What Is the Gainful Employment Rule? The Definition, Benefits, and Challenges

The gainful employment rule appeared in 2014. The goal of this rule was to reduce the burden of loan debt that has been pressing students for decades. In simple terms, this rule attempted to protect students from entering low-value programs that leave them with a hefty debt but don’t help them find a well-paid job.

Developed and released by the Obama administration, the gainful employment rule has generally shown positive outcomes. It encouraged schools to have greater accountability and triggered positive changes in educational programs. Nevertheless, it was later repealed by the Trump administration.

Here, we’ll look at this rule and its history in detail to understand the associated benefits and challenges.

Student Loan Debt Statistics

The state of student loan debt is always a big topic. Here’s what you should know:

• Currently, student loan debt in the US totals $1.833 trillion. There is a rapid increase in the annual growth of student debt that began in 2023, after years of decline.
• The average federal loan debt balance is $39,547 per student. If you add private loans to this, the total number can reach up to $43,333 per student.
• The majority of borrowers face significant challenges with repaying their loans after school. 42% report they are forced to make tradeoffs between covering their everyday needs and making loan payments.

In 2026, the topic of student debt continues to get more pressing. The annual growth of debt is increasing. At the same time, there is a significant risk of being placed in programs that don’t help students find jobs and make money for a living.

Gainful Employment Rule History

The gainful employment regulations have gone a long way. We can define the three key stages in its history:

The Importance and Benefits of the Gainful Employment Rule

While gainful employment regulations can create challenges for educational programs, they also offer several benefits for students, the government, and the community.

The key benefits include:

• Empowering students. The main idea of gainful employment is to prevent students from getting into poor-quality or irrelevant programs that don’t help them build prosperous careers.
• Protecting federal funds. The gainful employment concept protects taxpayer money from going to poor programs that don’t guarantee returns.
• Growing awareness of student loan debt and career prospects. The gainful employment regulations emphasize the growing problem of student debt. At the same time, the new 2023 rules require programs to report the information about potential income. This makes the educational decisions more informed and transparent for students.

The Existing Critique and Challenges of the Gainful Employment

Despite the positive outcomes and multiple benefits, there is still quite a lot of criticism toward the gainful employment rule. The primary challenge emphasized by the rule opponents is the unfair calculation of income metrics. There is a belief that certain programs (e.g., hospitality or cosmetology) may not be able to meet the income metrics because they often rely on non-traditional payments, such as tips. 

Another concern lies in the potential impact of discrimination. Some programs tend to serve student groups whose wages are affected not just by education but by issues like racism. These programs can be potentially unfairly singled out from federal aid.

The rule also creates some challenges for students who have to rely on financial aid. They might be required to change schools or programs just to find options that meet the rule requirements. Or they might be forced to seek alternative funding opportunities. And this can also negatively impact their debt balances in the future.

Conclusion

The gainful employment rule was introduced more than a decade ago. Then, it was repealed and finally restored after years. At the moment, the final version of the rule seems to offer fairer conditions for programs. And it does offer a number of benefits for students and the government.

On the other hand, the rule does have certain limitations and challenges. Apparently, its qualification metrics don’t consider systemic issues or career-specific payment peculiarities. This can make students’ educational choices more complicated and forced. So the rule might need further improvement.