US Department of Education Amends “150%” Rule for Federal Funding

Despite Associated Skin Care Professionals’ (ASCP) efforts to advocate for changes to the US Department of Education’s (ED) Gainful Employment (GE) rules in June 2023, the ED issued final rules on October 31 that will likely impact programs in states with minimum clock-hour requirements for licensure or certification, including esthetics and cosmetology. Below are highlights of the changes and an explanation of key aspects of the new rules.  

What Are the Changes?
There are two components of the new GE regulations. The Financial Value Transparency (FVT) provisions are intended to increase the quantity and quality of information students will have before enrollment. The FVT establishes new debt-to-earnings (D/E) performance measures and an earnings premium test that compares the earnings of program graduates to the earnings of typical high school graduates.  

The second component addresses accountability for GE programs—those programs providing training for GE in a recognized occupation or profession. This component determines whether programs are eligible for continued participation in the ED’s federal student aid by requiring that they adapt to and do not require students to complete education hours exceeding the state minimum requirement for licensure.

Importantly, the FVT rules apply to all programs eligible for financial aid from the ED. Program performance, as measured by the new formulas, will be posted for public viewing on the ED’s website. By contrast, the GE accountability provisions and their consequences for federal aid apply only to GE programs, which include most degree programs at for-profit institutions and some non-degree programs at public and nonprofit institutions. (source: https://www.hklaw.com/en/insights/publications/2023/10/new-gainful-employment-rules-impact-for-profit-and-nonprofit.)

Explanation of the “150%” Rule and How It’s Changing
Educational programs that are clock-hour-based, such as esthetics, have historically had a rule for financial aid called the 150% Rule. This allowed programs to offer more education than their state’s minimum requirements and remain eligible to offer students federal financial aid. Essentially, if a state had a minimum-hour requirement for a program, then a school could offer a program that exceeded the minimum hours by up to 50% and students would still be eligible for financial aid through Title IV. For example: If a state has an esthetics minimum requirement of 600 hours, a school in that state could offer an esthetics program up to 900 hours (150% of the minimum) and remain eligible to offer federal financial aid.

Effective July 1, 2024, for an esthetics program to remain Title IV-eligible, program length must be equal to state minimum hour requirements. Schools cannot deviate from this number, or the entire program becomes ineligible for Title IV funding. In essence, the new rule amends the 150% Rule to 100%.

The ED’s reasoning for this change is based on the premise of saving the US taxpayer money. The ED believes that when a state arrives at a minimum number of required education hours, the state has made a reasonable judgment about how many hours it takes to be trained and ready to work in a profession. Therefore, in the ED’s reasoning, Title IV financed hours in addition to that foundation result in an unnecessary taxpayer financial burden. The ED aims to protect students from graduating without realistic prospects of paying off their student loans and believes that forcing schools to adhere to the minimum requirement is one measure by which it can control costs.  

What Will Happen to Clock-Hour Programs
There is no “grandparenting” clause—all esthetics and cosmetology schools offering a skin care program across the country with Title IV funding must align their hours to their state minimum hours by July 1, 2024. ASCP estimates that a significant portion of esthetics and cosmetology programs may be configured to offer hours more than the state required minimums. These are the programs most likely to be affected by the change in the 150% Rule. This change is for students who start on or after July 1, 2024. Students who start before July 1, 2024, will remain in a program that exceeds state minimum hours and remain eligible for Title IV funding. Schools will have a transition period where some students in esthetics programs will be subject to different hour requirements.

What Are My School’s Options?
Schools have at least two options:

1. Consider minimal revisions to program offerings. If your school is offering hours beyond your state hour requirement, one option would be to consider eliminating training in elective courses, such as brow and lash treatments, microneedling, chemical peels, and/or microdermabrasion. Instead, offer training in these subjects as supplemental continuing education post-graduation. In doing so, the core curriculum hours can better match the state requirements for esthetics. Supplemental courses can be offered to students outside of core requirements for graduation and licensure.
    
2. Play the long game. We can work together to advocate for reasonable, defensible increases to raise minimum state requirements. In doing so, esthetics programs will be able to maintain quality curriculum offerings. This would require cooperation with state legislators and regulatory boards, but it’s not impossible. The most common minimum state requirement across the US is 600 hours. If most schools in your state offer more than that threshold and schools in your state believe collectively that students need more instructional hours, an attempt to change the law may be an avenue worth exploring.

ASCP intends to advocate for reconsideration of the rule change at the federal level. Our Government Relations team will be working with our partners and state and federal leaders to find solutions that work for schools and students. We will be in regular contact with any updates we receive. If you have questions or would like to learn more about federal advocacy options, don’t hesitate to reach out to us at gr@ascpskincare.com.