A department spokeswoman said Friday that the course of action has not been finalized. But two sources familiar with the matter, who spoke on the condition of anonymity because of its sensitivity, confirmed the plan to rescind the rule. The New York Times and Wall Street Journal reported the department’s plan Thursday evening.
Under the Obama-era rule, issued in October 2014, for-profit colleges face cutoff of federal funding if they fail to meet conditions that limit debt relative to income after students leave school. The rule aimed to ensure that graduates moved into gainful employment, not low-level jobs that fail to provide enough income to pay off student loans.
The Obama administration spent years battling for-profit colleges as it developed the rule. The industry mobilized to fight the crackdown on Capitol Hill and in the courts. Republicans in Congress denounced the rule as an executive branch overreach intended to hobble a sector of higher education that serves many low-income adults. But most congressional Democrats contended it was a win for consumers who are sometimes duped into enrolling in programs that yield no payoff.
When the final version was released, Arne Duncan, who was education secretary at the time, said the rule was necessary because “too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable.”
The rule covers programs at for-profit colleges and nondegree career programs at public and private nonprofit colleges. Nearly all programs in jeopardy of violations are at for-profit colleges.
The rule stipulates that loan payments for a typical graduate cannot exceed 20 percent of discretionary income or 8 percent of total earnings. Programs not meeting those benchmarks face warnings and sanctions. Repeated violations over a few years could lead them to be ineligible to participate in federal student aid, which could sound the death knell for schools that rely on students’ being able to obtain federal grants and loans.
The rule also requires schools to disclose more information on the likelihood of graduation and on former students’ earnings and debt.
The Trump administration’s plan represents a major victory for a sector battered by years of declining enrollment and the implosions of for-profit Corinthian Colleges and ITT Technical Institute. Tens of thousands of students were left in the lurch when those chains closed.
Nationwide, about 1.4 million students were enrolled in for-profit institutions in fall 2016, according to federal data, down 40 percent from the peak in 2010. Public colleges had 14.7 million students in 2016, while private, nonprofit colleges had 4.1 million.
Steve Gunderson, president and chief executive of the industry group Career Education Colleges and Universities, praised the pending reversal on the gainful-employment rule, saying the Trump administration was ending “an ideological assault on one sector of higher education.” He said the Obama administration had unfairly singled out for-profit colleges for punitive regulation. “We are happy to abide by any set of rules that are for all schools,” he said. “We don’t ask for any exceptions.”
Noting the sector’s recent woes, Gunderson said that “bad programs” had been closed and that the for-profit education sector overall was of a “much higher quality” than a decade ago.
But former Obama officials decried the plan. Century Foundation senior fellow Robert Shireman, who was a senior education official in Obama’s first term, said the Trump administration was abrogating its duty to protect students and taxpayers. He said schools that are run for profit will inevitably seek to take advantage of a government-funded market if they are not tightly controlled. “We’ve seen the evidence of this over and over,” Shireman said. “It will invite a return to the same predatory practices.”
James Kvaal, president of the Institute for College Access & Success, who served in the Obama White House and Education Department, said he was surprised that the Trump administration would rescind the rule entirely. “We thought they would maintain at least some kind of minimum standard,” he said.
This week, the Education Department proposed a replacement for another Obama-era regulation related to student loans. In that case, the department is proposing a version that makes it harder for students who say they were defrauded by a college or university to win a reprieve from paying back their federal loans.