WASHINGTON — Education Secretary Betsy DeVos has made it clear she is intent on restructuring or repealing Obama administration regulations. Front and center is a rule that requires colleges to show that their graduates earn enough money to repay their loans — an attempt to hold for-profit schools accountable for the amount of debt many of their students incur.
The gainful employment rule withholds federal student aid from higher education institutions that saddle students with exorbitant debt. The Department of Education defines these loans as exceeding 30 percent of graduates’ discretionary income, meaning income after taxes are paid, or 12 percent of their total earnings. Programs that exceed the loan limits in two of three consecutive years lose federal funding.
The rule, which went into effect in the summer of 2015, gave colleges until mid-2017 to disclose their graduates’ debts and earnings so their programs could be evaluated. It is designed to ensure that education programs adequately train students for their careers at a reasonable price, said Debbie Cochrane, vice president for higher education nonprofit College Access and Success.
In July, the Education Department granted a one-year extension to all institutions — including for-profit, public and nonprofit — to disclose the data. It also gave DeVos time for a “regulatory reset.”
“Since their creation under the previous administration, gainful employment regulations have been repeatedly challenged by educational institutions and overturned by the courts, underscoring the need for a regulatory reset,” DeVos said in June. “We need to expand, not limit, paths to higher education for students, while also continuing to hold accountable those institutions that do not serve students well.”
Under the rule, more than 2,000 programs, most of them at for-profit colleges and offering cosmetology or medical/nursing instruction, risk losing the ability to give out federal loans.
The for-profit sector has said the rule unfairly targets them and leaves little time to improve their programs.
“Gainful employment was 100 percent about putting a bunch of the for-profits out of business,” said Dr. Watson Scott Swail, president and CEO of the Educational Policy Institute, a nonprofit think tank. “That’s the way it was designed under the Obama administration. They were real serious about doing that.”
Cochrane said schools typically resist legislation with federal financial aid restrictions because they feel the government often enforces rules that require strict cost and quality benchmarks they often can’t meet.
Of the programs at risk, more than 800 serve students with annual loan payments greater than 12 percent of their total earnings, the affordability line the government has drawn for colleges. For-profit career programs — including one in theater arts at Harvard University and another on music performance at John Hopkins University — make up 98 percent of those failing to abide by the federal guidelines.
“All of the programs that fail are for-profit,” Cochrane said. “That doesn’t mean [the rule] targets them. That’s like saying that rules against bank robberies unfairly target bank robbers.”
Because the rule is under review, the Department of Education declined to comment on possible updates to the regulation.
Barmak Nassirian, the director of policy analysis at the American Association of State Colleges and Universities, said for-profit institutions’ complaint that the government “maliciously” discriminates against them is intended to divert attention from their programs’ “abysmal performance.”
Nassirian, who also served as a negotiator on the second rulemaking panel for the gainful employment rule in 2015, said the final version is so diluted that it hasn’t disrupted colleges’ day-to-day practices. The only clear victims of the rule end up being the students, who have “become profit centers to build multi-billion-dollar corporations,” he said.
According to data collected by the Center for Responsive Politics, top contributors in for-profit education have so far donated up to $1.2 million during the 2017-2018 election cycle to candidates and their parties. Eighty-nine percent of that money has gone exclusively to Republican lawmakers, who control both chambers of Congress.
Republican Rep. Virginia Foxx of North Carolina, who chairs the House Committee on Education and the Workforce, is the top recipient of donations made by for-profit advocates, collecting about $53,000 this year. Foxx called regulations like the gainful employment rule “troublesome,” and sided with the Department of Education on its mission to prevent future federal overreach in postsecondary affairs.
“Republicans recognize the need to reduce federal regulations that stifle innovation and may lead to higher costs for colleges and students,” Foxx said in November.
But Cochrane offered a caution on rescinding the rule: “Last thing we want is more students enrolling and ending up with debt they can’t repay.”