Gainful Employment Ruling Struck Down

English: Photo of Education Secretary (2009-)....

Just days after the Department of Education released Gainful Employment Informational Debt Measures and Gainful Employment Informational Loan Medians to institutions, GE is Dead!

On Saturday, United States District Judge Rudolph Contreras struck down Gainful Employment rules in a suit that the Association of Private Colleges and Universities brought against the Department of Education and Secretary Arne Duncan to challenge Gainful Employment rules.

Check out the full text of the legal decision here:


Does your campus culture promote financial literacy?


2011 10 06 - 1237 - Washington DC - Occupy DC

2011 10 06 - 1237 - Washington DC - Occupy DC (Photo credit: thisisbossi)

April is National Financial Literacy Month and on campuses across the country, students, faculty and staff are getting engaged as schools integrate default aversion strategies into everyday campus life in an effort to lower default rates and promote financial health through education. Financial literacy campaigns have become a prime strategy for preventing student loan defaults. Unfortunately, many schools still view financial literacy as an isolated function of the Financial Aid office but, it takes the combined effort and understanding of everyone on campus to create a culture capable of promoting financial literacy. Want to know how to get your school’s head in the game? Read on.

First things first. Let’s assume that very few people outside of the financial aid office ever think about financial literacy. It’s probably also safe to assume that few people within the financial aid office ever think about student retention, persistence and success. Where these two conversations converge is where the magic happens. 

It’s just as important for everyone on campus to know how student success is determined and to be able to identify barriers to student persistence as it is for everyone on campus to know what tools and resources are available to students to overcome them. Barriers come in all shapes and sizes and they’re not always financial either. Social and academic integration, parental support, family background, and even cultural values can create barriers to student success. And the student’s most at risk of defaulting on their student loans are the ones who leave school before attaining either degree. By cultivating an understanding of the characteristics and risk factors that contribute to default, schools can proactively engage the students who need assistance academically as well as financially. 

Clueless about starting that dialogue on campus? Don’t worry, you’re not alone. Many schools contract with third party services to provide financial literacy to their students. With the old FFEL lenders, servicers and guarantors, looking for a way to stay in the student lending game, many have shifted their entire focus to default aversion planning and financial literacy. There’s a lot of choices out there so call a few and choose the one that fits for your campus.

Okay – this is a “Financial Aid” blog, so what can you do in the Financial Aid office to help educate your students and families? Here are a few suggestions:

  • Conduct entrance and exit counseling. Already doing it? Great! Ever try to get 100% of your departing students to complete exit counseling? Raise the bar. Go for it.
  • Make sure mom and dad are part of the financial aid process. As independent as today’s dependent students may seem, the FSA program is predicated on the student’s parents being the first source of financial aid, before the Pell Grant and Direct Loans even come into play. Remember, mom and dad can use a co-borrower to take out that PLUS loan too.
  • Brush up on your understanding of Income Based Repayment (IBR), Graduated Repayment and all of the other repayment plans that are extended to borrowers of Federal Student Loans. Being able to explain all of the options to your students is the first step to helping them choose wisely.
  • Advise students to borrow Federal Student Loans before exploring other, more costly options. Private, credit-based loans can carry significantly higher interest rates than Direct Loans.
  • Contract with a third party default management company. Unlike a collection agency, a third party default management company can help you maintain contact with students after they leave school. The best ones build a long-term relationship with each student and will contact students throughout repayment of their federal loans to help keep them on track.
  • Use loan calculators! Loan calculators are great for demonstrating the cost of borrowing in real terms. Most online loan calculators show not only principal and interest over the term of the loan, but many allow you to compare rates and repayment terms too.
  • Encourage students to make interest only payments on their loans. This reduces capitalization and makes repayment more affordable in the long run.
  • Encourage students to borrow conscientiously and whenever possible reduce their reliance on federal student aid.
  • Promote scholarships. Free money is always better than something that has to be repaid. Send an email blast or a tweet whenever you hear about a new scholarship that your student could benefit from. 

Draft Cohort Default Rates Delayed, but coming…

In a message addressed to the Financial Aid Community, Federal Student Aid announced the release dates of the  FY 2010 2-Year and FY 2009 3-Year Draft Cohort Default Rates. All schools, both domestic and foreign, enrolled in the Electronic Cohort Default Rate (eCDR) process will receive their FY 2010 2-Year and the FY 2009 3-Year Draft Cohort Default Rate and accompanying documentation via their Student Aid Internet Gateway (SAIG) mailbox.This year, the reports will be delivered separately and several days apart as follows:

  • FY 2010 2-Year Draft Cohort Default Rates – On February 27, 2012
  • FY 2009 3-Year Draft Cohort Default Rates – On March 5, 2012

Although sanctions from the 3 year Cohort Default Rate will not be imposed until 2014, many schools will review the student level data in the report to ensure the accuracy of the official Cohort Default Rate which will be published in September. In 2014, institutions that have three-year rates higher than 30 percent will face possible sanctions, including loss of eligibility to participate in Title IV programs. Trial rates project the following data by sector.

Public —10.8% overall 14.7% 17.9% 7.9%
Private7.6% overall 26.1% 16.7% 7.3%
Proprietary25.0% overall 27.6% 27.9% 22.7%
Foreign – 4.7% overall

During the Draft Cohort Default Rate Review period,schools have 45 days to challenge/appeal the rates by submitting an Incorrect Data Challenge appeal to the data manager via the eCDR appeals process. A good idea since benefits as well as sanctions apply to cohort default rate thresholds.

  • FY 2010 2-Year Incorrect Data Challenges are due – April 12, 2012
  • FY 2009 3-Year Incorrect Data Challenges are due –  April 19, 2012

For more information about Cohort Default Rates, check out the revised edition of the Cohort Default Rate Guide.

Related articles

Sample Verification Worksheets for 2012-2013

Earlier this week, the US Department of Education published sample Dependent and Independent Verification Worksheets.  Copies of the worksheets are available here:

Schools are not required to use the sample worksheets.  Schools  may develop their own worksheets or they may choose not to use a worksheet at all but  rather, to collect the required documents, statements, certifications and  signatures through other means. In addition to the usual PI and household size, schools will be required to verify specific data elements from the student’s 2011 Federal Income Tax Transcript. SNAP and Child Support are also among the potentially verifiable items. To get a complete listing of the of the information that may need to be verified for applicants who complete the FAFSA for the 2012-2013 award year check out GEN 11-13 which was published way back in July of 2011.

Welcome to the FAST FACTS BLOG!

For the last ten years, I’ve worked in higher education. I started out as a Financial Aid Advisor and worked my way up from there. For the last seven years I’ve been working for a mid-sized group of proprietary schools as their Corporate Director of Financial Aid. Until today, I oversaw the administration of their Title IV program across 30 campuses and for more than 10,000 students and I enjoyed every minute of it.

Today, I’m starting a new career as a consultant and blogger. I’ll still be working in the higher education space and of course, specializing in Title IV Administration. Those of you who know me are familiar with the daily FAST FACTS emails I’ve been sending out for a few years now, so if you liked those, you’ll like this blog too. In the coming days you’ll see articles, analysis and most importantly dialogue; all wrapped up into neat little snippets that are just the right size to get you through your morning cup of coffee. I know you’ll like my blog. I’ve got some work to do to get it ready so, check back tomorrow for an update.
Best Wishes,

Peter Terebesi
Be the change you want to see in the world. Make a Great Day!