The gainful employment rule was first released by the Obama administration in 2011 and formally adopted in 2014, and later rescinded under the Trump administration in 2019.

On September 27, 2023, the U.S. Department of Education published the final rule for financial value transparency and gainful employment, which restores an accountability and eligibility framework for career training programs and, additionally, establishes for the first time a series of unprecedented transparency measures for all postsecondary programs. As stated by the Department in its accompanying press release, the final rule “establish[es] the most effective set of safeguards ever against unaffordable debt or insufficient earnings for postsecondary students.” The official version of the final rule will be published in the Federal Register in the coming days and will go into effect on July 1, 2024.

The gainful employment (GE) rule was first released by the Obama administration in 2011 and formally adopted in 2014, and later rescinded under the Trump administration in 2019. In an expansion of the Obama administration’s 2014 GE rule, the Department provides in its press release that: 

The rules include a revitalized and strengthened Gainful Employment (GE) rule, that will protect approximately 700,000 students a year from career training programs that leave graduates with unaffordable loan payments or earnings no better than what someone with a high school diploma (who never pursued a college credential) earns in their State. In addition, the rules contain a new Financial Value Transparency (FVT) framework [that] will give all students the most detailed information ever available about the cost of postsecondary programs, and the financial outcomes they can expect. It will also help prospective students understand the potential risks involved in their program choices by requiring them to acknowledge viewing this information before enrolling in certificate or graduate programs whose graduates have been determined to face unaffordable debt levels.

The publication of the final rule ends a lengthy process for the Department that initially began on May 26, 2021, following the Department’s announcement of its intention to establish a Notice of Proposed Rulemaking (NPRM) package of proposed rule changes addressing FVT and GE, financial responsibility, administrative capability, certification procedures and ability to benefit. The Department has specified that the remaining four rules will be published in a joint package at a later date. In response to the initial proposed rule, 7,583 interested parties submitted comments on the proposed regulations. Additionally, several parties conducted EO 12866 meetings with the Office of Information and Regulatory Affairs to provide their comments and concerns with the proposed rule. However, that large volume of comments elicited very few changes in the final rule.

Set out below is a brief analysis of the minor modifications that were implemented in the final rule from the NPRM and a timeline of institutional obligations associated with the final rule. We will provide a more in-depth analysis of the final rule at a later date.

Modifications – NPRM to Final Rule

Implementation Date of July 1, 2025

The Department provided clarity concerning the implementation date of GE and FVT regulations.

• For GE, the first official rates will be published after July 1, 2025, and programs may be deemed ineligible to participate in Title IV programs as of July 1, 2026.
• For FVT, the Department website publishing the programmatic compliance information will officially launch on July 1, 2026.

This clarity concerning the dates of implementation will provide all postsecondary institutions with an extended period of time to comply with the GE and FVT measures. The Department additionally provides clarity stating that the earnings data for the earnings premium (EP) measure will based on information provided by the Census Bureau, and by an unidentified federal agency for the debt-to-earnings rate.

Transitional Rates for GE and FVT

For GE and FVT measures, an institution may choose to report transitional rates for the first six years after the rule is in effect. Transitional rates allow all programs to calculate debts for the most recent two award years, rather than for the same completer cohorts (who generally graduated about five years earlier) as used to measure earnings outcomes. For schools completing transitional reporting for the 2024-25 award year by July 31, 2024, the prior two award years would be 2022-23 and 2023-24. This change to the NPRM provides institutions with increased flexibility to comply with the final rule.

Expanded Definition of Programs for Graduate Earnings

The cohort period for certain programs and fields that are provided with additional time before graduate earnings are measured is expanded from doctoral medical and dental programs to “qualifying graduate programs.”

The definition of a “qualifying graduate program” is defined in Section 668.2―general definitions. Among other requirements, these programs provide its student with training programs to obtain licensure in one of the following fields: medicine, osteopathy, dentistry, or the newly added fields of clinical psychology, marriage and family counseling, clinical social work and clinical counseling.

Refused Proposed Revisions

As noted above, the Department refused to implement several of the proposed revisions referenced by the 7,583 interested parties that submitted comments on the proposed regulations. Those disregarded recommended revisions include but are not limited to the following:

• Eliminating the FVT’s application to all postsecondary programs as being outside the scope of regulatory authority provided to the Department.
• Eliminating the newly established EP measure as failing to accurately reflect earnings of all program graduates and, additionally, being outside of the Department’s regulatory authority to ensure that Title IV eligible programs lead to GE.
• Adding the alternate earnings appeal that was present in the previously implemented GE rule and that provides an alternative for programs that have earnings that are not fully accounted for in federal agency data sources.

Timeline for FVT

Timeline for GE

We will publish a more robust analysis of the final rule following a full review the 700-page regulation.

For More Information

If you have any questions about this Alert, please contact any of the attorneys in our Higher Education Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.