This Summer Betsy DeVos Quietly Repealed the “Gainful Employment Rule” on For-Profit Colleges and Trade Schools

This summer, while we’ve been reading about candidates running for President in 2020, the tragedy of mass shootings, and the Jeffrey Epstein scandal, deregulation has been perking along at the U.S. Department of Education, even though Betsy DeVos has managed to stay out of the spotlight.  Right at the end of June, DeVos and her staff moved along their agenda to deregulate for-profit colleges and trade schools by eliminating an important Obama-era rule. On Friday, June 28, they repealed what has been known as the “gainful employment rule.”

The Associated Press’s Collin Binkley reports: “The agency’s announcement said the rule focused too narrowly on graduate earnings and unfairly targeted for-profit colleges.”

What was the “gainful employment rule”?  Concerned that the federal government was bankrolling—with student grants and loans—shoddy career training programs that left graduates deeply in debt and unqualified to get a job, the Obama Department of Education created a rule to deny federal financial aid to these institutions unless they proved their programs were well enough designed to provide their students the skills that would make them employable upon graduation.

The NY Times’ Erica Green explains: “The so-called gainful employment rule was issued by the Obama administration in 2014 right before huge for-profit chains collapsed, leaving students stranded with debt and worthless degrees. Under the new standards, career and certificate programs, many of which operate in the for-profit sector, would have to prove their graduates could find gainful employment to maintain access to federal financial aid.  It also would have required schools to disclose in advertisements a comparison of the student debt load of their graduates and their career earnings.”

The Washington Post‘s Danielle Douglas-Gabriel reports that the rule has motivated the for-profit higher education sector to clean up its act: “Shortly after the rule took effect, many colleges eliminated their worst-performing programs, froze tuition, and instituted other reforms to improve graduate outcomes.  Without the threat of sanctions, supporters of the regulation say there will be no accountability.  Accountability, they say, is critical after the implosions of for-profit Corinthian Colleges and ITT Technical Institute. The closure of those chains, felled by charges of lying about job placement and graduation rates, resulted in hundreds of millions of dollars in taxpayer-funded loan forgiveness.”

But committed on principle to deregulation, Betsy DeVos and her appointees in the U.S. Department of Education have never enforced the “gainful employment rule” and have done everything they could to get rid of it.  Douglas-Gabriel explains: “DeVos delayed enforcement of key provisions of the regulation, then suspended the rule, then proposed a rewrite, before deciding to rescind it…. She said the delays were necessary in light of a federal lawsuit brought by an association of for-profit cosmetology schools seeking exemption.  But her actions spawned a series of lawsuits, including one filed by a coalition of 18 Democratic state attorneys-general… Although the rule covers vocational education at a variety of institutions, for-profit colleges voiced the loudest objections because a number of their programs were at risk.  When the Obama administration issued the rule in October 2014, it had identified 1,400 programs serving 840,000 students that would not meet its accountability standards; 99 percent of them were at for-profit colleges.”

DeVos and her staff argue that replacing regulation with marketplace transparency will protect prospective students. While the for-profits aggressively market their programs, the Department of Education has launched a website filled with data about various institutions—information for students shopping for a training program. Green explains: “Education Department officials have argued that transparency, not regulation, is the best way to hold all schools—public nonprofits, community colleges and for-profits—accountable for their results. Instead of any accountability measures, it promised to expand an existing database, called the College Scorecard, to provide information on student debt and earning prospects. The database, which provides information, including loan debt information, for 2,100 certificate granting programs was unveiled last month.”

Many for-profit colleges and certificate programs depend for the bulk of their operating expenses on students bringing federal grants or federally guaranteed student loans.  Binkley quotes Aaron Ament, president of the National Student Legal Defense Network: “Scrapping these common sense regulations will lead to students racking up debt for worthless degrees, while DeVos props up failing and predatory schools with billions of dollars from taxpayers… There is simply no sound rationale for eliminating these important protections.”

Green quotes the chair of the House Education Committee, Rep. Robert Scott, who said DeVos’s move to repeal the regulation will “prop up low-quality, for profit colleges at the expense of students and taxpayers.”

The repeal of the “gainful employment rule” is complete, but because the Department of Education missed a deadline in its repeal process, the regulation will, according to Douglas-Gabriel, “remain on the books until July 2020.”

You might ask for documentation that for-profit colleges soak up the bulk of federal loans and grants and for proof that students at these schools accrue unreasonable debts compared to other college students.   Politico’s Benjamin Wermund reports the U.S. Department of Education’s own numbers: “The number of students graduating from for-profit colleges rose from 4.6 percent of all students in 2008 to 6 percent in 2016.  Nearly 85 percent of them borrowed to attend, compared to 65 percent of students who graduated from public colleges and 69 percent who attended private nonprofits. For-profit graduates borrowed much more than their peers—$43,600 on average, compared to $27,900 borrowed by public school grads and $32,500 by private nonprofit graduates.”

And the for-profits are almost completely dependent on federal grants and loans. In her 2014 book, Degrees of Inequality, Cornell University’s Suzanne Mettler explains: “Defenders of for-profit universities champion them as belonging to the private sector, but in recent years as in the past, they receive nearly all of their revenues from the U.S. federal government… Notably these institutions, with only one exception, earned between 60.8 and 85.9 percent of their total revenues in 2010 from Title IV of the Higher Education Act, meaning predominantly student loans and Pell grants. The Apollo Group, owner of the University of Phoenix, gained between 85 and 88 percent of its income from these sources in each of the past three years. Most received an additional 2 to 5 percent from military educational programs, including the Post-9/11 GI Bill.  The sum of these federal government funds added up, as a portion of all revenues collected, to a minimum of 65.8 percent for ITT and a maximum of 93.7 percent for Bridgepoint. In short, the for-profit schools are almost entirely subsidized by government.” (Degrees of Inequality, p. 168)

2 thoughts on “This Summer Betsy DeVos Quietly Repealed the “Gainful Employment Rule” on For-Profit Colleges and Trade Schools

  1. The term “for profit” says so much. We have demonstrated throughout our history that, without regulation, the quest for profits – i.e., the reason for being for for-profit businesses — are both unwilling and unable to self-regulate. This is particularly onerous when the business involves the decision to use people directly as commodities and profit centers. We are seeing this in the misuse of the for-profit charter school business model and the for-profit trade/professional prep programs you highlight here. It is one of the reasons why people refer to our current economic system as predatory capitalism.

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