Posted Date: April 27, 2012

Author:  David Bergeron, Deputy Assistant Secretary for Policy, Planning and Innovation, Office of Postsecondary Education

Subject: Gainful Employment Electronic Announcement #34 - Title IV Eligibility of Preparatory Courses of Study and Their Gainful Employment Status

This Electronic Announcement provides updated policy guidance related to the Title IV eligibility and gainful employment status of preparatory courses of study. Specifically, we are advising institutions of the different statuses that apply to such courses of study depending on whether or not the coursework leads to a certificate, degree, or other credential awarded by the institution. The clarification and guidance provided in this Electronic Announcement supersedes information we provided in Gainful Employment Electronic Announcement #19, which was posted on August 31, 2011.

Eligibility of Preparatory Courses of Study

We remind institutions of the statutory exception in section 484(b)(3) of the HEA that allows a student who is enrolled in a course of study "necessary for enrollment in a program leading to a degree or certificate" to receive Title IV Direct Loan funds (for a period of up to 12 consecutive months) even though the course of study does not lead to a degree or certificate awarded by the institution. In Electronic Announcement #19, we stated that these preparatory courses of study under the statutory HEA exception were not gainful employment programs, regardless of whether the coursework leads to a credential awarded by the institution or is simply coursework that is necessary for enrollment in a degree or certificate program. With respect to the statutory exception being discussed, we are providing this clarification to note that programs where an institution offers preparatory coursework leading to a certificate or degree qualify as gainful employment programs under the general requirements.

The statutory exception in 484(b)(3) that allows a student to receive Direct Loan funds for preparatory coursework applies only to a preparatory course of study that does not lead to a credential awarded by the institution. Because such preparatory courses of study do not lead to a credential awarded by the institution, they are not gainful employment programs. See below for a discussion of the special Direct Loan annual loan limits that apply to students enrolled in these preparatory courses of study.

In contrast, since educational programs that do lead to a credential awarded by the institution are Title IV-eligible without the need for a statutory exception, they are gainful employment programs, even if the coursework is preparatory for admission into a program leading to a degree or certificate. Students enrolled in such programs may be awarded all Title IV aid for which they are otherwise eligible. The regular Direct Loan annual loan limits apply to students enrolled in such programs.

GE Reporting and Disclosures for Preparatory Programs that Lead to an Institutionally Awarded Credential

As a result of this updated policy guidance, an institution that did not include a preparatory program that leads to a credential being awarded by the institution in its GE reporting last fall must report information for that program no later than October 15, 2012. That reporting must include all students who were enrolled in the program during award years 2006-2007 through 2011-2012.

Similarly, institutions that have not met the GE disclosure requirements for preparatory programs that lead to a credential being awarded by the institution must do so as soon as possible.

Loan Limits for Preparatory Courses of Study that Do Not Lead to an Institutionally Awarded Credential

Pursuant to the statutory exception, a student enrolled in a preparatory course of study that does not lead to a credential awarded by the institution is eligible for funding only from the Direct Loan Program and for no more than 12 consecutive months. If the student is enrolled in a preparatory course of study that exceeds 12 consecutive months, the student ceases to be eligible for Direct Loans after the 12-month period.

The annual loan limit information below is a correction to information that was provided in Electronic Announcement #19.

A preparatory course of study that does not lead to an institutionally awarded credential is considered to be at the undergraduate level, even if the coursework is at the graduate level. Therefore, a student enrolled in such a program may not receive a Graduate/Professional Direct PLUS Loan; however, if the student is a dependent student, the student's parent may receive a Parent Direct PLUS Loan.

Annual Loan Limits for Preparatory Courses of Study That Do Not Lead to a Credential

Dependent Students
(excluding students whose parents cannot borrow PLUS)
"Base" Amount
(combined Direct Subsidized/Unsubsidized)
Additional Direct Unsubsidized Amount
Preparatory course of study necessary for enrollment in an undergraduate program $2,625 $0
Preparatory course of study necessary for enrollment in a graduate or professional program $5,500 $0
Independent Students
(and dependent students whose parents cannot borrow PLUS)
"Base" Amount
(combined Direct Subsidized/Unsubsidized)
Additional Direct Unsubsidized Amount
Preparatory course of study necessary for enrollment in an undergraduate program $2,625 $6,000
Preparatory course of study necessary for enrollment in a graduate or professional program $5,500 $7,000

Note that for both dependent and independent students, the "base" Direct Subsidized/Direct Unsubsidized annual loan limit of $2,625 for these students is not the same as the $3,500 "base" annual loan limit for students who are in the first year of any undergraduate program that leads to a degree or certificate awarded by the institution.

In addition, dependent students enrolled in these programs are not eligible to receive the additional $2,000 in Direct Unsubsidized Loan funds that is available to dependent students enrolled in an undergraduate degree or certificate program. However, independent undergraduates (and dependent undergraduates whose parents are unable to borrow a Direct PLUS Loan) are eligible to receive up to $6,000 in additional Direct Unsubsidized Loan funds for a preparatory course of study necessary for enrollment in an undergraduate degree or certificate program and up to $7,000 in additional Direct Unsubsidized Loan funds for a preparatory course of study necessary for enrollment in a graduate or professional degree program.

Since a student may complete an academic year in less than 12 calendar months, a student may receive more than one annual loan limit during the consecutive 12-month period.

   

End of Page