Blog: Higher Ed Beat

Obama Ed Dept. Puts For-Profits on Notice, But Will Trump’s Follow Through?

With just days remaining in office, the Obama administration is still leaving its regulatory footprint, this time by releasing new data that show that nearly all of the career programs running afoul of federal student debt-to-earnings regulations are for-profit colleges. Scrutiny of the for-profit sector has been one of the signature drives of the Obama administration. How these institutions fare under President-elect Trump’s White House could be a key issue for the next four years.

As part of the U.S. Department of Education’s new ‘gainful employment’ rules, the administration on Monday published data on the ability of students to repay their debts after completing vocational programs. These new regulations threaten to cut off federal funding to programs in which students’ annual loan repayments exceed 30 percent of their discretionary income or 12 percent of their total income. According to the data released yesterday, 98 percent of the 802 programs that were sanctioned by the department were at for-profit colleges; the remaining 2 percent of failing programs belonged to private, nonprofit colleges, and none to community colleges.

Those roughly 800 programs graduated 116,000 students. Another 1,239 programs graduating almost 245,000 students fell into the “zone” range, meaning students who graduated from those had annual loan payments that were between 20 and 30 percent of discretionary income or between 8 and 12 percent of their total earnings.

The department evaluated 8,700 programs; more than 800,000 students completed programs that were considered “passing.”

The consequences for schools with sanctioned programs can be crippling. Programs deemed failing two out of three consecutive years become ineligible for federal financial aid, which particularly affects for-profit colleges because they rely heavily on their students’ ability to borrow federal loans and receive federal grants to stay in business.

Why should we care about this data? According to outgoing U.S. Education Secretary John B. King Jr., “Far too many hardworking students are graduating with certificates or degrees that have little or no value in the job market. And then they’re stuck with thousands of dollars of student loans with no way to repay them because they can’t find a good job.”

“When a student invests time, money to attend a college, they need to be confident that it is a sound investment in their future, not a liability that will further defer their dreams,” King added during a call with reporters on Thursday.

Ted Mitchell, under secretary of education, said that the regulations, which were finalized in 2014 and went into effect in 2015, have already led to voluntary higher standards. “As a result of the rules, some institutions have preemptively closed poor-performing programs to focus on programs with better outcomes for students.” As evidence, he points to the decline in the number of vocational programs in the U.S., dropping from 38,000 in 2014 to fewer than 29,000 today.

Some critics of for-profit schools were unimpressed. Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, told The Washington Post’s Danielle Douglas-Gabriel, “If the department took upfront gatekeeping more seriously, we wouldn’t have to wait for statistics on how many shoddy providers have been offering worthless programs at the students’ and taxpayers’ expense.”

Whether any of these regulations will continue in the Trump administration is an open question. During the call with reporters, Education Secretary John King Jr. wouldn’t comment on whether a Trump presidency would preserve these rules or how long it might take to reverse them. Republicans have been critical of the Obama White House’s efforts to regulate for-profit colleges, viewing the rules as arbitrary and a form of federal and executive overreach. The Wall Street Journal’s Josh Mitchell writes that for-profit college leaders share those views and argue that “many nonvocational programs –such as those in the liberal arts – would fail the metrics if the rules applied to them.” In fact, as Politico’s Michael Stratford observed, some programs at elite universities like Harvard and USC did fail the debt-to-earnings ratios. 

Ben Miller, senior director for postsecondary education at the liberal Center for American Progress, wrote in an email that any “executive changes to regulations would take a year- plus, raising the question of whether it’s really a good use of government resources to spend so much time just so lousy career programs could rip off more students.”

Nor could congressional Republicans use the suddenly popular Congressional Review Act to overturn the gainful employment rules. While other regulations authored by the Obama administration could be reversed by the Republican-led Congress, the CRA only applies to actions taken by the executive branch that were submitted within 60 days of the previous Congress’s adjournment. The gainful employment rules, explains the law firm Cooley LLP, fall outside that window.

The for-profit college sector made short shrift of the new data. Steve Gunderson, who heads the association that represents many for-profit colleges, said in a statement that the department’s “action today is disappointing and disrespectful” because it didn’t provide schools with 14 days to file a notice of appeal and 60 days to file the appeal. “The Department’s decision to publish a list of schools failing their initial calculations before the process is complete makes clear this is all about political motivations and harming institutions,” he was quoted as saying. David Halperin, a critic of the sector, wrote that the department did in fact follow the necessary guidelines for disclosing the data.