What is Gainful Employment? 

By: Michael Fryar 

Over the next few days Quincunx Consulting will be updating everyone on the implications of the recent decision in American Association of Cosmetology Schools vs. Secretary of Education.  The heart of the issue is a unique income situation of graduates from cosmotology schools and the rigid definition of gainful employment promulgated by the Department of Education. This is not the first challenge to the regulations and definitions; in 2012 a legal challenge led to parts of the gainful employment rule being found to be arbitrary and capricious under the Administration Procedure Act   Ass’n of Private Colls. & Univs. v. Duncan, 870 F. Supp. 2d 133. The current definition for Gainful Employment focuses on the graduates debt from education compared to earnings.  At a glance:
  • The D/E starts with the amount of debt (tuition and fees and books, equipment, and supplies) and then compares it to the graduates discretionary and annual earnings after completing a program. 
  • The first monthly ratio is approximately 20%, with a student required to earn, for instance, $500 income for every $100 in student loans.
  • The second ratio, the annual rate, is less forgiving. Annual loan payments should be 8% or less of a graduates annual income.
  • A program is determined to be failing if its monthly discretionary income rate is more than 30% ($300 payment for every $1000 earned) or annual earnings rate is more than 12% ($120/year for every $1,000 earned per year).


If a program does not pass either test it is put on notice. If it fails 2 out of 3 consecutive years or is “in the zone” or failing for 4 out of 4 consecutive years it loses its ability to offer HEA loans.The DoE uses Social Security Administration data which is complied from the IRS and either employer reported income or tax returns. The DoE uses presumptive rates from SSA to complete the gainful employment calculation. If the program or school is found to be either “in the zone” or “failing” from this data they can file an “alternate earnings appeal” and request a different method of calculation. This is either from state data, if the state collects such data, or a survey of graduates of the program. 

Do you feel that this method of data collection is fair?
   
Check back tomorrow for more on the American Association of Cosmetology Schools vs. Secretary of Education. 

If you are in need of employee on-boarding, hiring, training or assistance with your transition to a new accreditation schedule a free consultation at  www.quincunxconsulting.org 



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