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| Gainful Employment Rule | |
|---|---|
| Name | Gainful Employment Rule |
| Established | 2011 (final rule), revised 2014, rescinded 2019 |
| Jurisdiction | United States |
| Administered by | United States Department of Education |
| Related legislation | Higher Education Act of 1965, Pell Grant, Federal Supplemental Educational Opportunity Grant |
Gainful Employment Rule
The Gainful Employment Rule was a United States regulatory standard issued by the United States Department of Education under the Higher Education Act of 1965 to evaluate career preparation programs tied to federal student aid, affecting proprietary institutions, community colleges, and for‑profit colleges such as University of Phoenix, DeVry University, ITT Technical Institute, Capella University and Walden University. Critics and supporters debated its metrics across administrations including the Obama administration, the Trump administration, and the Biden administration, with advocacy groups like Center for American Progress, Brookings Institution, American Council on Education, National Association of Independent Colleges and Universities, and legal actors such as U.S. Court of Appeals for the D.C. Circuit engaging in litigation.
The rule emerged after critiques of outcomes at institutions including ITT Technical Institute, Corinthian Colleges, University of Phoenix, Ashford University, and DeVry University led legislators from the House Committee on Education and Labor, the Senate HELP Committee, and consumer advocates like Consumer Financial Protection Bureau allies to seek accountability tied to the Federal Family Education Loan Program, Pell Grant Program, and William D. Ford Federal Direct Loan Program. Designed to protect borrowers and taxpayers, proponents cited reports from Government Accountability Office, studies by Georgetown University Center on Education and the Workforce, analyses by Urban Institute, and investigations by journalists at The New York Times and ProPublica documenting high debt-to-earnings ratios and default patterns.
Initial regulatory action grew from rulemaking under Secretary of Education Arne Duncan in the Obama administration culminating in a 2011 proposed rule and a 2014 final rule, with later modifications under Secretary of Education John B. King Jr. and rescission efforts led by Secretary of Education Betsy DeVos during the Trump administration. Litigation involved parties such as Association of Private Sector Colleges and Universities and state attorneys general including New York Attorney General initiatives; key judicial decisions came from the U.S. Court of Appeals for the D.C. Circuit and district courts. Subsequent administrative actions under the Biden administration prompted renewed review and proposed rulemaking by officials including Secretary of Education Miguel Cardona.
The rule used metrics comparing annual student loan payments to annual earnings, producing "pass", "fail", or "zone" designations; methodology incorporated cohort default rate data from National Student Loan Data System, median earnings from the Internal Revenue Service via data sharing agreements, and debt measures influenced by Federal Reserve and Bureau of Labor Statistics analyses. Technical specifications referenced fiscal assessments similar to those used by the Office of Management and Budget, and accountability thresholds echoed provisions in the Higher Education Act of 1965 reauthorization debates led by legislators like Senator Lamar Alexander and Representative Bobby Scott.
Coverage focused on vocational and occupational programs at institutions including for-profit colleges, community colleges offering certificate programs, and nondegree programs at public universities; specific affected entities included ITT Technical Institute, Corinthian Colleges, DeVry University, University of Phoenix, and regional operators such as Career Education Corporation. Exemptions and delineations referenced accreditation bodies such as the Council for Higher Education Accreditation and national accreditors including Accrediting Council for Independent Colleges and Schools and interactions with state authorizing agencies like the California Bureau for Private Postsecondary Education.
Empirical analyses by Brookings Institution, New America Foundation, Urban Institute, and university researchers at Georgetown University and Harvard Kennedy School found declines in program enrollments, program closures at entities such as ITT Technical Institute and Corinthian Colleges, shifts toward online delivery by institutions like University of Phoenix and DeVry University, and changes in recruitment and tuition strategies. Fiscal implications touched federal outlays for Pell Grant and Direct Loan budgets, while student outcomes measured by National Student Clearinghouse and Integrated Postsecondary Education Data System showed heterogeneous effects across programs and demographics.
Litigation included suits by trade associations like the Association of Private Sector Colleges and Universities, state challenges from offices including Attorney General of California and Attorney General of New York, and federal judicial review in the U.S. District Court for the District of Columbia and the U.S. Court of Appeals for the D.C. Circuit. Cases invoked administrative law doctrines involving Administrative Procedure Act claims, standing questions considered by judges appointed by presidents such as Barack Obama and Donald Trump, and settlement negotiations influenced by investigations from the Federal Trade Commission and state regulators.
Following the 2014 final rule, the Trump administration via Secretary Betsy DeVos delayed and then rescinded key provisions in 2019, prompting renewed commentary and proposed regulatory action under the Biden administration and Secretary Miguel Cardona to reinstate accountability measures; ongoing rulemaking processes have involved stakeholder consultations with entities like National Association of Student Financial Aid Administrators, advocacy groups such as Student Defense, and congressional oversight from committees chaired by lawmakers including Senator Patty Murray and Representative Rosa DeLauro. The status remains subject to regulatory rulemaking, federal budget decisions, and potential future legislation amending the Higher Education Act of 1965.
Category:United States federal education policy