The gainful employment rule is a regulation designed to prevent students from taking on excessive student loan debt at programs that are not likely to lead to success. It holds higher education institutions accountable by analyzing graduate employment, income, and student debt statistics against national averages.
In short, the rule compares the financial well-being graduates of a particular education program against average benchmarks. Mandated by the United States Department of Education, the rule applies to federal student loans, excluding private student loans. If an institution does not pass the rule, they wouldn’t be eligible for federal funding.
The rule was intended to protect students and potential students from low-quality educational programs that have a history of producing low-value degrees or certificates. By using post-graduate earnings compared to student loan debt as a metric, the Department of Education believes that it can gauge the likelihood that a student will succeed in a particular program — and whether he or she will be able to pay back his or her federal student loans.
This rule applies to all colleges, universities, and career and technical schools whose students may seek federal student aid.
While the exact ratios and formulas have changed throughout the years, the basic purpose of the rule remains the same. If a school cannot pass the gainful employment rule, then its students will not qualify for federal student loans if they plan on attending that school with financial aid.
The gainful employment rule was first implemented in 2012, and it has undergone various revisions since that time, with the most recent version released on July 1, 2017. Current Secretary of Education Betsy DeVos has signaled that the Department does not support this most recent version of the rule. The Department of Education has stopped the implementation of reporting requirements for educational institutions, which means that career schools, colleges, and universities no longer have to release gainful employment information to prospective students regarding income and student loan debt.
While the current leadership of the Department of Education appears to back relaxing or even repealing the gainful employment rule, other groups are strong advocates of this regulation. Student advocacy groups believe that this rule is vital to protect students from predatory programs that produce low-value, high-cost degree and certificate programs alongside hampering student loan debt. Solicitations and other organizations believe this rule saves the Department of Education money by refusing to loan money to students who will likely be unable to repay the government.
However, many colleges and universities feel the gainful employment rule limits access to education to low-income students, and that the rule’s calculations are not always accurate. With a new administration and significant change afoot in Washington, a wholesale change to the gainful employment rule is entirely possible, or even likely. This may once again allow a variety of college, career, and technical programs to flourish — regardless of the success of their graduates.