CCA Washington Update

1. CCA Washington Update Brian MoranExecutive Vice President of Government RelationsGeneral CounselCareer College AssociationApril 26, 2010

2. Gainful Employment Definition • The term “proprietary institution of higher education” means a school that provides an eligible program of training to prepare students for gainful employment in a recognized occupation. • This is the statutory basis for the Department’s proposed gainful employment regulation. • The proposed regulation would define “gainful employment” in a recognized occupation as follows: • An institution is considered to provide an eligible program that prepares students for gainful employment in a recognized occupation if the Secretary determines at the end of each three-year period that the debt-to-earningsratio associated with the program is eight percent or less.

3. Department of Education Proposed Gainful Employment Regulation Metrics: • Median debt level • 8 percent debt-to-income ratio • 25th percentile of annual earnings calculated by Bureau of Labor Statistics • Loan repayment period of 10-years Alternatives: • 90 percent graduate repayment rate • Actual earnings

4. Department of Education Lacks Statutory Authority • Because a college cannot control the salary paid in a particular profession or students’ ability to pay for college absent financial aid, the proposed regulation will effectively impose a cap on the price of tuition – the only variable colleges can control. • The word “gainful” modifies only “employment.” It does not modify the entire process of embarking on a program of study, borrowing money to pay for it, and then obtaining a job. Indeed, it is not the “program of training” that must be gainful. • “Gainful” as applied to employment only means that the work pays – as compared to a program that provides avocational training. • Congress has not authorized the Department to control tuition prices – the immediate effect of the Department’s proposed regulation.

5. ED’s Proposal • The use of a student loan debt-to-income ratio as a primary indicator of "gainful employment," where debt would include all forms of student loans, except for institutional payment plans; • The proposal is based on the Department's determination that graduates should be able to repay their loan debt in ten years without using more than 8 percent of their expected earnings in the occupation;

6. ED’s Proposal • ED’s hypothesis seems to be that programs exist that require students to assume “too much” debt relative to likely earnings, and those need to be ended by formula, rather than increased consumer disclosure. 

7. ED Proposal Based on Faulty Premise and Absence of Data • Do Programs Generating the Highest Levels of Debt Result in Highest Levels of Default? • No…our data demonstrate the inverse • Students that enter those programs most likely to fail ED metric have lower default rates than their counterparts in programs that pass

8. ED Proposal Based on Faulty Premise • Does the Proposal Impact Just a Small Number of Outlier Programs and Students? • No…our data suggest that impact on accessibility is widely felt • One of every three students are in programs that fail the test • News reports suggest community and state colleges dealing with cuts ill–prepared to pick up displaced

9. ED Proposal Based on Faulty Premise • Should Level of Earnings be a Metric in Determining Gainful Employment? • No…benefits of education should be measured in terms of the increase in earnings, not the level of earnings • The difference in earnings with or without an education is the appropriate measure of benefit • Restricting debt to students denies them a lifetime of earnings

10. ED Proposal Based on Faulty Premise • Does the Proposal Have the Correct Focus? • No…data show that graduates have a far higher percentage of loan repayment than those who fail to graduate • Why not concentrate on increasing graduation rates for all students rather than set arbitrary debt ratios for some graduates? • Proposal includes only graduates and ignores others

11. ED Proposal Based on Faulty Premise • Should Such a Measure Focus on Earnings Immediately After Graduation? • No…economists agree that education is an investment that pays out over time • Benefits of education should be measured in terms of the increase in earnings, not the level of earnings Benefits include: Reduced unemployment Increased access to health care and health insurance

12. ED Proposal Based on Faulty Premise • Will the Proposal Impact All Student Equally? • No…the debt limit disproportionately impacts students with limited resources • Education is a source of social mobility • Proposal denies access to populations otherwise underserved by higher education • Proposal affects students who need to borrow for higher education

13. ED’s Focus on Annual Income Ignores Other Education Benefits • Reduced unemployment • Insulation from recessions • Increased access to health care and health insurance • Educated mothers have healthier babies • Reduced criminality • General fulfillment

14. CCA Commissions Study • CCA Commissions Study to Get at Answers about “Unintended Consequences”… • Dr. Jonathan Guryan, University of Chicago Booth School of Business, and Charles River Associates • Survey of CCA Members • Representing wide range of programs and over 600,000 students and over 10,000 programs • Modeled ED Gainful Employment metric to analyze impacts on programs and students

15. CCA Study Results • Major Findings of Study Show… • Over 360,000 students a year displaced • At historic growth rates, 5.4 million students displaced through 2020 • Limits access opportunities for education in critical professions, including Healthcare and Information Technology • Disproportionate impact on minorities and women • At-Risk Programs actually generate better loan repayment results

16. Major Findings of Study Show… • Number of Students Impacted First Year • 68,000 (29%) Black Non-Hispanic Students • 79,000 (35%) Hispanic Students • 16,000 (44%) Asian Students • 179,000 (25%) Women • Expected Number Impacted by 2020 • Black Non-Hispanic Students – Over 1 Million • Hispanic Students – Over 1 Million • Asian Students – Over 230,000 • Female Students – Over 2 Million

17. SAFRA 90-10 • The Health Care and Education Reconciliation Act of 2010, P.L. 111-152, was signed into law on March 30, 2010 • The law invests $36 billion over 10 years to increase Pell Grants for low-income students, increasing the maximum award to $5,975 by 2017. • Maximum award annually will be adjusted to match rising cost of living. • The final law does NOT include temporary changes to the 90/10 rule.

18. SAFRA 90-10 • There may be another higher education legislative vehicle moving in Congress that could include items that were excluded from the reconciliation bill, including 90/10 temporary relief. • Increased scrutiny by appropriators to make up for a $5.5 billion shortfall in funding for Pell Grants in FY’11.

19. SAFRA 90-10 • The legislation also includes a provision added by Rep. Rob Andrews (D-NJ) and Mark Souder(R-IN) during committee markup that makes temporary changes to 90-10. This provision:  • Allows career colleges to count the unsubsidized Stafford loan limit increases established by the Ensuring Continue Access to Student Loans Act of 2008 as part of the 10% in the 90/10 rule through July 1, 2012 (this relief would have expired in 2011.) • Provides similar relief from loans originated under the new Federal Direct Perkins Loan program and increases for the same the number of consecutive years of failure to comply with the 90/10 rule before Title IV eligibility suspension from two years to three years and the automatic invocation of provisional status from after one year of failure to two years of failure. • This is all temporary relief until 2012.

20. Consumer Financial Protection Act (CFPA) • On March 22, 2010, the Senate Banking Committee marked up draft financial oversight legislation that did not include higher education private loans. • Senate Majority Leader Reid, on April 22, 2010, filed a cloture motion to bring the Dodd financial regulatory reform bill to the floor, setting up a key test vote this week.  Reid has said the floor will be open to amendments from both parties, a process that could tie up floor time for two weeks. At this point our Sector does not appear to be targeted.  

21. Consumer Financial Protection Act (CFPA) • The bill would create a Private Education Loan Ombudsman. • The Ombudsman would, among other things: • Assist borrowers of private education loans; • Resolve complaints from borrowers of loans; • Compile and analyze data on borrower complaints regarding private education loans; and, • The Ombudsman would not be involved in reviewing institutional loans.

22. Post-9/11 GI Benefits-Housing Allowance, National Guard and Certificate Programs • Congressman Bob Filner (D-CA), Chairman of the House Veterans Affairs Committee, has introduced a bill that would correct the distance learning inequity, H.R. 950. The bill has been passed and reported out of Committee. • CCA is working with a large coalition of veterans groups to ensure that ALL veterans are able to receive the benefits of the Post 9/11 GI Bill. • CCA in coalition with various Military organizations is supporting H.R. 3813, legislation that would change the definition of an institution of higher learning in Chapter 33 to incorporate institutions that offer non-degree educational and training programs. • A Senate version of the bill, S. 3171 was introduced by Senator Lincoln (D-AR).

23. ANY QUESTIONSPlease contact Brian MoranExecutive Vice President of Government RelationsGeneral CounselCareer College Association202-336-6817brianm@career.org