the American Association of Colleges of Osteopathic Medicine

This analysis was prepared by Venable, LLP, on behalf of AACOM.

On September 27, 2023, the U.S. Department of Education (Department) published the final rules for gainful employment (GE) and financial value transparency (FVT). The GE rule restores an accountability and eligibility framework for career training programs and programs at for-profit institutions of higher education. The FVT rule establishes for the first time a series of transparency measures applicable to all higher education programs. The rules were published in the Federal Register on October 10, 2023 (link) and will go into effect on July 1, 2024.

GE Rule

The GE rule was first proposed by the Obama administration in 2011, formally adopted in 2014, and rescinded by the Trump administration in 2019. The Biden administration’s final rule is an expansion of the 2014 GE rule.

The final GE rule applies to all Title IV eligible program offered by proprietary (i.e., for-profit) institutions of higher education and less than 2-year (i.e., certificate) programs at public and private non-profit institutions. To maintain their eligibility to participate in the Title IV federal student aid programs, covered educational programs will be subject to two independent metrics to determine whether the programs satisfy the statutory requirement to prepare students for gainful employment in a recognized occupation:

A debt-to-earnings (D/E) ratio that compares the median earnings of graduates who received federal financial aid to the median annual payments on loan debt borrowed for the program. To pass, a program must either show that debt payments are no more than 8 percent of annual earnings or 20 percent of discretionary earnings, which is defined as annual earnings minus 150 percent of the federal poverty guideline for a single individual (about $21,870 in 2023). Covered programs that fail the debt-to-earnings standards are considered “high-debt-burden.”
A new earnings premium test that measures whether the typical graduate from a covered program that received federal student aid is earning at least as much as a typical high school graduate in the labor force (i.e., either working or unemployed) in their state between the ages of 25 and 34. This is equal to roughly $25,000 nationally but varies across states. Covered programs that have typical earnings lower than the median high school graduate are considered “low-earnings.”

Covered programs that fail either or both metrics in a single year will be required to provide warnings to students that the programs could be at risk of losing eligibility for federal student aid in subsequent years. Covered programs that fail the same metric in two of three consecutive years will have their eligibility to participate in federal aid programs revoked for at least three years.

Calculating the D/E Ratio and Earnings Premium Metric for Covered Medical Programs

For purposes of calculating both the D/E ratio and the earnings premium metric, the Department will use a two-year or four-year cohort period similar to the 2014 GE Rule. The Department will use a two-year cohort period when the number of students in the two-year cohort period is 30 or more and a four-year cohort period when the number of students completing the program in the two-year cohort period is fewer than 30 but the number of students completing the program in the four-year cohort period is 30 or more.

Similar to the 2014 GE Rule, the cohort period will be calculated differently for “qualifying graduate programs,” and whose students therefore experience an unusual and unavoidable delay before reaching the earnings typical for the occupation. The definition of “qualifying graduate program” was expanded from doctoral medical and dental programs, as was specified in the proposed rule. Specifically, a “qualifying graduate program” will include programs that provide its students 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.

The two-year cohort period for a qualifying graduate program will consist of the sixth and seventh award years prior to the year for which the most recent earnings data are available at the time of calculation. For example, D/E rates and the premium earnings threshold measure calculated for award year 2024–25 will be calculated in after July 1, 2025 using earnings data measured in calendar years 2021 and 2022, with a two-year cohort period of award years 2014–15 and 2015–16. The four-year cohort period for a qualifying graduate program will be the sixth, seventh, eighth, and ninth award years prior to the year for which the most recent earnings data are available at the time of calculation. For example, the D/E rates and the earnings threshold measure calculated for award year 2024–25 will be calculated in late 2024 or early 2025 using earnings data measured in calendar years 2021 and 2022, and the four-year cohort period will be award years 2012–13, 2013–14, 2014–15, and 2015–16.

Covered programs must begin reporting to the Department by July 31, 2024, and by October 1, each year thereafter. The first official outcomes will be published after July 1, 2025. Programs may be deemed ineligible for Title IV beginning July 1, 2026.

FVT Rule

The final FVT regulations establish a framework to attempt to increase the quality and availability of information provided to the public and directly to students about the costs, sources of financial aid, and outcomes of students enrolled in Title IV-eligible programs. The final FVT will apply to all Title IV-eligible programs offered by all institutions and use the same D/E and earnings premium metrics as the GE rule.

No penalties or sanctions will apply under the FVT rule; however, the Department will label programs failing the D/E rate as “high debt burden” and those failing the earnings premium metric as “low earning.” This information will be made available via a new website maintained by the Department. Where the D/E rate results in a failing program, the Department will require a student acknowledgment that the program has a high debt burden prior to enrollment and disbursement. This student acknowledgement requirement will not apply to undergraduate degree programs. Additionally, student acknowledgements for low earnings programs will not be required based on the Department’s rationale that some students attending non-GE programs seek ends other than financial gain.

All institutions will be subject to the following augmented reporting requirements:

For each Title IV-eligible program: Information needed to identify the program and the institution, including program name, CIP code, credential level and program length; programmatic accreditation (if applicable), program licensure information; total number of Title IV and non-Title IV students enrolled in the program; and if the program is a medical or dental program with an internship or residency.
For each recipient of Title IV funds: The date the student initially enrolled in the program; the student’s attendance dates and status (enrolled, withdrawn or completed); the student’s enrollment status (full time, part time, etc.); total annual cost of attendance; total tuition and fees assessed for the award year; student’s residency tuition status; total allowance for books, supplies and equipment; amount of institutional grants and scholarships disbursed; amount of other state, tribal or private grants disbursed; and amount of any private education loans disbursed.
For students who completed or withdrew from the program and never received any Title IV assistance: The date the student completed or withdrew from the program; the total amount of private education loans the student owes for the program; the total amount of institutional debt the student owes; total tuition and fees for enrollment in the program; total allowance for books, supplies and equipment included in cost of attendance; and total amount of institutional grants and scholarships.

Institutions must begin reporting by July 31, 2024, and by October 1 each year thereafter. By July 1, 2026, the Department website will be actively displaying information concerning programmatic compliance with FVT. Also by July 1, 2026, students in a high-debt-burden non-GE program (except for undergraduate degree programs) will be required to sign an acknowledgment prior to entering into an enrollment agreement with the institution.

Changes from the Proposed Rule

The final GE and FVT rules are largely the same as the proposed rules that the Department published earlier in 2023. However, the final rule permits institutions to 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 will be 2022-23 and 2023-24. This change to the NPRM provides institutions with increased flexibility to comply with the final rule.

Implementation of AACOM’s Comments

AACOM submitted comments on the proposed rule package, but none of AACOM’s recommendations were adopted. The Department specifically acknowledged AACOM’s request to calculate individualized D/E rates based on varying medical residency lengths. The Department claims that “it is not feasible . . . to adapt different cohort periods for every student depending on the type of residency they pursue.” The Department believes “that establishing a 6-year lag before earnings are measured gives the vast majority of students in such programs time to complete residency requirements and measure their early career earnings.”

The Department also specifically addressed AACOM’s request that the D/E measure incorporate loan repayment programs such as the National Health Service Corps Loan Repayment Program (LRP), Indian Health Service LRP, Health Professions LRP, and the Veterans Affairs Specialty Education LRP. The Department stated that “income-based and income-driven repayment programs partially shield borrowers from the risks of not being able to repay their loans. However, such after-the-fact protections do not address underlying program failures to prepare students for gainful employment in the first place, and they exacerbate the impact of such failures on taxpayers as a whole when borrowers are unable to pay.”

What’s Next?

In addition to GE and FVT, the proposed rule package included rules on financial responsibility, administration capability, certification procedures, and ability to benefit. These four rules were not included in this final rule. The Department has indicated that the remaining four rules will be published at a later date.

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