New Rules Proposed by DeVos Would Reduce Student Loan Forgiveness, Favor For-Profit Colleges

Betsy DeVos is busy eliminating regulation of for-profit colleges and reducing protection of the rights of students who use federal loans to attend them. President Obama’s administration had tried to crack down, but DeVos and her Department of Education are cozier with the for-profit college sector.

Last Wednesday, Betsy DeVos’s U.S. Department of Education proposed new rules to set the parameters for loan forgiveness when students file claims alleging their colleges have defrauded them. Under the new “borrowers’ defense to repayment” rules, DeVos expects the Department of Education to save money—approximately $700 million annually. Then on Thursday, the NY Times obtained a copy of draft plans to end what has been called the “gainful employment rule,” which has been used to shut down for-profit trade schools and colleges when their students are so unemployable they cannot pay off their federal loans.

Borrowers Defense to Repayment — Advocates for protecting the rights of student borrowers say the rules released last week will make it much harder for students who believe they have been defrauded to have their student loans cancelled. The very existence of many for-profit colleges depends on a steady revenue stream of federally backed student loans. After Corinthian Colleges and ITT Technical Institute were shut down, thousands of their former students filed claims for cancellation of loans used to pay tuition for programs that had been terminated.

For the Washington Post, Laura Meckler and Danielle Douglas-Gabrielle explain: “Education Secretary Betsy DeVos moved Wednesday to make it harder for students who say they were defrauded by colleges to erase their debts, rolling back Obama-era regulations that for-profit colleges saw as threatening their survival. The proposed rules… require students to prove schools knowingly deceived them if they want their federal loans canceled. And it scuttled an Obama administration provision that allowed similar claims to be processed as a group. Instead, students will have to prove their claims individually. The rules are DeVos’s rewrite of an Obama-era regulation published in 2016 and part of that administration’s crackdown on for-profit colleges that critics say prey on vulnerable students. In ways big and small, the new version makes it harder for students to win debt forgiveness… The department aims to publish a final rule by Nov. 1 so that it can take effect for loans originating after July 1, 2019. The agency will allow 30 days for public comments on the proposal.”

Consumer and borrower advocates believe the standard of proof under the DeVos rules proposed last week favors the for-profit college industry and fails adequately to protect students. The NY Times’ Erica Green reports that DeVos has filled the positions who regulate for-profit colleges with former employees and advocates for the for-profits: “DeVos advisers include her senior counselor, Robert S. Eitel, and Diane Auer Jones, a senior adviser on postsecondary education, both of whom worked for Career Education Corporation, a company that operates for-profit colleges, and reached a $10.25 million settlement with the New York attorney general over charges that it had inflated graduates’ job placement rates. The department’s general counsel, Carlos G. Muñiz, worked as a consultant for the company.”

POLITICO‘s Benjamin Wermund adds that the newly proposed rules will reduce loan reimbursements to students whose colleges suddenly close as long as those colleges provide a phase out that allows students to complete some of their coursework: “Under the plan, the Education Department would no longer provide “closed school” discharges to students if the school offers an approved “teach-out” or a wind-down of their program — a move the agency predicts would reduce the amount of closed school discharges by $96.5 million each year.”

The newly proposed rules require students to prove they were intentionally defrauded. Meckler and Douglas-Gabrielle report: “Consumer advocates also said it is unrealistic to expect borrowers to prove that their college intended to mislead them. ‘How are borrowers supposed to prove intent? They don’t have any discovery rights. They don’t have the ability to get testimony from the person who lied to them about what they knew or didn’t know,’ said Abby Shafroth, an attorney at the National Consumer Law Center.”

Advocates for protection of borrower’s rights criticize the proposed rules because they require that students filing complaints submit to arbitration:  Green explains: “The proposal also restores ‘pre-dispute arbitration agreements,’ which allow colleges to force students to sign waivers saying they will settle their disputes with institutions through arbitration. The Obama administration had removed those agreements from its rule because they essentially forced to students to sign away their rights to sue and file federal claims, and shielded student complaints from the public.”

Gainful Employment Rule — The Obama administration began to crack down on trade schools’ unscrupulous recruiting practices and fraudulent promises that students would be prepared for jobs when the colleges’ programs were weak or worthless. Last Thursday, the NY Times Erica Green obtained a draft plan from the U.S. Department of Education to eliminate the Obama “gainful employment rule” altogether.

Green explains: “Education Secretary Betsy DeVos plans to eliminate regulations that forced for-profit colleges to prove that they provide gainful employment to the students they enroll, in what would be the most drastic in a series of moves that she has made to free the for-profit sector from safeguards put in effect during the Obama era. The so-called gainful employment regulations put into force by the Obama administration cut off federally guaranteed student loans to colleges if their graduates did not earn enough money to pay them off. That sent many for-profit colleges and universities into an economic tailspin because so many of their alumni were failing to find decent jobs. The Obama regulations — years in the making and the subject of a bitter fight that pulled in heavy hitters from both parties who backed the for-profit schools — also required such schools to advertise whether or not they met federal standards for job placement in promotional materials and to prospective students.”

Green continues, describing implications of  the Department’s plan to eliminate the “gainful employment rule”: “The move would punctuate a series of decisions to freeze, modify and now eliminate safeguards put in place after hundreds of for-profit colleges were accused of widespread fraud and subsequently collapsed, leaving their enrolled students with huge debts and no degrees. The failure of two mammoth chains, Corinthian Colleges and ITT Technical Institutes, capped years of complaints that some career-training colleges took advantage of veterans and other nontraditional students, using deceptive marketing and illegal recruitment practices.”

Green reports that the department would continue efforts by the Obama administration to make available some information about for-profit colleges, but far less than the Obama administration required, and the Department of Education would no longer enforce the rule by withholding federal loans: “The existing database, created under the Obama administration, includes such data for more than 7,000 institutions, but it does not include program-by-program success rates for such certificates as nursing assistance, cosmetology or auto maintenance, nor does it contain the detailed employment statistics that the gainful employment regulations targeted… (I)t would eliminate the powerful threat to withhold access to guaranteed student loans from colleges whose graduates cannot find the work to pay them back. Few higher-education institutions could survive without federal student aid.”

DeVos’s plans to reduce regulations of for-profit colleges and trade schools should not be surprising. Not only has DeVos continued to hire former administrators from the for-profit college sector as well as lobbyists for the sector, but from the beginning, DeVos has shown her intent to roll back efforts begun by the Obama administration to protect the tax investment in student loans and to protect students from predatory recruiting by for-profit colleges whose programs are so weak that their students have been unemployable.

The Washington Post’s Valerie Strauss quotes Connecticut Senator Chris Murphy, who, when presented with the new rule changes, wondered, “Why would anyone deliberately hurt students who have been screwed over by scam schools?”

2 thoughts on “New Rules Proposed by DeVos Would Reduce Student Loan Forgiveness, Favor For-Profit Colleges

  1. I wonder how many federal legislators and/or staffers have attended for-profit institutions of higher education or have needed federal loans to finance their children’s higher education. Not surprisingly, this direction is consistent with the beliefs of DeVos, her libertarian friends, and the prosperity gospel evangelists. While it is regrettable that there are those who would prey on the vulnerability of those most in need of continuing education and least able to afford it, it masks the deeper societal problem of… our continued unwillingness to confront the conditions which result in unequal access to such educational opportunities.

  2. Pingback: In Funny Column, Gail Collins Explains Sad Subject of DeVos’s Deregulation of For-Profit Colleges | janresseger

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