Given Donald Trump’s campaign promises to wipe out “job killing” regulations on Day One, no one should be surprised that the Trump administration is going after federal safeguards that protect consumers at the expense of corporate profits.
But surely there’s some limit to that. Even the leaders of a wholly dysfunctional administration must recognize that fraud is fraud. Out-and-out cheating, lying to potential customers, isn’t just unethical. It’s illegal. And the worst fraud in the higher education world during recent decades has been perpetrated by for-profit colleges that grossly overstate their graduates’ ability to land good jobs, that talked students into applying for loans they would almost certainly be unable to repay and that bamboozled them into signing away their right to sue should they discover how dishonestly they had been treated.
Nevertheless, in mid-June, Education Secretary Betsy DeVos announced that she was holding off on implementing two key Obama-era rules designed to prevent colleges from luring students into unaffordably large loans and to provide loan-repayment relief to students who had been defrauded by bad school operators. DeVos said the regulations might be too burdensome for the colleges, and she wanted to look into creating new rules. Last week 19 attorneys general, sued, arguing that the administration lacked the authority to unilaterally put the brakes on the regulations, and aiming to force DeVos to make good on what students had been promised.
These colleges’ practices have been costly to taxpayers as well as to students, with default rates on federally guaranteed student loans that were sky-high compared with those at other schools.
These colleges’ practices have been costly to taxpayers as well as to students, with default rates on federally guaranteed student loans that were sky-high compared with those at other schools. That’s what happens when pricey institutions draw in low-income students who then can’t find the jobs that have been rosily dangled in front of them.
Corinthian Colleges closed in 2015 after the Education Department fined it $30 million for exaggerating job-placement rates, including by paying employers to hire graduates for just a few days so that they could be listed as having gotten jobs. ITT Technical Institutes closed in 2016 after the department said it no longer would provide federal financial aid to the school’s students, after allegations emerged that ITT was misrepresenting its graduates’ job-placement rates and providing a substandard education.
And then the federal government began the process of cleaning up the mess left behind. The “borrower defense to repayment” rule, which was scheduled to take effect July 1, would allow defrauded students to apply to have their federal loans forgiven. It also would prohibit colleges from forcing students into binding arbitration in lieu of filing suit. DeVos put that rule on hold, as well as announcing that she would delay implementation of provisions of the “gainful employment” rule that requires colleges to show that their graduates generally earn enough to pay back their student loans. If colleges can’t meet that reasonable standard, their students could lose access to federal student aid, which would in effect lead to the closure of many for-profit trade schools; federal loans make up the bulk of their income.
16,000 Number of students who already have filed claims for loan relief (after the collapse of Corinthian and ITT)
DeVos has promised that the 16,000 students who already have filed claims for loan relief (after the collapse of Corinthian and ITT) will have their cases decided under the old rule. But the delays she announced would put off protections for anyone else until at least 2019, because of the time required for hearings and public comment.
It’s of course reasonable for DeVos to review the regulations inherited by her from the previous administration. There have been complaints from colleges, for example, that the borrower-defense rule makes it easy for students to claim fraud where none had occurred. But the administration’s deregulatory zeal seems to have blinded it to federal law, which ordinarily requires agencies to go through just as open and evidence-based a process to change a rule as to create one.
Responsible for-profit colleges should support strong, protective rules; the reputation of the industry as a whole has fallen under the shadow of its worst members. Leaving the public with no protection from the predatory players within the college industry – and leaving taxpayers to pick up the tab for the loan defaults that would inevitably follow – would be the higher education equivalent of repealing Obamacare and leaving Americans with no insurance at all.