Economy

Did Betsy Devos Just Give For-Profit Colleges Exactly What They Wanted?

July 3rd 2017

By:
Katelyn Harrop

A major check-and-balance on for-profit colleges has moved to the back burner under Secretary of Education Betsy Devos.

Flickr/Gage Skidmore
On June 30th, the Department of Education announced a one-year extension for schools that have to demonstrate compliance with Obama-era Gainful Employment requirements. Under Gainful Employment, the government evaluates and grades for-profit colleges and non-degree employment certificate programs based on how much students earn after graduation, compared to the amount of money taken out in loans while pursuing a non-degree program or for-profit degree.

Schools and programs were then rated, and in cases of extreme disparity between loan levels and earning (basically, a bad look for paying back loans) institutions could receive a failing grade. This could lead to loss of federal funding for programs and institutions unwilling to make changes. 

The logic of Gainful Employment is simple: if students aren’t getting a return on their investment, schools don't deserve student investment. The loss of federal funding would likely be a death sentence for failing for-profit institutions. 

Writing for the Center for American Progress, a DC-based nonpartisan think tank, CJ Libassi and Ben Miller write this about the Gainful Employment rule:

Without this rule, hundreds of thousands of students run the risk of paying large sums of money to attend low-quality programs that leave them underemployed and mired in debt. These students would either face a lifetime of financial hardship or rely on payment plans based on their income that have long repayment terms and accumulate great deals of interest before ultimately obtaining taxpayer-supported loan forgiveness. The real winners would be colleges offering these low-value programs that would continue to pad their revenues with government-funded student loans.

The first Gainful Employment results came out in the last days of the Obama administration, after years were spent fighting lawsuits from resistant for-profit colleges. The early data labeled more than 500 failing programs.  Although none have received federal funding cuts yet, more than 300 of the failing programs have already closed their doors, suggesting that the system serves as an informative check and balance.

 

 

While early results from Gainful Employment show that the system has been successful in identifying financial pitfalls for students, a recent statement from the Department of Education refers to the program as “overly burdensome” for the institutions required to comply.

"We need to get this right for our students, and we need to get this right for our institutions of higher education,” Devos said in a statement. “Once fully implemented, the current rules would unfairly and arbitrarily limit students' ability to pursue certain types of higher education and career training programs. 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."

"We need to get this right for students, and we need to get this right for our institutions of higher education."

Under the new decision, institutions will have until 2018 to to comply with Gainful Employment disclosure requirements, including providing numbers on student debt burden.

This notice comes two weeks after DeVos announced intentions to rewrite the rules of both Gainful Employment and and the borrower's defense rule, which clarifies paths to loan forgiveness for students who were defrauded or misled by a higher education program or school. The move came less than 10 days after she appointed the founder of a for-profit student lending company as the head of Federal Student Aid. 

While it may take up to two years for Gainful Employment to see a full redevelopment, education reform advocates worry the extension and cuts are the beginning of a slow death for the program in-full.

 

 

 

On the other hand, for-profit affiliates have expressed relief over DeVos’ latest decision.

“We applaud the Department of Education for delaying the gainful employment rule. The rule is clearly flawed,” said Career Education Colleges and Universities, an organization representing for-profit institutions, in a recent statement. “Recent studies and court rulings prove this rule needs to be revisited. Now, through public comments and negotiated rulemaking, all stakeholders involved have a chance to identify the shortcomings of this regulation.”