Before he became president, Donald Trump lent his name to a for-profit fake university that paid $25 million in compensation for abusing its customers. So perhaps we shouldn’t be surprised his administration gives similarly fraudulent operators a pass. That’s exactly what happened on Wednesday, when Betsy DeVos announced a postponement and imminent rewriting of two key rules designed to protect students of predatory for-profit colleges.
The Gainful Employment rule and the Borrower Defense rule both force for-profits to make good on their promises of helping students pursue a viable career path, and provide students a way to cancel their debt if the college actually defrauded them. The Gainful Employment rule has already been working to identify what colleges and universities fall short of delivering a quality, useful education; the Borrower Defense rule was set to go into effect July 1.
DeVos’s announcement postpones the effective date for the Borrower Defense rule, and sets up negotiated rule-making committees to revamp both regulations. As Pauline Abernathy with the Institute for College Access and Success notes, “Today’s action by the Trump Administration will be cheered by for-profit colleges and Wall Street but is terrible news for students, taxpayers, and anyone concerned about rising student debt.”
The concept of the Gainful Employment rule is simple: No school that doesn’t prepare its students to succeed should be able to access federal financial-aid dollars. Finalized in 2014, the rule assesses the after-graduation results of career college programs, either from for-profits or certificate programs at public and private universities. If the typical graduate’s loan payment exceeds 20 percent of discretionary income or 8 percent of total earnings, then they did not receive an education setting them up for “gainful employment” under the rule. It also required institutions to publish accurate information about graduation rates, average debt, and expected earnings. If career programs failed the gainful-employment rule, they would be restricted from having their students use federal student loans.
The first set of data released under this rule in January, before Trump’s inauguration, found that 800 programs serving hundreds of thousands of students were out of compliance. Approximately 98 percent of those failing programs were from for-profit colleges. Because for-profits survive on federal student loans—which make up almost 90 percent of their revenue—the regulation is an extremely effective way to put unsuccessful or even predatory for-profits out of business.