Home News Education Politics and Policy FSA’s Guidance on Gainful Employment Regulation ‘Nothing Short of a Debacle’
FSA’s Guidance on Gainful Employment Regulation ‘Nothing Short of a Debacle’

FSA’s Guidance on Gainful Employment Regulation ‘Nothing Short of a Debacle’


FSA’s Guidance on Gainful Employment Regulation ‘Nothing Short of a Debacle’

The Office of Federal Student Aid’s communication, guidance and deadline related to the gainful employment regulation is “nothing short of a debacle,” according to a financial aid expert.

Justin S. Draeger, president and CEO of the National Association of Student Financial Aid Administrators (NASFAA), testified Nov. 18 before a joint hearing of the U.S. House of Representatives Committee on Oversight and Government Reform – Subcommittee on Government Operations – and the Education and the Workforce Committee – Subcommittee on Higher Education and Workforce Training. The NASFAA represents financial aid administrators at more than 3,000 public and private colleges, universities and trade schools across the nation, and his testimony highlighted the number of challenges facing institutions seeking to comply with the gainful employment (GE) regulation.

Draeger said that while the Office of Federal Student Aid (FSA) has had successes, it is not acting appropriately in its role as a performance-based organization, particularly as it relates to increasing officials’ accountability for administering the program’s operations and providing greater flexibility in the management and administration of the financial aid programs.

“The general experience with FSA from institutions has actually been the opposite: a lack of accountability on the part of FSA and a stifling, archaic approach to institutional management and administration of the aid programs,” he said. “For many schools, the working relationship with FSA has become so tenuous that it is having adverse effects on students.”

But institutions have little recourse because of the structure that exists between the schools and the federal government, he said.

“Schools are reluctant to raise valid concerns about FSA’s operations for fear that it would negatively impact an institution’s relationship with the agency,” Draeger testified.

“Schools often shy away from asking FSA questions or vocalizing complaints about poor customer service or unworkable FSA initiatives for fear of a possible compliance review and potential loss of student aid funding.”

APSCU’s Thoughts

The value of the NASFAA testimony is important for two reasons. First, it serves as an independent, highly respected voice making clear there are significant problems with the implementation of the Gainful Employment regulation. Second, based upon their testimony even those who support a Gainful Employment Regulation should realize that delaying the implementation is in everyone’s interest. It allows the Department to fix the problems before beginning to publish unsound data and imposing unjustified penalties. It allows the Congress to consider this regulation in the larger context of one set of outcomes for all of higher education during the Reauthorization process. And it helps our sector as we continue to independently review our programs in the context of today’s economy and specific career skill demands.

The battles of ideological confrontation can continue. Or, everyone can work together to achieve a consensus on both policy and policy implementation that protects students, student access and student opportunities. – Steve Gunderson, President and CEO, APSCU

While the FSA regularly acts as a watchdog, Draeger said the FSA and institutions should instead be partners in the successful administration and delivery of federal student aid. “FSA rarely consults schools before making major changes or setting deadlines, often resulting in confusion, misunderstandings, unintended and unanticipated consequences, and compliance challenges by institutions.”

As an example, he cited FSA’s recent communication, guidance and deadlines related to the GE regulation. Final regulations, published Oct. 31, 2014, notified schools that they would have to report seven award years of data for gainful employment programs. Yet necessary guidance to report the data was published anywhere from 120 days in advance to 2 weeks after the initial July 31, 2015 GE deadline, Draeger said.

“The day before reporting was due, FSA provided instructions to schools on how to confirm their data was submitted without any issues,” he said. “Ten days after the July 31 deadline, the Department provided additional guidance on how to report certain programs, acknowledging that their own guidance thus far was lacking and may have led schools to believe they did not need to report data on certain programs.”

Despite the confusion, the FSA refused to provide any deadline extensions, even after the NASFAA sent a formal request on behalf of the financial aid community. “Nearly a month after the July 31 deadline, FSA finally provided program tracking functionality allowing schools to look up whether the school reported data for GE programs,” he said.

Only nine calendar days after the program-tracking tool was released, school presidents received their first warning letter regarding the institution’s noncompliance with gainful employment regulations, Draeger testified. “These warning letters threatened the school with violations of administrative capability, a serious allegation that can result in the loss of eligibility to participate in the Title IV aid programs. These threatening letters were sent to schools from every corner of higher education, from large research institutions to flagship public and private universities, to community colleges.”

In many cases, these schools were actually in compliance, Draeger said, but simply had data conflicts that could have been resolved through a collaborative effort between schools and the Department of Education (ED). Over the next three weeks, the FSA provided even more reporting-related guidance and sent yet another warning letter to schools.
To make matters even worse, Draeger said, the NASFAA heard from schools throughout the reporting process that the ED began making system corrections during workdays at the same time schools were trying to correct data, all without announcement or forewarning.

“It was only after all GE reporting deadlines passed that FSA provided instructions to schools on how to confirm their compliance with the GE reporting requirements,” he said.

“Clearly, this information would have served schools better if it was released before the first deadline to make sure the institutions were in compliance with the rules. But just as schools receive this invaluable tool, FSA sends out another non-compliance notice the next day.”

As of the final Oct. 1, 2015 GE deadline, several hundred schools were still in a questionable status regarding the satisfactory completion of their GE reporting for the previous years. “To date, ED has not provided any of these schools a notification that their data conflicts have been corrected, leaving many schools wondering when another shoe will drop – this time with sanctions,” he said.

Draeger said had the Department of Education used a more reasonable timetable to implement its new regulations, the system of reporting could have been tested in a partnership with institutions to identify problems and create solutions before going live, potentially avoiding the threatening letters FSA sent to schools.

“One of our members, a financial aid director in Ohio, summed up these last few months of GE reporting very accurately by saying, ‘GE reporting … has been an incredibly frustrating experience of wasted time, time which could have been more productively spent on our students and families.’”

Draeger also told about an institution that reached out to FSA to share a concern they had about a difference of opinion with their software provider about a specific requirement. “While the FSA staff agreed with the institution’s perspective, they were not willing to reach out to that software provider to correct them, even though that provider serviced thousands of institutions,” he said.

In another example, Draeger said FSA quietly and without warning to institutions ended a portion of its enrollment reporting contract with the National Student Clearinghouse in Fall 2014 that resulted in reporting delays, sometimes putting students incorrectly into loan repayment when they were still in school.

“The change affected the daily operations of financial aid offices, yet FSA made no public announcement of the change until the repercussions became apparent several months later,” he said. “The termination of the contract led to institutions, on very short notice, having to do more labor-intensive, manual work to meet students’ needs – a backwards move in an age where efficiency through technology is the norm.”

About Justin Draeger

Justin Draeger is president and CEO of the National Association of Student Financial Aid Administrators. He serves as the primary voice of NASFAA and as the liaison between 3,000 financial aid offices, the U.S. Congress and federal agencies.

Most of Draeger’s career has been devoted to assisting disadvantaged populations achieve their educational goals and better their communities. Since 2002, he has worked in administering, interpreting, communicating and developing student financial aid policy.

Previously, he also worked as a financial aid director, and regulatory and policy analyst. In addition, he has held senior positions overseeing government relations, communications and public policy work.

Draeger is frequently quoted in the press and has appeared on “The Today Show” on NBC, National Public Radio, American Public Media’s “Marketplace,” Fox Business News, CNBC, and C-SPAN, and he is often quoted in national news outlets. He currently serves on the boards of directors of Baker College, the Association Mutual Health Insurance Company and other organizations that promote health and education.

He earned his undergraduate degree from Brigham Young University and his Master’s in Business Administration from Baker College.

Ultimately, this change decreased services to students due to the additional workload, it removed flexibility, and it eliminated one of the integrated systems to administer federal aid, he said. “To make matters worse, FSA assured institutions in an Electronic Announcement that they would do their part to keep information up to date in their system, the National Student Loan Data System, but (they) have yet to make significant improvements to the notoriously and unacceptably slow database that still does not provide data in real-time, even though this technology has existed in the private sector for many years.”

NASFAA sent a letter to FSA on June 3, 2015 outlining institutions’ concerns and requesting that the FSA address the operational issues and reach out to institutions in the future when considering major decisions that would impact day-to-day functions in the financial aid office. As of the date of his testimony, NASFAA had not yet received a response, Draeger said.

According to the FSA’s most recent five-year strategic plan, one of their goals is to “develop efficient processes and effective capabilities that are among the best in the public and private sectors.” But Draeger said the FSA has a “very long way to go before being ‘among the best’” with respect to efficiency and effectiveness.

“Additionally, these point to the fact that there may be a more fundamental issue in question: Is it even appropriate for the functions of FSA to be so all encompassing?” he testified. “After all, how is a single entity without real oversight supposed to partner with schools?”


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