This Electronic Announcement provides information on the implementation of new requirements related to Gainful Employment programs under the Administrative Capability regulations in 34 C.F.R. § 668.16(t) and the Financial Responsibility regulations in § 668.171(c), which go into effect July 1, 2024.
POSTED DATE: June 20, 2024
AUTHOR: Federal Student Aid
ELECTRONIC ANNOUNCEMENT ID: GENERAL-24-74
SUBJECT: Implementation of the Gainful Employment Funding Metric Requirements for Institutions Under Administrative Capability and Financial Responsibility
On October 31, 2023, the Department published a final rule in the Federal Register [88 FR 74568] amending the regulations related to Financial Responsibility, Administrative Capability, Certification Procedures, and Ability To Benefit (ATB) pertaining to the student financial assistance programs under Title IV of the Higher Education Act of 1965, as amended (Title IV, HEA programs). This Electronic Announcement provides information on the implementation of new requirements related to Gainful Employment (GE) programs under the Administrative Capability regulations in 34 C.F.R. § 668.16(t) and the Financial Responsibility regulations in § 668.171(c), which go into effect July 1, 2024.
Administrative Capability § 668.16(t)
For institutions that offer GE programs, the regulations at § 668.16(t) require that less than half of their total Title IV, HEA funds come from programs that are “failing” under subpart S of 34 C.F.R. Part 668 for the most recent award year. To determine compliance with this requirement, the Department will utilize our administrative data provided from institutions through the Common Origination and Disbursement (COD) and National Student Loan Data System (NSLDS) to determine:
- An institution’s total Title IV, HEA funds from their most recently completed award year;
- Whether a GE program is failing; and
- If half of the institution’s total Title IV, HEA funds from their most recently completed award year went to GE program(s) that are failing under subpart S.
Under Administrative Capability, the Department’s methodology will be to use the GE metrics calculated by the Department and released during the most recently completed award year. The Department will not use multiple years of data (i.e., multiple GE metrics) to determine compliance with § 668.16(t). The most recent GE metrics calculated by the Department will be compared to the institution’s total Title IV, HEA funds for the most recently completed award year to determine an institution’s compliance with § 668.16(t). For example, Administrative Capability GE program funding amounts will be assessed in Fall 2025 using the GE metrics released during Award Year 2024-2025.
Financial Responsibility § 668.171(c)
The regulations at § 668.171 amend the set of conditions that require an institution to post financial protection, if applicable, if certain events occur. These mandatory triggers are certain external events, financial circumstances that may not be reflected in the institution’s regular financial statements, or financial circumstances that are not yet reflected in the institution’s composite score. Additional guidance regarding those triggers will be provided in a separate announcement.
One of the new mandatory triggers is § 668.171(c)(2)(iii), which is triggered when an institution receives at least 50 percent of its Title IV, HEA program funds in its most recently completed fiscal year (FY) from GE programs that are “failing” under subpart S of 34 C.F.R. Part 668. To determine compliance with this requirement, the Department will utilize our administrative data provided from institutions through COD, NSLDS, and eZ-Audit systems to determine:
An institution’s total Title IV, HEA funds from their most recently completed FY;
Whether a GE program is failing; and
If half of the institution’s total Title IV, HEA funds from their most recently completed FY went to GE program(s) that are failing under subpart S.
Under Financial Responsibility, the Department’s methodology will be to use multiple sets of GE metrics. In the beginning, the Department will only have one set of GE metrics calculated, but this will increase over time to where the Department will be able to utilize multiple years of GE metrics to determine compliance with § 668.171(c). For example:
Institution’s fiscal year end (FYE) 12/31/2024: Compliance is assessed using one year of data, which will be the GE metrics released in Winter 2025.
Institution’s FYE 12/31/2025: Compliance is assessed using two years of data, which will be the GE metrics released in Winter 2025 and in Winter 2026.
Institution’s FYE 12/31/2026: Compliance is assessed using three years of data, which will be the GE metrics released in Winter 2025, Winter 2026, and Winter 2027.
Consequently, the Department could examine up to five years of data consecutively for an institution’s FY period due to the possibility that a GE program may receive “no results” in more than one year. If a program’s GE metrics are not calculated or issued for an award year, the program remains in the same status from the last year for which the metrics were calculated for the program, with respect to warning and acknowledgement requirements and the number of years of failures for program eligibility purposes. GE metrics more than five years old are not considered when determining the program’s Title IV eligibility.
This is a different methodology from Administrative Capability, where only one set of GE metrics (the calculated metric released during the most recently completed award year) will be used and is intended to address different risks associated with institutional financial stability. Specifically, in the amended Financial Responsibility regulations, the Department sought to increase our ability to timely identify high-risk events and require financial protection to protect students and taxpayers, allowing us to gather financial protection earlier to better protect students and taxpayers against the financial costs resulting from an institutional closure. Since the GE regulations at § 668.603 state that GE programs will lose eligibility for failing the same metric twice in three consecutive calculations, it is prudent for the Department to view multiple years of data to determine if surety is required and, depending on circumstances, held in case an institution loses eligibility for one or more of its GE programs where the institution received at least half of their total Title IV, HEA funds. Such a circumstance represents a significant reduction in the institution’s revenue and creates a situation where the institution’s financial health could be negatively impacted.
The new Financial Responsibility regulations at § 668.23(d)(1) require that all institutions align their FY with the year that is used for their tax returns submitted to the Internal Revenue Service. The “determined annually” provision in the GE mandatory trigger is indexed to the school’s most recently completed FY; therefore, the Department can calculate the trigger metric with each approved FY end change. For example, if an institution changes their FYE from 06/30/2025 to 12/31/2025, the Department will review GE metrics that correspond to both FYE periods. Additionally, the Department could also assess financial responsibility for an institution’s same fiscal period more than once to account for release of additional metrics.
As a reminder, § 668.28(a)(2)(ii)(A) and (B) requires proprietary institutions to make any disbursements to students by the end of their FY. It is equally important for public and non-profit institutions to complete payments to students, as appropriate, before the end of their respective FY. Under the amended Administrative Capability requirements in § 668.16(s), institutions are required to disburse funds to students in a timely manner that best meet students’ needs.
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