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Business Officer Magazine

Capitol Report

Coverage of legislation and regulatory activity that affects higher education

Are Students Getting Their Money's Worth?

“Gainful employment” is a fairly innocuous term, and most of us have a good sense of what it means. For decades, the term has been part of the definition of some types of educational programs that are eligible to participate in the federal student aid funds provided under Title IV of the Higher Education Act. Most programs at for-profit institutions and nondegree programs that are at least one academic year in length at public and independent colleges and universities are eligible if they “prepare students for gainful employment in a recognized occupation.”

Now, as part of a larger effort to tighten up on programs that provide little value to students, leave them with debt they cannot repay, and waste taxpayer resources, the Department of Education (ED) has proposed a new gainful employment standard. Under the proposed standard, in order for a program to be considered to be preparing students for gainful employment, it would need to meet certain thresholds on two new measures of loan-repayment rates and debt-to-income ratios.

The loan-repayment ratio calculates, for the preceding four years, the percentage of subsidized and unsubsidized federal Stafford loans owed by students enrolled in the educational program (weighted by dollar amount of the original outstanding principle balance) where the borrower had either paid in full or had made payments during the last year sufficient to pay off at least $1 of the principal. Programs would remain fully eligible if their loan-repayment ratio exceeds 45 percent. Programs with rates below 35 percent would remain eligible only if they scored well on the other measure.

The debt-to-income ratio is a little more complex, with several possible variations. This measure takes into account all student loan debt, including private education loans and institutional financing agreements borrowed by program completers for attendance at the same institution. Median annual debt repayment, based on a standard 10-year repayment schedule, would be divided by average annual earnings for the most recent three years. A ratio of 8 percent or less would lead to full eligibility, depending on the program's loan-repayment ratio, while scores higher than 12 percent would invoke more restrictions or even render the program ineligible.

An alternative debt-to-income ratio looks at the students' debt relative to their discretionary income, defined as earnings minus 1.5 times the poverty level. Corresponding thresholds would be set higher for the discretionary income ratio, at 20 and 30 percent. In the final variation, a program that didn't pass those ratios, but could demonstrate that its graduates tended to make significantly more money a few years after graduating, could meet a higher standard based on students who completed the program four to six years earlier.

ED would calculate these measures for each program using a mix of information provided by institutions about students enrolled in and completing the program, along with federal databases. Under proposed rules issued in June, institutions would be required to supply ED with identifying information for students in these types of programs, their date of completion, classification of instructional programs (CIP) code, and the amounts of any private education loans (including institutional loans and non-Title IV federal loans) and institutional financing agreements for each. ED proposes to use its information on federal loans to calculate the loan-repayment ratio and to use earnings data obtained from another federal agency (such as the Social Security Administration) to calculate average earnings of program completers.

In addition, under the proposed rules, institutions would have to apply to ED for approval of any new program falling into the “gainful employment” category. The institution would need to provide five years of projected enrollments, documentation from unaffiliated employers that the proposed program aligns with recognized occupations at their businesses, and approval from the institution's accrediting agency if the new program would be considered a substantive change.

The gainful employment provision was perhaps the most contentious of the 14 “program integrity” issues covered in negotiated rulemaking sessions that ended last January, with the committee far from reaching consensus. The proposal was revised considerably in the intervening months. It was removed from the notice of proposed rulemaking published on June 18 so that ED could take additional time to analyze data and refine the proposal. The July 26 Federal Register notice contains an unprecedented amount of analysis and data (a 68-page appendix provides the Regulatory Impact Analysis) in an attempt to show why ED chose this route, why the proposed thresholds were set, and how many programs would likely be affected.

Much of the ED data shows a distinct delineation between the for-profit sector and the public and nonprofit sectors, including higher average loan debt, lower completion rates, and higher default rates. ED's data is primarily available at the institutional level rather than for individual programs, however, leading to considerable extrapolation in estimates of the impact of the proposed regulations. ED estimates that programs affecting about 8 percent of students would fail its tests, although for the first year failures would be capped at programs enrolling 5 percent of program completers. Few public and nonprofit programs are expected to be affected.

ED plans to issue final rules by November 1, the statutory deadline for changes to Title IV regulations that take effect the following July. Sanctions, such as requiring institutions to prominently provide warnings that students might not be able to repay their loans, would be imposed beginning July 2012.

RESOURCE LINK More detailed explanation of the proposed rule and a link to the notice of proposed rulemaking are available at

NACUBO CONTACT Anne Gross, vice president, regulatory affairs, 202.861.2544

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Got PCBs? NACUBO Submits Comments to EPA on Caulk

On behalf of the higher education community, NACUBO sent comments to the EPA in response to its Advanced Notice of Proposed Rulemaking regarding the reassessment of PCB use authorizations. In its August letter to the EPA, NACUBO requested that the EPA establish a use authorization for any caulk containing PCBs that was in use in college and university buildings prior to July 1979.

Scope and Impact of PCB-Containing Caulk in Buildings

Based on the results of an anonymous nationwide survey administered by the Campus Consortium for Environmental Excellence, NACUBO conservatively estimates that between 20 and 30 percent of its members' buildings were constructed or renovated between 1950 and 1979—the time frame when PCBs were added to caulk, reportedly to improve elasticity. This translates to approximately 82,000 campus buildings, with an approximate floor space in excess of 5 billion square feet. Limited sampling data further indicated that:

  • Thirty percent of the 82,000 buildings contain caulking with PCB concentrations in excess of 50 parts per million (ppm), the maximum-allowed threshold.
  • In 80 percent of buildings with confirmed PCBs in excess of 50 ppm, the PCBs had migrated into the adjacent substrate, which makes removal and mediation even more challenging.
  • In sum, NACUBO estimates that tens of thousands of college and university buildings, both publicly and privately owned, are likely to have caulking (and other material) that contains PCBs in excess of 50 ppm.

The financial impact of managing caulk or other building materials containing PCBs can be staggering. Costs for renovations involving PCB-impacted building materials typically include those associated with sampling and testing, abatement practices, replacement or repair of contaminated adjacent substrate material (e.g., concrete, brick, stone, and mortar), and disposal. Some of those costs are well understood, but they can escalate quickly if, for instance, the caulk removal expands from a discrete renovation project to an entire building once PCBs have been identified.

Based on the survey data, the average cost for PCB-containing caulk removal and disposal is on the order of $10 to $50 per linear foot. However, the estimated fully loaded costs for projects involving PCB-impacted substrate may be 10 times this amount, up to $480 per linear foot. Data gathered from a number of completed and pending remediation projects put abatement costs involving PCB-impacted materials between $500,000 and $6 million per building. This translates into well over $10 billion in remediation costs for the higher education sector alone.

NACUBO Recommendation

Given that there is also no clear correlation between PCB levels in caulk and an increase in risk from exposure, NACUBO takes the position that it is not appropriate or reasonable for EPA to mandate the premature removal of this material from college and university buildings.

Instead, NACUBO requested that EPA establish a use authorization that allows for the continued use of intact caulk and any impacted substrate material, regardless of the PCB concentration, for the life of the building. Premature removal of contaminated material will impose an enormous financial burden on colleges and universities, and is without a correlative benefit to public health.

RESOURCE LINK To read the complete letter, details of the proposed use authorization, and survey findings, visit

NACUBO CONTACT Michele Madia, director, environmental leadership, NACUBO, 202.861.2554

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