FACTS Newsroom Information:

Department of Veterans Affairs and Department of Defense "Principles of Excellence"

Date: August , 2012

Please read below on how the DOE is trying have the ruling vacating “Gainful Employment” amended”

Department of Veterans Affairs and Department of Defense "Principles of Excellence"

Effective August 1, 2012 all institutions of higher education that are approved to offer VA educational benefits and/or participate in any of the Federal military and educational benefits programs must commit to the Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members (Principles) developed as part of President Obama's April 27, 2012 Executive Order 13607 (EO). This week's deadline was an extension of the original Saturday, June 30, 2012 deadline contained in the May 31, 2012 letter, distributed through VA state approving agencies ( link: Department of Veteran’s Affairs Principles of Excellence Letter and E. O. 13607 Federal Register Information ), outlining the requirements for schools to comply with the new EO and Principles.

While it is still unclear all of the details of the Principles, additional guidance was provided by the U.S. Department of Education on July 13, 2012 (link: Department of Education Letter and E.O. 13607 Q&A).

At the present time institutions approved for VA educational benefits and/or participating in any of the Federal military and educational benefits programs are encouraged to – at a minimum send an email to principles.excellence@va.gov indicating whether or not your school agrees to comply and adhere to the Principles by the end of academic award year 2012-2013 and seek additional guidance in the same email on what is expected of your institution(s) in order to comply.

Gainful Employment

At the end of July the U.S. Department of Education filed a motion requesting that the United States District Court of the District of Columbia's ruling vacating the Gainful Employment rule be amended. The motion (summary below) seeks to have the reporting requirements upheld in an effort to enable the Department to use the information gained from the institutions to populate data on both the Gainful Employment Disclosure Templates (originally scheduled to be sent to institutions for each GE program July 2, 2012) and also to populate information on the newly introduced Student Shopping Sheet.

This motion is not an appeal of the District Court's ruling and the judge's decision to vacate the use of the three debt measures, reporting, and new program approval process, but simply a request to amend the decision. IF the Department chooses to seek an appeal of the decision they must do so within sixty days of the courts original decision (June 30, 2012). We continue to monitor the actions of the Department to determine whether or not they will seek to appeal the ruling or will accept it and move toward modifications of the regulations which will require a new round of Federal Negotiated Rulemaking.

Dept. of Ed file a Rule 59(e) motion that is a motion to alter or amend a judgment basically asking the appellant court to uphold the reporting requirements and the formulas and procedures used to calculate a program’s repayment rate and debt-to-income ratios because these provisions interact with the disclosure requirements contained. This is their first step of their appeal. (This is the 27-main.pdf attachment). Under Rule 59(2), courts may alter or amend a judgment upon motion made within 28 days after the entry of the judgment. Here, the Department is asking the court to amend because it is "needed to correct a clear error or prevent manifest injustices."

The 27.2 attachment is basically the Dept. doing the Court's work for them. This is exactly what they want the court to do.

The 27-1 attachment is their legal argument.

The department doesn't seek to challenge the determination that the lower court's ruling that the repayment rate was arbitrary. Rather, they want an amendment of the judgment that will allow students, schools and the department to receive the "full benefit of disclosure requirements of the reporting and disclosure regulations – benefits expressly recognized by this Court in upholding those requirements as a valid exercise of the Department’s rulemaking authority. The disclosure requirements require schools to disclose a program’s median loan debt, repayment rate, and debt-to-income ratios. But schools cannot disclose core pieces of this important information if the reporting requirements and the formulas and procedures for calculating a program’s repayment rate and debt-to-income ratios remain vacated under the Court’s Judgment. The Department, therefore, requests that the Court amend these portions of its Judgment so that schools can disclose to students the full range of valuable information required by the disclosure regulations.

Department requests that the Court permit the full disclosures required under the disclosure regulations by altering or amending the portions of the judgment that vacated the reporting requirements as well as the formulas and procedures for calculating a program's repayment rate and debt-to-income ratios. The reasoning behind this request sis that the Court's decision to vacate the provisions was based on three misunderstandings. First, the Court did not acknowledge that the reporting requirements and debt measure formulas serve a valid and important information-sharing purpose. Second, the reporting requirements and debt measure formulas are necessary to enable the Department to provide schools with information they must disclose under the other disclosure requirements that were upheld. Third, the reporting requirements do not require the Department to fold a new database into an existing old one, as the Court suggested.

Below is information provided to Tom Netting, the American Association of Cosmetology Schools (AACS) Lobbyist.

I. THE REPORTING REQUIREMENTS AND DEBT MEASURE FORMULAS SERVE AN IMPORTANT INFORMATION-SHARING PURPOSE.

The Court ruled that the reporting requirements and debt measure formulas served only to allow the Department to “conduct its own assessments of [gainful employment programs]” by calculating repayment rates and debt-to-income ratios for the purpose of terminating eligibility for those programs that do not satisfy the Department’s thresholds. But the Department contends that the reporting requirements and debt measure formulas also serve an equally important purpose intended to result in calculated debt information being provided to each school for the school to include in its disclosures to prospective students so that students can make an informed decision about whether to enroll in a particular program.

The Department contends that together, the reporting and disclosure requirements for all gainful employment programs, not just the failing programs, establish the framework for students, prospective students, and the schools offering the programs to make meaningful comparisons about similar programs offered by different schools. Thus, the Department argues, the independent purpose for the reporting requirements and debt measure formulas and procedures supports severing them from the provisions that set thresholds to identify failing programs.

II. THE REPORTING REQUIREMENTS AND DEBT MEASURE FORMULAS ARE NECESSARY TO THE DISCLOSURE REQUIREMENTS.

The Court ruled that the reporting requirements and debt measure formulas were not necessary to the disclosure requirements. The Court specifically stated that the disclosure requirements “do not require gainful employment programs to report information to the Department.”

Although this is true with respect to some of the disclosures required, the Department claims it is not true with respect all of them. Specifically, schools do not possess all of the information necessary to make the disclosures that require “the median loan debt incurred by students who completed the program as provided by the Secretary, as well as any other information the Secretary provided to the institution about that program.” (emphasis added by Department). Further, the disclosures must be made in the “form issued by the Secretary . .. when that form is available.” The Department explains the multiple edits and revisions the template went through before ultimately gaining OMB approval on March 19, 2012.

The Department contends that a program’s median loan debt, repayment rate, and debt-to-income ratios cannot be disclosed by schools as required by § 668.6(b)(1)(v), which the Court upheld, unless schools first
report certain data to the Department pursuant to the reporting requirements of the reporting and disclosure regulations, which the Court vacated. (NF emphasis). Once the necessary data is reported by schools to the Department, the Department will calculate each program’s median loan debt, repayment rate, and debt-to-income ratios (the latter two pursuant to the debt measure formulas and procedures in § 668.7(a)(2), (b) – (f)), and provide that information to schools so that schools can disclose the information to students. Thus, the Department appeals, although the Court upheld the disclosure requirements, those requirements – particularly the requirements in § 668.6(b)(1)(v) – cannot be implemented without the reporting requirements and the debt measure formulas.

The Department claims they are the only ones who can verify the accuracy of loan debt information reported by multiple schools and ensure that the median debt calculations are performed in the same way and they are the only ones who can obtain mean and median annual earnings data from the Social Security Administration which are needed to calculate debt-to-income ratios.

As a result of the two misunderstandings described above, the Department claims the Court did not consider that the reporting requirements are necessary for the Department to obtain the program-specific
information needed to provide schools with essential parts of the intended program disclosures. For that reason, the Department pleads to the Court to recognize that the Court erred in concluding that the reporting requirements are not “necessary for the operation of programs authorized by” Title IV as required under 20 U.S.C. § 1015c, or for fulfilling the disclosure requirements the Court upheld.

The reporting requirements are necessary to the operation of the disclosure requirements. And, as the Court recognized, the disclosure requirements, which are intended “to better inform prospective students,” “fall comfortably within . . . the Department’s authority under the [HEA],” id. at 34. The Department concludes that the Court, therefore, should alter or amend the Judgment to uphold the reporting requirements and the debt measure formulas and procedures to the extent that they interact with the disclosure requirements to enable schools to make necessary disclosures.

However, The Department recognizes that the Court found the Department’s reasoning for selecting a repayment rate threshold of 35 percent lacking and does not challenge that portion of the Court’s decision. Thus, the Department recognizes that, under the Court’s order, it may not use the reporting requirements or the debt measure formulas or procedures to assess whether a program satisfies the vacated debt measure thresholds or to determine a program’s eligibility on that basis.

III. THE REPORTING REQUIREMENTS DO NOT REQUIRE THE DEPARTMENT TO FOLD A NEW DATABASE INTO AN EXISTING ONE.
The Department contends the Court appears to have misunderstood the content of the National Student Loan Data System (NSLDS) and the limited nature of the modifications to that database that are necessary to implement the reporting and disclosure regulations. DoEd reminds the Court that Congress explicitly directed the Department to create the NSLDS in 1992 as a comprehensive database with information on all Title IV, HEA loans, including data on borrowers and grant recipients, and that it was a non-exhaustive list of the types of information the NSLDS should contain. The categories of the NSLDS have been altered since 1992 with no contention from Congress.

The Department fleshes out these facts to make the argument that the Department is not creating a new database to implement the reporting requirements; nor is it folding a new database into an existing one. Rather, the reporting requirements require schools to input 23 new data fields directly into the NSLDS database that Congress expressly authorized for the purpose of collecting information on student loan borrowers. The Department’s interpretation of the exception in 20 U.S.C. § 1015c(b)(2) to allow such alterations to an existing, congressionally-authorized, to which the Department claims, database would be entirely reasonable.

The Department finally pleads to the Court to amend the Judgment to uphold the reporting requirements and the debt measure formulas and procedures. This amendment will enable the Department to obtain from schools data about their programs that is necessary to calculate median loan debt, repayment rate, and debt-to-income ratios. The Department can then calculate and provide that information to schools so that schools can improve their programs and provide students with a full range of valuable information about their programs before students make important decisions regarding their future education and before they incur significant debt. The Department wishes to make clear that it will not use the vacated repayment rate or debt-to-income ratios thresholds to determine a program’s eligibility. Nor will the Department disclose, or require schools to disclose, whether their programs meet the Department’s vacated thresholds, and no program will be required to send warning letters because it failed the vacated thresholds.