UPDATE: Final Gainful Employment Regulations Announced

UPDATE: Final Gainful Employment Regulations Announced


The final regulation for Gainful Employment was announced Thursday, going into effect on July 1st, 2015. The core of the legislation is targeted at ensuring students are enrolled in educational programs that prepare them for careers with an income to allow them to afford to pay back their student loans. However, critics say it’s unfairly targeting a specific segment of higher education that could cut off access to quality education for many Americans.

The Gainful Employment Regulations requires schools to meet minimum standards on debt to earning ratios of their graduates. Programs whose graduates have annual loan payments less than 8% of total earnings or less than 20% of discretionary earnings will be in the clear. Any schools who do not meet these standards will fall into the ‘Zone’ or completely ‘Fail.’ For schools that fail in 2 out of 3 consecutive years or are in the ‘Zone’ for 4 consecutive years will risk losing their Title IV funding, leaving students without the ability to borrow money for a career program.

This regulation will mostly impact ‘for profit’ schools, which many say target an underserved, and underprivileged market. According to the Association of Private Sector Colleges and Universities, about two-thirds of students that enroll in for-profit schools are over the age of 24, 50 percent have dependents and almost 40 percent work full time while enrolled. Sound like the average cosmetology student? That’s because it is.

This final regulation removed the program cohort default rate, relieving schools from the responsibility of ensuring graduates pay their student loans on time and making the rule somewhat simpler to enforce. However, it does not address the issues of graduates under-reporting wages, which is something that schools have little or no control over.

This new final ruling will go into effect this coming summer and beauty schools across the country will be looking for ways to adjust their programs to meet these minimum standards of accountability.

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