The U.S. Department of Education's proposed "gainful employment" regulations could significantly reshape the higher education landscape. Under the new rules, career education programs could lose access to federal financial aid if they leave graduates with low incomes or heavy debt burdens.

However, these requirements apply only to certificate programs and programs at for-profit colleges. The Department has also proposed other regulations with broader reach, covering nearly all college programs.

One such proposal is a financial transparency website for students. The site would include statistics for every higher education program, including debt burdens, graduate earnings, and tuition and fee costs. All colleges would be required to inform students how to access the site.

For programs with high debt-to-earnings ratios, prospective students would have to confirm they have reviewed the data before receiving federal financial aid.

These proposals are not popular among industry representatives and lobbying groups.

"It's hard to overstate the concern about the potential cost and burden of implementation," said David Baime, senior vice president of government relations at the American Association of Community Colleges.

What would the reporting requirements involve?

The Department says the new rules are intended to address rising college costs and increased student borrowing. But the rules would also require colleges to track and report student outcomes in new ways, which worries industry representatives.

Overall, the agency estimates that the new reporting requirements for all colleges would total more than 5 million hours of work in the first year, dropping to 1.5 million hours in subsequent years.

Emmanual Guillory, senior director of government relations at the American Council on Education, noted that the Obama-era gainful employment regulations (formally repealed in 2019) were estimated to require a total of only 1.9 million hours for colleges.

"Just from the reporting alone, you can see the increase in burden," he said. "And even the Department itself acknowledges this in its own data."

Guillory said smaller colleges may find the new requirements more burdensome.

According to Department estimates, small colleges could spend nearly 668,000 hours in the first year to meet the new reporting requirements, dropping to about 272,000 hours in subsequent cycles. The Department considers about 2,500 colleges "small," defined as two-year institutions with fewer than 500 full-time equivalent students and four-year institutions with fewer than 1,000 full-time equivalent students.

"We have questions about the scope of the expansion—requiring every college to report on every program, especially for smaller institutions in our sector with fewer resources and limited capacity," Guillory said.

Baime said that for community colleges, the additional costs of the new reporting requirements would either lead to higher tuition or reduced services.

"Compliance costs have to come from somewhere," he said.

What is the Department's goal?

The Department already operates the College Scorecard website, a consumer tool providing information on different colleges and programs, including some earnings data. But Department officials say they believe the site has not adequately provided financial transparency to students.

The main problem appears to be that students are not using it. Although 16 million students enter higher education each year, only about 2 million unique visitors accessed the Scorecard website in fiscal year 2022.

Second, research has questioned the idea that providing information changes students' college choices.A 2018 studyfound that this data had limited impact on student choices.

"While we continue to believe the College Scorecard is an important resource for students, families, and the public, we do not believe it is sufficient to ensure that students are fully informed about the outcomes of the programs they are considering before receiving Title IV funds," the Department wrote in the regulations.

The new disclosure website would include metrics related to private and institutional loans, as well as public and private grants.

The gainful employment regulations and the disclosure website are not the only new initiatives the Department has introduced to improve student transparency and institutional accountability. In January,the Department also sought comment on plans to create a list of programs with "low financial value". This idea is also unpopular with industry lobbyists, some of whom object to the Department labeling programs as having "low financial value."

"We don't think that's a role the Department should play," Baime said.

Being on the watch list does not mean a program would be cut off from federal funding. But the gainful employment regulations do indicate that the Department could consider factors such as an institution's debt-to-earnings ratio and earnings premium when deciding whether to enter into a program participation agreement with a college—the contract that allows colleges to participate in the federal financial aid system.

Other industry representatives worry that gainful employment transparency measures may not provide students with a complete picture of lifetime earnings trajectories, because some programs boost graduate earnings over decades but show little effect in the initial years.

"Are we suggesting to low-income students that what they earn in the first three years after college is what they will earn for the rest of their lives?" said Sarah Flanagan, vice president of government relations at the National Association of Independent Colleges and Universities.

Flanagan said the vagueness of the proposals—from how information will be presented to students to how the Education Secretary might use their authority—works against them and leaves colleges unable to understand how these policies might affect them.

"We seem to be embarking on a very large-scale implementation—placing the burden of implementation not on the government but on colleges, at great cost to them—without knowing whether it is truly important, beneficial, and accurate for students," she said.

Should these rules go further?

Despite protests from the college industry, many consumer and education advocates applaud the new measures to crack down on low-value programs, and some even call for strengthening them.

The Department's proposal only requires students to sign an acknowledgment when a program fails one of the tests in the new rules. Tia Caldwell, a higher education policy analyst at the left-leaning think tank New America, believes the Department should also require students to sign an acknowledgment when a program fails the new "earnings premium" metric—which determines whether graduates earn more than the average high school graduate in their state.

"The research we've done shows that the threshold the Department requires these programs to meet is really quite low—too low to warrant a warning," she said. The earnings threshold programs would be judged against is below the living wage in 46 states.

Caldwell'sother researchshows that the regulations as currently drafted would not affect many institutions outside the for-profit sector. Her research found that only 1% of students at public colleges and 6% at private nonprofit colleges would be enrolled in programs requiring an acknowledgment.

Rachel Fishman, acting director of higher education at New America, defended the new rules against complaints from colleges about implementation and compliance burdens.

"Given the stakes, I don't think this is excessive," she said. Colleges receive millions of dollars in federal financial aid each year, and imposing transparency measures on these funds is just "common sense."

"Participation in the Title IV program is a privilege," Fishman added, "not a right."