DeVos proposes another rollback on for-profit college rules

  • Aug. 11, 2018 10:36 a.m.

The Trump administration plans to roll back another major Obama-era rule that was created to police the for-profit college industry, according to a proposal issued by the Education Department on Friday.

Education Secretary Betsy DeVos said the gainful employment regulation should be scrapped entirely, arguing that it wasn’t backed up by research and created burdensome reporting requirements for schools. The rule sought to punish for-profit college programs that left graduates with heavy debt compared to their incomes

DeVos’ proposal represents the Education Department’s second planned rollback of a major Obama-era rule in a matter of weeks.

On July 25, DeVos proposed changes to the so-called borrower defence rule to toughen the process by which defrauded students can get their loans erased, saying it had become too easy for students to skip out on their debt.

The rules were part of the Obama administration’s crackdown on for-profit colleges, which was fueled by widespread complaints of fraud against chains including Corinthian Colleges and ITT Technical Institute. Both chains collapsed under pressure from Obama officials.

Under the 2014 gainful employment rule, college programs could be cut off from federal funding if the average debt ratio of their graduates stayed above a certain limit for two out of three straight years.

The rule also required schools to publicize debt and earnings data for their programs, which aimed to help students avoid programs with poor outcomes.

But DeVos said that, instead of punishing schools, her department plans to give more information to students by publishing earnings data for programs at all colleges and universities, not just those in the for-profit industry.

“Students deserve useful and relevant data when making important decisions about their education post-high school,” she said. “That’s why instead of targeting schools simply by their tax status, this administration is working to ensure students have transparent, meaningful information about all colleges and all programs.”

In early 2017, the Education Department found that more than 800 programs bound by the gainful employment rules, or about 10 per cent, were failing to meet its debt threshold. But before any programs lost funding, DeVos delayed the rule last year and moved to rewrite it.

The Education Department estimates that revoking the rule will add $5.3 billion in federal costs over the next decade. Department officials will gather public input on the proposal for 30 days before it can be finalized.

Arguing against the regulation, DeVos’ proposal says it was “more burdensome than previously anticipated” and that officials found “troubling inconsistencies” in the way job placement rates were calculated and reported.

DeVos also questioned the debt ratio that schools were required to meet. The rule gave programs a pass as long as a typical graduate’s debt didn’t exceed 8 per cent of his or her total earnings, a debt threshold borrowed from the mortgage industry.

But in the same study that the Obama administration cited in support of that figure, the authors warn that it “has no particular merit or justification” as a student debt ceiling. DeVos cited that warning, saying it raises questions about using the figure as a “critical, high-stakes test of purported program performance.”

Opponents were quick to attack the rollback on Friday, including some from the Obama administration, saying it loosens accountability and allows shoddy programs to keep their doors open.

John B. King Jr., who was Obama’s education secretary in 2016, called the proposal “outrageous and irresponsible.”

“By withdrawing the gainful employment regulations, the Trump administration is once again choosing the interests of executives and shareholders of predatory for-profit higher education institutions over protecting students and taxpayers,” said King, who is now president and CEO of the non-profit Education Trust.

James Kvaal, president of the non-profit Institute For College Access and Success, said the gainful employment rules prevented students from getting swamped with loans and had already spurred programs to improve.

“The administration put its cards on the table today, and it’s clear that it has little interest in protecting students or taxpayers from excessive, unaffordable student debts,” Kvaal said.

But the news was welcomed by some in the for-profit college industry, which fiercely opposed the rule under Obama.

Steve Gunderson, president of Career Education Colleges and Universities, the industry’s biggest lobbying group, said the proposal widens transparency and “could be the most significant consumer protection for all college students in all colleges and all programs.”

“Now is the time to move beyond ideological attacks on any one sector of higher education and establish a uniform commitment to transparency of outcomes that can stand the test of time,” he said.

The for-profit industry has suffered steep enrolment losses for years, forcing some chains to close dozens of campuses or shutter all together. Many blamed their woes on the Obama administration and the tightened regulations it imposed. But since Donald Trump brought his business-friendly approach to the White House, the industry has seen a shift in its favour.

Several former industry executives have gained powerful roles within the Education Department, including Julian Schmoke Jr., a former dean for DeVry University who now leads a unit that investigates fraud, and Robert Eitel, a former lawyer for Bridgepoint Education who serves as a senior counsellor to DeVos.

Critics have said the hirings suggest favouritism toward for-profit colleges, but industry officials insist they aren’t getting special treatment and say the administration has barred them from direct meetings with the former executives.

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