Because of the high investment and low returns of this program, the Education Department in January said it failed accountability standards under the gainful-employment rule, and risked losing federal student aid funding. But now that the Trump administration has given schools like McCann more time to appeal their reviews, advocacy groups worry that career-training programs with poor outcomes will endure to the detriment of students.
On Wednesday, a coalition of 53 advocacy groups sent a letter urging Congress to uphold gainful, student-debt-forgiveness rules and other regulations to prevent waste, fraud and abuse in higher education. They fear that the Trump administration will gut rules like borrower defense to repayment, a statute that wipes away federal loans if a school used illegal or deceptive tactics to persuade students to borrow money for college. They’re also concerned the administration may relax the ban on incentive compensation that discourages colleges from steering students into loans to boost revenue.
“Each of these accountability measures is essential to protecting students and taxpayers from sudden school closures and other misconduct by unscrupulous colleges, and to maintaining the integrity of our federal aid program,” the coalition wrote. “Protections for students and taxpayers should be strengthened, not scaled back.”
The letter arrives two weeks after Lynn Mahaffie, the acting assistant secretary for postsecondary education, announced a three-month delay in the implementation of the gainful employment rule. The controversial regulation threatens to withhold federal student aid from vocational programs whose graduates consistently end up with more debt than they can repay.
Mahaffie has given schools more time to appeal the earnings data and to comply with the disclosure requirements of the rule. She said the decision was being made “to allow the department to further review the GE regulations and their implementation.” The action, however, has signaled that the Trump administration may relax enforcement to the benefit of for-profit colleges, which have argued that the rule unfairly targets their sector.
A program is considered to lead to “gainful employment” if the annual loan payment of a typical graduate does not exceed 20 percent of their discretionary income or 8 percent of their total earnings. Exceeding those debt-to-earnings rates means possible expulsion from the federal student aid program. Eight hundred of the 8,700 programs reviewed by education officials failed to meet the thresholds. Ninety-eight percent of those programs are offered by for-profit colleges, while the remaining 2 percent are at private nonprofit schools, such as Harvard University.
The government will cut off federal student aid to any program that fails twice in three consecutive years or teeters on the line for failure for four consecutive years. Failing programs are supposed to notify students that they are at risk for losing access to federal loans and grants.
“The mere threat of sanctions under this rule prompted many colleges to eliminate their worst performing programs, to freeze tuition and implement other reforms to improve outcomes for their graduates,” the coalition wrote.
The group highlights the dismal outcomes of the medical assisting program at McCann as an example of a failing program that would have remained under the radar were it not for the gainful employment rule. They argue that “delaying, weakening or repealing the rule would lead … unscrupulous schools to enroll as many students as possible without regard to the quality of the training, the student’s preparation or the job prospects.”
Some higher education experts are concerned that Education Secretary Betsy DeVos’s ties to for-profit colleges might influence her actions regarding the sector. During her ethics review, DeVos disclosed a financial stake in Apollo Investment Corp., which has money in Delta Educational Systems, a company that operates McCann and other for-profit schools.
The Center for American Progress has noted that Delta has 40 programs at risk of losing access to federal student aid based on the results of the first debt-to-earnings review under the gainful employment rule. Sixteen of those programs failed, while the remaining 24 received a “zone” rating because of a high number of graduates with unsustainable debt. Delta declined to comment for this article.
Before taking the helm at the Education Department, DeVos agreed to divest from the assets identified in her ethics agreement to avoid any conflicts of interest, according to the department. Ben Miller, senior director for postsecondary education at CAP, said those investments still matter because they raise questions about how she might make decisions.
“Even if she divested all her Apollo holdings she presumably still knows people at that company,” he said. “When they call and ask for a favor does she follow prudent policy or help someone who maybe made her a bunch of money in the past?”
Education officials say no decisions have been made to roll back any regulations.
Rules governing the discharge of student loans are finalized and take effect in July, but the Trump administration could push back the date. Some Republican lawmakers have said they plan to use the Congressional Review Act to rescind the Obama administration’s overhaul of the borrower defense rule but have yet to take action.
Dismantling the gainful employment regulation, which is already in effect, would mean going through a lengthy rulemaking process. But the Education Department can choose not to enforce the rule, which is exactly what advocates say is happening now.
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