (b)(2) of this section.
    (4) Within 15 days after receiving incomplete or illegible records 
or data from a data manager, you must send a request for replacement 
records or clarification of data to the data manager and us.
    (5) Within 20 days after receiving your request for replacement 
records or clarification of data, the data manager must--
    (i) Replace the missing or illegible records;
    (ii) Provide clarifying information; or
    (iii) Notify you and us that no clarifying information or 
additional or improved records are available.
    (6) You must send us your completed request for a new data 
adjustment, including all supporting documentation--

[[Page 65023]]

    (i) Within 30 days after you receive the final data manager's 
response to your request or requests; or
    (ii) If you are also filing an erroneous data appeal or a loan 
servicing appeal, by the latest of the filing dates required in 
paragraph (b)(6)(i) of this section or in Sec.  668.511(b)(6)(i) or 
Sec.  668.512(c)(10)(i).
    (c) Determination. If we determine that incorrect data were used to 
calculate your program cohort default rate, we recalculate your program 
cohort default rate based on the correct data and make corrections to 
the rate that is publicly released.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.511  Erroneous data appeals.

    (a) Eligibility. Except as provided in Sec.  668.508(b), you may 
appeal the calculation of a program cohort default rate if--
    (1) You dispute the accuracy of data that you previously challenged 
on the basis of incorrect data under Sec.  668.504(b); or
    (2) A comparison of the loan record detail reports that we provide 
to you for the draft and official program cohort default rates shows 
that the data have been newly included, excluded, or otherwise changed, 
and you dispute the accuracy of that data.
    (b) Deadlines for submitting an appeal. (1) You must send a request 
for verification of data errors to the relevant data manager, or data 
managers, and to us within 15 days after you receive the notice of your 
official program cohort default rate. Your request must include a 
description of the information in the program cohort default rate data 
that you believe is incorrect and all supporting documentation that 
demonstrates the error.
    (2) Within 20 days after receiving your request for verification of 
data errors, the data manager must send you and us a response that--
    (i) Addresses each of your allegations of error; and
    (ii) Includes the documentation used to support the data manager's 
position.
    (3) Within 15 days after receiving a guaranty agency's notice that 
we hold an FFELP loan about which you are inquiring, you must send us 
your request for verification of that loan's data errors. Your request 
must include a description of the information in the program cohort 
default rate data that you believe is incorrect and all supporting 
documentation that demonstrates the error. We respond to your request 
as set forth under paragraph (b)(2).
    (4) Within 15 days after receiving incomplete or illegible records 
or data, you must send a request for replacement records or 
clarification of data to the data manager and us.
    (5) Within 20 days after receiving your request for replacement 
records or clarification of data, the data manager must--
    (i) Replace the missing or illegible records;
    (ii) Provide clarifying information; or
    (iii) Notify you and us that no clarifying information or 
additional or improved records are available.
    (6) You must send your completed appeal to us, including all 
supporting documentation--
    (i) Within 30 days after you receive the final data manager's 
response to your request; or
    (ii) If you are also requesting a new data adjustment or filing a 
loan servicing appeal, by the latest of the filing dates required in 
paragraph (b)(6)(i) or in Sec.  668.510(b)(6)(i) or Sec.  
668.512(c)(10)(i).
    (c) Determination. If we determine that incorrect data were used to 
calculate your program cohort default rate, we recalculate your program 
cohort default rate based on the correct data and correct the rate that 
is publicly released.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.512  Loan servicing appeals.

    (a) Eligibility. Except as provided in Sec.  668.508(b), you may 
appeal, on the basis of improper loan servicing or collection, the 
calculation of the most recent program cohort default rate for a GE 
program.
    (b) Improper loan servicing. For the purposes of this section, a 
default is considered to have been due to improper loan servicing or 
collection only if the borrower did not make a payment on the loan and 
you prove that the responsible party failed to perform one or more of 
the following activities, if that activity applies to the loan:
    (1) Send at least one letter (other than the final demand letter) 
urging the borrower to make payments on the loan.
    (2) Attempt at least one phone call to the borrower.
    (3) Send a final demand letter to the borrower.
    (4) For a FFELP loan held by us or for a Direct Loan Program loan, 
document that skip tracing was performed if the applicable servicer 
determined that it did not have the borrower's current address.
    (5) For an FFELP loan only--
    (i) Submit a request for preclaims or default aversion assistance 
to the guaranty agency; and
    (ii) Submit a certification or other documentation that skip 
tracing was performed to the guaranty agency.
    (c) Deadlines for submitting an appeal. (1) If the loan record 
detail report was not included with your official program cohort 
default rate notice, you must request it within 15 days after you 
receive the notice of your official program cohort default rate.
    (2) You must send a request for loan servicing records to the 
relevant data manager, or data managers, and to us within 15 days after 
you receive your loan record detail report from us. If the data manager 
is a guaranty agency, your request must include a copy of the loan 
record detail report.
    (3) Within 20 days after receiving your request for loan servicing 
records, the data manager must--
    (i) Send you and us a list of the borrowers in your representative 
sample, as described in paragraph (d) of this section (the list must be 
in Social Security number order, and it must include the number of 
defaulted loans included in the program cohort for each listed 
borrower);
    (ii) Send you and us a description of how your representative 
sample was chosen; and
    (iii) Either send you copies of the loan servicing records for the 
borrowers in your representative sample and send us a copy of its cover 
letter indicating that the records were sent, or send you and us a 
notice of the amount of its fee for providing copies of the loan 
servicing records.
    (4) The data manager may charge you a reasonable fee for providing 
copies of loan servicing records, but it may not charge more than $10 
per borrower file. If a data manager charges a fee, it is not required 
to send the documents to you until it receives your payment of the fee.
    (5) If the data manager charges a fee for providing copies of loan 
servicing records, you must send payment in full to the data manager 
within 15 days after you receive the notice of the fee.
    (6) If the data manager charges a fee for providing copies of loan 
servicing records, and--
    (i) You pay the fee in full and on time, the data manager must send 
you, within 20 days after it receives your payment, a copy of all loan 
servicing records for each loan in your representative sample (the 
copies are provided to you in hard copy format unless the data manager 
and you agree that another format may be used), and it must send us a 
copy of its cover letter indicating that the records were sent; or
    (ii) You do not pay the fee in full and on time, the data manager 
must notify you and us of your failure to pay the fee

[[Page 65024]]

and that you have waived your right to challenge the calculation of 
your program cohort default rate based on the data manager's records. 
We accept that determination unless you prove that it is incorrect.
    (7) Within 15 days after receiving a guaranty agency's notice that 
we hold an FFELP loan about which you are inquiring, you must send us 
your request for the loan servicing records for that loan. We respond 
to your request under paragraph (c)(3) of this section.
    (8) Within 15 days after receiving incomplete or illegible records, 
you must send a request for replacement records to the data manager and 
us.
    (9) Within 20 days after receiving your request for replacement 
records, the data manager must either--
    (i) Replace the missing or illegible records; or
    (ii) Notify you and us that no additional or improved copies are 
available.
    (10) You must send your appeal to us, including all supporting 
documentation--
    (i) Within 30 days after you receive the final data manager's 
response to your request for loan servicing records; or
    (ii) If you are also requesting a new data adjustment or filing an 
erroneous data appeal, by the latest of the filing dates required in 
paragraph (c)(10)(i) of this section or in Sec.  668.510(b)(6)(i) or 
Sec.  668.511(b)(6)(i).
    (d) Representative sample of records. (1) To select a 
representative sample of records, the data manager first identifies all 
of the borrowers for whom it is responsible and who had loans that were 
considered to be in default in the calculation of the program cohort 
default rate you are appealing.
    (2) From the group of borrowers identified under paragraph (d)(1) 
of this section, the data manager identifies a sample that is large 
enough to derive an estimate, acceptable at a 95 percent confidence 
level with a plus or minus 5 percent confidence interval, for use in 
determining the number of borrowers who should be excluded from the 
calculation of the program cohort default rate due to improper loan 
servicing or collection.
    (e) Loan servicing records. Loan servicing records are the 
collection and payment history records--
    (1) Provided to the guaranty agency by the lender and used by the 
guaranty agency in determining whether to pay a claim on a defaulted 
loan; or
    (2) Maintained by our servicer that are used in determining your 
program cohort default rate.
    (f) Determination. (1) We determine the number of loans, based on 
the loans included in your representative sample of loan servicing 
records, that defaulted due to improper loan servicing or collection, 
as described in paragraph (b) of this section.
    (2) Based on our determination, we use a statistically valid 
methodology to exclude the corresponding percentage of borrowers from 
both the numerator and denominator of the calculation of the program 
cohort default rate for the GE program, and correct the rate that is 
publicly released.

(Authority: 20 U.S.C. 1001, 1002, 1088)

Sec.  668.513  [Reserved]


Sec.  668.514  [Reserved]


Sec.  668.515  [Reserved]


Sec.  668.516  Fewer-than-ten-borrowers determinations.

    We calculate an official program cohort default rate regardless of 
the number of borrowers included in the applicable cohort or cohorts. 
However, an institution may not disclose an official program cohort 
default rate under Sec.  668.412(a)(12) or otherwise, if the number of 
borrowers in the applicable cohorts is fewer than ten.

(Authority: 20 U.S.C. 1001, 1002, 1088)


    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix A--Regulatory Impact Analysis

    This regulatory impact analysis (RIA) is divided into the 
following sections:

1. Need for Regulatory Action

    In ``Background'' and ``Outcomes and Practices'' we discuss how 
high debt and relatively poor earnings affect students who enroll in 
gainful employment programs (``GE programs''). In ``Basis of 
Regulatory Approach,'' we consider the legislative history of the 
statutory provisions pursuant to which the Department is 
promulgating these regulations. ``Regulatory Framework'' provides an 
overview of the Department's efforts, through these regulations, to 
establish an institutional accountability system for GE programs and 
to increase transparency of student outcomes in GE programs for the 
benefit of students, prospective students, and their families, the 
public, taxpayers, the Government, and institutions of higher 
education.

2. Analysis of the Regulations

    Using data reported by institutions pursuant to the 2011 Prior 
Rule, we estimate how existing GE programs would have fared under 
these regulations and how students would have been impacted.

3. Costs, Benefits, and Transfers

    The impact estimates provided in ``Analysis of the Regulations'' 
are used to consider the costs and benefits of the regulations to 
students, institutions, the Federal Government, and State and local 
governments. In ``Net Budget Impacts'' we estimate the budget impact 
of the regulations. We also provide a ``Sensitivity Analysis'' to 
demonstrate how alternative student and program impact assumptions 
would change our budget estimates.

4. Regulatory Alternatives Considered

    In this section, we describe the other approaches the Department 
considered for key features of the regulations, including components 
of the D/E rates measures and possible alternative metrics.

5. Regulatory Flexibility Analysis

    The RIA concludes with an analysis of the potential impact of 
the regulations on small businesses and non-profit institutions.

1. Need for Regulatory Action

Background

    These regulations are intended to address growing concerns about 
educational programs that, as a condition of eligibility for title 
IV, HEA program funds, are required by statute to provide training 
that prepares students for gainful employment in a recognized 
occupation, but instead are leaving students with unaffordable 
levels of loan debt in relation to their income.
    Through this regulatory action, the Department establishes: (1) 
An accountability framework for GE programs that defines what it 
means to prepare students for gainful employment in a recognized 
occupation by establishing measures by which the Department will 
evaluate whether a GE program remains eligible for title IV, HEA 
program funds, and (2) a transparency framework that will increase 
the quality and availability of information about the outcomes of 
students enrolled in GE programs.
    The accountability framework defines what it means to prepare 
students for gainful employment by establishing measures that will 
assess whether programs provide quality education and training that 
allow students to pay back their student loan debt.
    The transparency framework establishes reporting and disclosure 
requirements that will increase the transparency of student outcomes 
of GE programs so that information is disseminated to students, 
prospective students, and their families that is accurate and 
comparable to help them make better informed decisions about where 
to invest their time and money in pursuit of a postsecondary degree 
or credential. Further, this information will provide the public, 
taxpayers, and the Government with relevant information to 
understand the outcomes of the Federal investment in these programs. 
Finally, the transparency framework will provide institutions with 
meaningful information that they can use to improve the outcomes of 
students that attend their programs.

Outcomes and Practices

    GE programs include non-degree programs, including diploma and 
certificate programs, at public and private non-profit institutions 
such as community colleges and nearly all

[[Page 65025]]

educational programs at for-profit institutions of higher education 
regardless of program length or credential level. Common GE programs 
provide training for occupations in fields such as cosmetology, 
business administration, medical assisting, dental assisting, 
nursing, and massage therapy.
    For fiscal year (FY) 2010, 37,589 GE programs with an enrollment 
of 3,985,329 students receiving title IV, HEA program funds reported 
program information to the Department.\186\ About 61 percent of 
these programs are at public institutions, 6 percent at private non-
profit institutions, and 33 percent at for-profit institutions. The 
Federal investment in students attending these programs is 
significant. In FY 2010, students attending GE programs received 
approximately $9.7 billion in Federal student aid grants and 
approximately $26 billion in Federal student aid loans.
---------------------------------------------------------------------------

    \186\ NSLDS.
---------------------------------------------------------------------------

    Table 1.1 provides, by two-digit Classification of Instructional 
Program (CIP) code, the number of GE programs for which institutions 
reported program information to the Department in FY 2010. Table 1.2 
provides the enrollment of students receiving title IV, HEA program 
funds in GE programs, by two-digit CIP code, for which institutions 
reported program information to the Department.

[[Page 65026]]

[GRAPHIC] [TIFF OMITTED] TR31OC14.001


[[Page 65027]]


[GRAPHIC] [TIFF OMITTED] TR31OC14.002


[[Page 65028]]


[GRAPHIC] [TIFF OMITTED] TR31OC14.003


[[Page 65029]]


[GRAPHIC] [TIFF OMITTED] TR31OC14.004


[[Page 65030]]


    Table 1.3 provides the percentage of students receiving title 
IV, HEA program funds in GE programs who fall within the following 
demographic categories: Pell grant recipients; received zero 
estimated family contribution (EFC) as indicated by their Free 
Application for Federal Student Aid (FAFSA); married; over the age 
of 24; veteran; and female.
---------------------------------------------------------------------------

    \187\ Pell grant recipient percentages are based on students at 
undergraduate GE programs who entered repayment on title IV, HEA 
program loans between October 1, 2007 and September 30, 2009 and 
received a Pell grant for attendance at the institution between July 
1, 2004 to June 30, 2009. Graduate programs are not included in 
calculation of Pell recipient percentages. Other percentages are 
based on students at GE programs who entered repayment on title IV, 
HEA program loans between October 1, 2007 and September 30, 2009 and 
had a demographic record in NSLDS in 2008. Sector and credential 
averages are generated by weighting program results by FY 2010 
enrollment.
[GRAPHIC] [TIFF OMITTED] TR31OC14.005


[[Page 65031]]


    Research has demonstrated the significant benefits of 
postsecondary education. Among them are private pecuniary benefits 
\188\ such as higher wages and social benefits such as a better 
educated and flexible workforce and greater civic 
participation.189 190 191 192 Even though the costs of 
postsecondary education have risen, there is evidence that the 
average financial returns to graduates have also increased.\193\
---------------------------------------------------------------------------

    \188\ Avery, C., and Turner, S. (2013). Student Loans: Do 
College Students Borrow Too Much-Or Not Enough? Journal of Economic 
Perspectives, 26(1), 165-192.
    \189\ Moretti, E. (2004). Estimating the Social Return to Higher 
Education: Evidence from Longitudinal and Repeated Cross-Sectional 
Data. Journal of Econometrics, 121(1), 175-212.
    \190\ Kane, T. J., and Rouse, C. E. (1995). Labor Market Returns 
to Two- and Four-Year College. The American Economic Review, 85 (3), 
600-614.
    \191\ Cellini, S., and Chaudhary, L. (2012). ``The Labor Market 
Returns to For-Profit College Education.'' Working paper.
    \192\ Baum, S., Ma, J., and Payea, K. (2013) ``Education Pays 
2013: The Benefits of Education to Individuals and Society'' College 
Board. Available at http://trends.collegeboard.org/.
    \193\ Avery, C., and Turner, S. (2013). Student Loans: Do 
College Students Borrow Too Much-Or Not Enough? Journal of Economic 
Perspectives, 26(1), 165-192.
---------------------------------------------------------------------------

    Our analysis, provided in more detail in ``Analysis of the 
Regulations,'' reveals that low earnings and high rates of student 
loan default are common in many GE programs. For example, 27 percent 
of the 5,539 GE programs that the Department estimates would be 
assessed under the accountability metrics of the final regulations 
produced graduates with mean and median annual earnings below those 
of a full-time worker earning no more than the Federal minimum wage 
($15,080).194 195 Approximately 22 percent of borrowers 
who attended programs that the Department estimates would be 
assessed under the accountability metrics of the final regulations 
defaulted on their Federal student loans within the first three 
years of entering repayment.\196\
---------------------------------------------------------------------------

    \194\ At the Federal minimum wage of $7.25 per hour 
(www.dol.gov/whd/minimumwage.htm), an individual working 40 hours 
per week for 52 weeks per year would have annual earnings of 
$15,080.
    \195\ 2012 GE informational D/E rates.
    \196\ 2012 GE informational D/E rates. The percent of borrowers 
who default is calculated based on pCDR data.
---------------------------------------------------------------------------

    In light of the low earnings and high rates of default of 
graduates and borrowers at some GE programs, the Department is 
concerned that all students at these programs may not be making 
optimal educational and borrowing decisions. While many students 
appear to borrow less than might be optimal, either because they are 
risk averse or lack access to credit,\197\ the outcomes previously 
described indicate that overborrowing may be a significant problem 
for at least some students.
---------------------------------------------------------------------------

    \197\ Dunlop, E. ``What Do Student Loans Actually Buy You? The 
Effect of Stafford Loan Access on Community College Students,'' 
Working Paper (2013).
---------------------------------------------------------------------------

    Over the past three decades, student loan debt has grown rapidly 
as increases in college costs have outstripped increases in family 
income,\198\ State and local postsecondary education funding has 
flattened,\199\ and relatively expensive for-profit institutions 
have proliferated.\200\ Roughly only one-quarter of the increase in 
student debt in the past twenty-five years can be directly 
attributed to Americans obtaining more education.\201\ Student loan 
debt now stands at over $1,096.5 billion nationally and rose by 80 
percent, or $463.2 billion, between FY2008 and FY2013,\202\ a period 
when other forms of consumer debt were flat or declining.\203\ Since 
2003, the percentage of 25-year-olds with student debt has nearly 
doubled, increasing from 25 percent to 43 percent.\204\ Young people 
with student debt also owe more; the average student loan balance 
among 25-year-olds with debt has increased from $10,649 in 2003 to 
$20,326 in 2012.\205\
---------------------------------------------------------------------------

    \198\ Martin, A., and Andrew L., ``A Generation Hobbled by the 
Soaring Cost of College,'' New York Times, May 12, 2012.
    \199\ Deming, D., Goldin, C., and Katz, L. (2013). For Profit 
Colleges. Future of Children, 23(1), 137-164.
    \200\ Id.
    \201\ Akers, B., and Chingos, M. (2014). Is a Student Loan 
Crisis on the Horizon. Brookings Institution.
    \202\ U.S. Department of Education, Federal Student Aid 
Portfolio Summary, National Student Loan Data System available at 
https://studentaid.ed.gov/about/data-center/student/portfolio.
    \203\ Federal Reserve Bank of New York (2012, November). 
Quarterly Report on Household Debt and Credit. Retrieved from 
www.newyorkfed.org/research/nationaleconomy/householdcredit/DistrictReport_Q32012.pdf.
    \204\ Brown, M., and Sydnee, C. (2013). Young Student Loan 
Borrowers Retreat from Housing and Auto Markets. Liberty Street 
Economics, retrieved from: http://libertystreeteconomics.newyorkfed.org/2013/04/young-student-loan-borrowers-retreat-from-housing-and-auto-markets.html.
    \205\ Id.
---------------------------------------------------------------------------

    The increases in the percentage of young people with student 
debt and in average student debt loan balances have