Anu Roy-Chaudhury is an editorial intern at The American Prospect.
By Anu Roy-Chaudhury | Jul 17, 2019
The higher education system is broken, but instead of fixing it, the Department of Education is intent on breaking it even more.
The gainful employment rule was an Obama-era regulation that protected against the predatory loan practices of for-profit colleges by monitoring their students’ ability to earn back their debt after graduation. Last week, the Department of Education repealed it, the culmination of their years-long attempt to free for-profit colleges from what Betsy DeVos deemed as unfair targeting of for-profit institutions by Democrats. The rule was simple, it made sure students were able to pay off their loans after graduation, and kept the quality of an education in check with its cost. Now, DeVos has stripped that protection, and allowed for-profit colleges to slip back into their deceptive and fraudulent behaviors, with the potential to worsen an already dire student-debt crisis. Since the Department of Education has enabled for-profit educational institutions to take advantage of students, policymakers need to put more permanent measures in place to protect them.
The 2014 regulation required vocational programs at for-profit colleges and non-degree programs at community colleges to meet a minimum threshold of student debt-to-income standards. If they failed, the institutions lost their federal aid, which was how the majority stayed afloat in the first place. The rule was termed gainful employment, a reference to Title IV of the Higher Education Act that requires non-profit institutions to lead to “gainful employment in a recognized occupation” to be eligible for federal funds. Gainful employment then, was already part of the Higher Education Act and the Obama administration created the needed criteria to fully implement it. When the first ratings were released nearly 98 percent of the institutions that did not meet the threshold were for-profit institutions. While DeVos and Republicans argue the exclusion of non-vocational programs from the regulation as targeting, the data don't lie; for-profit institutions take advantage of students and ill-prepare them for their future. The regulation served as a needed consumer protection, protecting a vital good—an education.
The for-profit college industry has a history of corruption and without a gainful employment rule, their predatory practices will thrive. Since 2000, the number of for-profit institutions grew extensively, grounded by an influx of federal funding. But compared to community colleges and public institutions, degree programs at for-profit colleges are five to six times the cost while their students have consistently worse career outcomes, with post-graduate earnings 11 percent lower. This creates a vicious cycle of students taking out loans and then being unable to pay them back. Indeed, while for-profit colleges make up only 10 percent of higher education students, they account for 50 percent of student loan defaults.
Financial disclosures from for-profit and vocational institutions showed one in ten graduates attended programs that failed to meet gainful employment criteria. More, 28 percent of those students were concentrated at three places: the University of Phoenix, ITT Technical Institute, and the Art Institute of Phoenix. For ITT Tech, a giant in the for-profit college industry, the gainful employment rule led to its rightful demise.
These institutions don’t just take financial advantage of students, they capitalize on racial inequality and target minority populations. Blacks and Latinos make up over half of those who attend for-profit colleges, often times a result of strategic and deceptive targeting; Corinthian College, before it too closed its doors, spent over $600,000 on advertising on the BET channel alone. Women with children are also often appealed to with promises of short degree programs and online courses that fit their lifestyle as parents, as Whitney Barkley-Denney, Senior Policy Counsel with the Center for Responsible Lending told me. In reality, these institutions set already vulnerable students up to fail and then reap the benefits.
Since DeVos’s appointment in 2016, the Department of Education began to reverse accountability measures and delayed implementation of the rule as they reworked it. In addition, the Department of Education shut down the investigation unit tasked with looking into institutions that had a history of fraud. DeVos’s close relationship with the for-profit industry giants and lobbyists, make her actions unsurprising but nonetheless urgent. While the Department of Education continues to deregulate higher education at the expense of students, other government actors need to step in.
On June 26, Representatives Susie Lee and Rosa DeLauro introduced the PROTECT Students Act, the House version of a Senate bill that codifies gainful employment into law. The bill proposes new regulatory measures including the creation of a For-profit Education Oversight Coordination Committee. Legislation like this can make up for the failure of the Trump administration and establish permanent safeguards, not ones that fluctuate with each administration’s politics. DeVos and the Department of Education have done everything in their power to jettison protections that ensure students across the country are able to get an affordable education and stable employment, exacerbating an already broken system that congressional action needs to counter.