Gainful Employment and a Quick Note on the PROSPER Act

Hello debt-fighting and loan-curious friends! I have a new observation for you: The PROSPER Act will probably not be perfected or enacted any time soon. Granted, it is difficult to directly verify such a statement. The likely delay of PROSPER is, however, one of the implied conclusions of the Republican Party’s recent announcement of this year’s legislative focus. Their list covered a few items, like campus safety and IRS reforms, but, notably, it did not include PROSPER. Now, this does not mean I intend to abandon our exploration of this act (an exploration we began in my last post); rather, I will approach its content without the rush often imposed by impending change. I will now take the time to intersperse PROSPER material and analysis with other policy changes. We will go over policies that promise immediate effect or demonstrate some other importance to the discussion of student loans.

Gainful Employment Policy

One such a change, which is fairly short to explain yet is one of those “oh, that’s good to know” topics: There are impending regulation modifications regarding how universities and other continuing education programs go about sharing information on gainful employment (GE) after program completion. More institutions, it seems, will be held accountable for their debt-to-earnings rate (D/E). The U.S. Department of Education, on the Federal Student Aid website, explains different aspects of the D/E rate. But basically, this ratio quantifies how people fair when we analyze both their annual debt payments and job earnings. A higher D/E percentage indicates that payments on loans are taking up a significant portion of a person’s earnings. A lower percentage indicates that the person’s annual debt payments do not consume an outrageous portion of their income.

Proposed Changes

So, which programs will have to present D/E data, and how will that data affect them? The latest action on this regulation is actually happening this week—and it seems the conclusion is headed toward requiring disclosure of GE status from more programs than had previously been held accountable. Before now, it has been non-degree programs (like educational training for a special kind of work, or earning a specified certificate) and educational programs offered by for-profit institutions. Now, all undergraduate programs will need to report their GE status. If the program is beneath a certain D/E percentage, this data will cast a favorable light on them. The numbers will show prospective and current students that previous students are making enough money to compensate for incurred debt. If the program has a high D/E percentage, however, that will indicate that many students who went through that program are not finding financially secure employment that effectively compensates for how much they owe.

Now, how does this affect those who are deciding where to get a certificate or undergraduate degree? These requirements will mean students-to-be can expect more transparency from universities regarding whether or not the program in question will adequately prepare them for gainful employment. We have yet to determine how effectively programs will present this information. For example, an institution could easily hide these numbers within the many notifications already sent out to students. But we can work against that outcome by encouraging prospective students to seek out this data. Then GE disclosures can be another tool to help people choose programs that meet their educational and career aspirations.

Recommended Listening

If you find that during one of the lulls in your day you want to do something relaxing yet helpful, I recommend listening to the most recent Off the Cuff podcast episode. This podcast presents material on student debt-related advocacy. A  team of fun and highly qualified people hosts this podcast (including Justin Draeger, president of NASFAA, and Megan Coval, vice president of NASFAA). This episode presents some thoughts on the wavering PROSPER progress and offers insight into possible effects of new GE regulations. Enjoy listening, and keep your eye out for the official decision on the GE policy.

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