Submitted by: Shannon Cross, USA Funds account executive
Gainful employment and student loan default prevention. Both
topics are of keen interest to the post-secondary education community, and both
can have a significant impact on institutions and their students.
But the similarities don’t end there.
In fact, many of the widely accepted best practices for
lowering your school’s cohort default rate can help your school meet the standards
for gainful employment program performance as well.
Encouraging students to focus on loan affordability —
borrowing only what their expected salaries will reasonably allow them to repay
— is important for preventing default. As it turns out, it’s also critical in
addressing gainful employment requirements. Whether you’re working to prevent
student loan default or making sure your gainful employment programs lead to
positive outcomes for your students, the key to success is being proactive.
What is ‘gainful
employment’ all about?
Let’s set the stage by reviewing the requirements for schools with gainful
employment programs.
Generally speaking, to award Title IV funds to students, an
eligible academic program must lead to a degree, such as an associate or
bachelor’s degree. An exception in federal regulations allows colleges and
universities to provide federal financial aid to students who aren’t enrolled
in programs that lead to a degree, but instead prepare students for “gainful
employment in a recognized occupation.”
Any post-secondary institution offering what are considered
gainful employment-eligible programs must comply with all gainful employment
requirements, including current reporting and public disclosure requirements.
Last fall, new regulations imposed several additional
requirements, effective July 1, 2015, including accountability measures. There
are negative consequences for failure to comply or meet specific accountability
thresholds. And several years down the road, schools with gainful employment
programs that don’t meet those standards could risk losing the ability to award
federal financial aid to students enrolled in these failing programs.
Why focus on gainful
employment now?
Gainful employment deadlines are quickly approaching for schools to report
data on all Title IV students enrolled in those programs. The U.S. Department
of Education will use this data to calculate two gainful employment debt
measures, which it will issue as draft rates beginning in 2016:
·
Annual earnings rate.
·
Discretionary income rate.
These rates will gauge how much students in a particular
gainful employment program are borrowing, and whether they’re earning enough
after leaving the program to support the repayment of that debt.
As with cohort default rates, gainful employment debt
measures will examine the status of a cohort of students who were enrolled
several years ago. For example, most students enrolling in gainful employment
programs for the 2015-2016 award year will appear for the first time in the
draft 2018-2019 debt measure calculations.
Now is the time to encourage these students to borrow wisely
— through counseling, advising and financial education — so that their loan
payments compare favorably to their income levels after they complete their
program of study. Students will benefit from these efforts, and your school
will be able to continue to provide federal financial aid to future students
enrolling in your gainful employment programs.
Default prevention
and gainful employment
Borrowers whose loan payments are affordable are less likely to default.
These borrowers also are less likely to adversely affect your school’s cohort
default rate or the debt measures calculated for your gainful employment
programs. Prepare yourself for both default prevention and gainful employment
success with a proactive approach focused on these five components
- Start
early. The best opportunity to make a difference with cohort default rates
is long before the Department issues the draft rate for any given cohort. The
idea is the same with gainful employment: You can’t afford to wait to address
the borrowing and employment issues that are key to your students’ success —
and critical to achieving satisfactory results in gainful employment-related
rates for each group of students.
- Be
consistent. Throughout students’ academic careers and beyond, find a
variety of ways to emphasize the importance of limiting borrowing and being
mindful of typical salaries in their chosen careers. Include lessons about
managing money during school and beyond in loan counseling and in any
supplemental information you share with your borrowers.
- Get
everyone on board. Default prevention is everyone’s responsibility, and
gainful employment is no different. The consequences of poor performance in
default prevention and in gainful employment programs can be dire — not just
for the students in select programs, but for your entire institution and, in
turn, students in all academic areas. After all, your school’s reputation could
be at stake.
- Reach out
to career services. As you look to involve other areas of your institution
in default prevention and gainful employment efforts, look to your career
placement office. Staff there can help estimate starting salaries for relevant
careers and help identify jobs that are a good fit for the training your
program provides. When students have a realistic sense of how much they are
likely to earn, they can make better decisions about borrowing. This
information will help them manage their student loan debt.
- Target
your efforts. This default prevention best practice is a helpful tactic to
employ in gainful employment efforts now. And, if program-level cohort default
rate regulations emerge in the future, it might become even more important. Pay
attention now to estimated cohort default rates for your gainful employment
programs. Analyze your borrower populations and look for common, at-risk
characteristics. If you discover that students in certain programs are more
likely to default, you can target your default prevention and gainful
employment efforts to focus on these at-risk borrowers.
For additional information about tackling both default
prevention and gainful employment requirements, visit www.usafunds.org.
