Editor’s note: An earlier version of this perspective piece contained a reference to Ashford University. The university disputes its accuracy, and neither the authors nor The Washington Post has conducted independent reporting on the matter. Therefore, the reference has been removed.
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Education Secretary Betsy DeVos has repealed the gainful employment rule, which requires career colleges to ensure that their graduates can afford to repay their loans. Any program that leaves most students with unaffordable debts, relative to their earnings, must either improve its value proposition or lose eligibility for federal student aid.
Although the Trump administration finalized the repeal on Friday, it will be published in the Federal Register on Monday.
DeVos believes that students should be free to make their own choices. She also argues that the rule discriminates against the for-profit colleges that offer many career programs because it does not apply to all colleges.
That’s a mistake. Minimum standards have actually driven career colleges to improve. They protect hundreds of thousands of students from unaffordable debts and – because some of these colleges are more than 90 percent federally funded – save taxpayers billions.
When the Obama administration proposed the so-called gainful employment rule a decade ago, some for-profit colleges were earning huge profits without serving students well. Half of students attending for-profit colleges would later default, with the disproportionate share of them black and Latino. Among those who defaulted were many veterans.
Journalists and congressional investigators went undercover to record widespread high-pressure, misleading and sometimes fraudulent recruiting practices. The Art Institute of Pittsburgh recruited a veteran who suffered a traumatic brain injury in Iraq and then denied him tutoring.
Back then, it was hard to know how widespread the problems were. Many insisted that most career colleges were a good investment. However, now that the rule is in place, data that the Department of Education publishes on students’ debts and earnings validates that while some programs are good bets, many are not.
More than 350,000 students graduated from the worst-performing programs with debts they are unlikely to repay. About 170,000 attended programs where most graduates earn less than the full-time minimum wage.
On average, students seeking occupational certificates at for-profit colleges earn wage gains so small that – after loan payments – they are worse off than if they had never enrolled at all, according to Stephanie Cellini of George Washington University and Nicholas Turner of the Federal Reserve Bank.
Sometimes there are big differences even among for-profit colleges offering the same program in the same city. In Birmingham, for example, a typical graduate of Strayer University’s master’s degree program in business earned $49,100 a year and owed $26,600 in debt. But Virginia College graduates in a similar program earned $16,700 less and owed $6,400 more.
The fight against colleges profiting from unaffordable debts sparked one of the most intense lobbying fights of the past decade. But even as the debate raged in Congress, colleges across the country sought to improve the value they offered students. Schools cut tuition, increased scholarships and introduced free trial periods.
According to one investment analyst in 2012, “successful for-profit schools will focus on improving value propositions by increasing transparency, retention, completion (and reducing time to completion), and employment prospects for students.” Another noted “substantial changes,” including “new program offerings, changing tuition, reducing the duration of programs, and even more dramatic steps including the closure of poorly performing campusesas
No wonder that four economists wrote in a Brookings Institution report that “the case for these rules is even stronger today than when the rules were written.”
For more than two years, though, the Trump administration has refused to carry out the rule, even though it carries the force of law. Now, at last, they are repealing it, effective immediately.
But the story is not over. Agencies must have a rational basis for their actions, and this one misrepresents or ignores a substantial body of experience and research. Soon it may be another in DeVos’s growing string of losses in court.
Congress will also have a say. Many Democrats are stalwart supporters of employment standards. Republicans are not, but some – like Sen. Lamar Alexander of Tennessee – believe in principle that colleges should be held accountable for leaving students worse off than they were before.
With continuing uncertainty over federal quality standards, investors would be wise to ill avoid repeating the cycle of the gold rushes into low-quality for-profit education.
Student loans can open up new opportunities for college and a better life, but – at the wrong college – they can become an albatross. The gainful employment rule has proven if we set higher standards for career colleges, they can offer students a better deal.
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Kvaal was an education adviser for President Barack Obama. Duncan was secretary of education.