Today Alexis Goldstein of Americans for Financial Reform and I met with officials of the White House Office of Management and Budget and the Department of Education as part of the process of developing a Trump administration regulation that would repeal and replace the Obama administration’s gainful employment rule, which was aimed at protecting students against predatory for-profit colleges.  Here’s what I told them.

1. This issue is not primarily about regulation of the private sector; it’s about management of a government program. Many career colleges get 80%, 90%, or more of their revenue from federal taxpayers — through the Department of Education, Department of Veterans Affairs, and Department of Defense. The government has an obligation to protect against waste, fraud, and abuse, especially where so many students’ futures are at stake.  
2. There is overwhelming evidence that many for-profit and career schools have engaged and are engaging in deceptive and coercive recruiting and financial aid practices, that they’ve charged excessive prices, that they’ve under-spent on education and job placement, and that they’ve provided false information to government regulators.  
3. The Senate HELP committee found that more than half of the students enrolled in for-profit colleges dropped out within about four months. Seventy-two percent of for-profit college programs studied by the Department of Education produced graduates who on average earn less than high school dropouts. A recent study found that for-profit college students — graduates and dropouts alike — earn less after leaving school than they did before they enrolled.
4. The result for many students has been overwhelming debt, without an improvement in job prospects.
5. Many such poor-performing schools have in recent years been under investigation and sued by federal and state law enforcement agencies for deceptive practices. A few of those schools have shut down, but many remain in business. Industry claims that all the bad actors are gone are false.
6. The 2014 gainful employment rule was carefully crafted, was based on data, and was upheld by federal courts. Some school owners expressed legitimate concerns during past rule makings. But over five years the Department took those concerns into consideration, and I believe you ended up with rules that are more than fair to schools, rules that in fact are not as strong as they should be, but rules that do penalize some of the bad actors while rewarding colleges that actually help students train for careers.  The 2014 rule would save money for taxpayers by pushing the Department to remove from federal aid programs that leave students worse off than when they enrolled.
7. There are good reasons that the 2014 rule covered only career education and for-profit programs. First, the authority for the rule is a provision in the law that relates only to career and for-profit programs. Second, there was widespread evidence that many for-profit programs are leaving students with overwhelming debt, essentially destroying their financial futures, and student complaints about those programs massively outnumber complaints from other sectors.
8. From the Department of Education’s draft proposals and comments in the negotiated rulemaking meetings, it seems the administration is headed toward switching to a toothless rule, and doing so, as a Department official frankly acknowledged during the rulemaking, with no new data.
9. The Department’s proposed regulatory language would (a) dramatically weaken the standards for passing the gainful employment rule’s measures of excessive debt; and (b) eliminate serious penalties, including the penalty of removing programs from Title IV eligibility. Implementing a final rule along these lines would be abdication of the Department and the administration’s responsibility to administer the Higher Education Act and protect students and taxpayers.
10. In addition to my broad objections to the proposals offered by the Department, I want to specifically object to the proposed removal of for-profit graduate level programs from GE coverage. There is significant evidence that those programs require more oversight. For example, numerous grad students at Laureate’s Walden University are suing the company for alleged deceptions. Recent research by both Brookings and the Center for American Progress found that African-American students are much more likely to attend for-profit graduate schools than are other groups.
11. The Secretary’s delay, announced on Friday, for another full year of even the requirement that career and for-profit colleges tell students basic facts about their programs — costs of attending, loan repayment & default rates, earning of graduates — is one more sign of the Department’s disregard for the interests of students.
12. Replacing the 2014 rule with a toothless rule will reduce incentives for schools to offer quality programs at affordable prices; in fact, it will give the green light for predatory behavior, and we already are seeing evidence that career schools are resuming bad practices. As a result, many more students will enroll in programs that will ruin their financial futures, our economy will be harmed, and taxpayers will be paying for such destructive activity.
13. The students who suffer, as before, will be veterans, single mothers, people of color, and the forgotten Americans President Trump promised to fight for. Many will be tricked into giving their contact information to recruiters by web sites promising jobs or offering fake college rankings and matchmaking systems that are in fact pay-to-play scams. Many will enroll because of false promises about the selectivity of the school, the urgency of enrolling immediately, the cost of attending, transferability of credits, job placement, starting salaries, and the value of the degree in obtaining jobs requiring professional licensure. Even if these students graduate — and many don’t — and even if they get the job they dreamed of — and many won’t — they may not earn enough to pay down their loans, because the tuition was just too high. That is the problem the 2014 GE rule addressed, and that is the problem that the Department’s proposals this year fail to address.
14. The Department announced in January 2017 that about 800 programs failed the GE test — less than 10 percent of all GE programs. Many of schools that flunked also have been the subject of federal and state law enforcement investigations — EDMC (the Art Institutes), Career Education Corp. (Sanford Brown), Kaplan University, Brightwood (formerly Kaplan College), ITT Tech, University of Phoenix, Everest, Globe University, Marinello School of Beauty, Vatterott, Westwood, and more — indicating that the rule is on the right track; fraudulent schools are often bad value for students, and that’s why they engage in deception.
15. Even if a college’s programs are good quality, and even if the operators aren’t intentionally deceiving students or the government, the results for students can be bad — if, for example, tuition is too high in proportion to the expected salaries of graduates, or if the school habitually admits many students who are unlikely to benefit from the program and end up dropping out or not getting a job. The 2014 GE rule finds and penalizes programs that produce bad outcomes for students and taxpayers. It’s better policy to protect students and taxpayers than to protect well-meaning, but ineffective programs. The schools have no entitlement to taxpayer dollars except to the extent they are helping students.
16. During a break in one of the GE rulemaking meetings, one lobbyist for a chain of for-profit schools acknowledged to me that ultimately all his schools were able to comply with the 2014 rule, but he said that the compliance efforts cost perhaps $500,000. That sounded like a lot of money, until I remembered that I know many for-profit college students, from low-income backgrounds, who ended up with $125,000 or more in student loan debt after obtaining degrees that haven’t helped them a bit. They’ve been paying down these loans, and they’re broke. The for-profit colleges got $125,000 each time.
17. Finally, the process for both the GE rule and the borrower defense rule have been tainted with improper conflicts of interest by the participation of Department of Education officials and Department-selected negotiators who have worked or still work for some of the same predatory for-profit colleges whose misconduct created the need for stronger accountability measures. These individuals include Department officials Robert Eitel (Bridgepoint Education, Career Education Corp.) and Diane Auer Jones (Career Education Corp., Center for Excellence in Higher Education, the trade association CECU), and negotiators Linda Rawles (Bridgepoint), Sandy Sarge (Alta Colleges), Aaron Lacey (Vatterott College), Greg Jones (Compass Rose Foundation), and Jennifer Blum (Laureate Education).
18. I urge you to end this regulatory process and enforce the gainful employment and borrower defense rules already in place.