Advocacy Groups Pan DeVos Rollback of For-profit College Regulations

Several advocacy groups on Wednesday assailed a U.S. Department of Education plan to roll back a pair of Obama administration regulations meant to protect students from shady colleges that leave students saddled with debt and little to nothing to show for it.

U.S. Secretary of Education Besty DeVos

They used words such as “terrible,” “toxic,” “irresponsible” and “worrisome” to lambaste Wednesday’s announcement from U.S. Secretary of Education Besty DeVos that her department plans to set up two negotiated rulemaking committees to produce new versions of the so-called “borrower defense” and “gainful employment” regulations.

In anticipation of the criticism, the Education Department sought to assure interested parties Wednesday that it intends to develop “fair, effective and improved regulations to protect individual borrowers from fraud, ensure accountability across institutions of higher education and protect taxpayers.”

“My first priority is to protect students,” DeVos said in a statement. “Fraud, especially fraud committed by a school, is simply unacceptable.”

But DeVos added that the Obama administration “missed an opportunity to get it right” and ended up establishing a “muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.”

“It’s time for a regulatory reset,” DeVos said. “It is the Department’s aim, and this Administration’s commitment, to protect students from predatory practices while also providing clear, fair and balanced rules for colleges and universities to follow.”

Some advocacy groups invested little stock in DeVos’s assurances.

The education secretary’s critics included her most recent predecessor, John B. King, Jr., president of The Education Trust, a DC-based nonprofit that advocates on behalf of low-income students and students of color.

King called the department’s decision to revise the gainful employment and borrower defense rules — and to delay the implementation of the existing borrower defense rule — “deeply worrisome and wrong.”

“These rules were put in place to protect taxpayers and students — particularly low-income students and students of color — who are most likely to be taken advantage of by unscrupulous institutions,” said King, who served as secretary of education during the tail-end of the Obama administration.  “This action indicates, yet again, that this department is abdicating its responsibility to students and taxpayers,” King said.

Under the gainful employment regulation, for-profit programs and certificate programs at private non-profit and public institutions would have been at risk of losing their ability to participate in federal student aid programs — a crucial source of revenue — if their graduates’ annual loan payments exceeded 20 percent of their discretionary income or eight percent of their total earnings. Representatives of the for-profit sector have complained that the rule unfairly targets their sector.

Under the borrower defense regulation, which would have gone into effect July 1, student loan borrowers would be eligible for forgiveness of their federal student loans if they were used to attend a school that defrauded them.

The department’s statement Wednesday indicated that it would postpone the borrower defense regulation due to a pending court case in which a group of California for-profit colleges sued to block the regulation.

However, DeVos’ statement also indicated that current claims will go forward.

“While negotiated rulemaking occurs, the Department will continue to process applications under the current borrower defense rules,” the statement said. Negotiated rulemaking is establishing a committee of experts and seeking input from stakeholders to rewrite regulations.

“Nearly 16,000 borrower defense claims are currently being processed by the Department, and, as I have said all along, promises made to students under the current rule will be promises kept,” DeVos said. “We are working with servicers to get these loans discharged as expeditiously as possible. Some borrowers should expect to obtain discharges within the next several weeks.”

Pauline Abernathy, executive vice president at The Institute for College Access & Success, or TICAS, an Oakland, California-based advocacy group, called the department’s plans to revise the gainful employment and borrower defense rules as “terrible news for students, taxpayers, and anyone concerned about rising student debt.”

“This irresponsible action will rightly be challenged in court,” Abernathy said, citing a statement from Massachusetts Attorney General Maura Healey regarding her intent to sue DeVos and the Department of Education for “abandoning federal regulations that protect students victimized by for-profit schools.”

Abernathy added that if the Administration were serious about helping harmed students and protecting students from predatory practices, it would implement the borrower defense and gainful employment regulations without delay and act on the tens of thousands of pending loan discharge applications, “not dismantling current protections and committing to follow through only on the 16,000 applications approved by the Obama Administration.”

Others also raised questions about the department’s decision to postpone enforcement of the borrower defense regulation and possibly the gainful employment regulation while it is rewritten.          “We certainly have no objection to good-faith efforts to improve the regulatory framework and strengthen protections for students and taxpayers,” said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities.

“The ideal way to do that would be to leave the two regulations in question in place as the department works on perfecting its alternative versions of them,” Nassirian said. “Hitting the pause button on borrower defenses is quite unfortunate because it leaves tens of thousands of defrauded former students in limbo for at least another two years.”

Nassirian said he was also concerned about how the department plans to enforce the existent gainful employment rule as it convenes a negotiated rulemaking committee to rewrite the rule. The department did not respond to a request for clarification on whether it would enforce the current gainful employment regulation as it initiates the negotiated rulemaking to rewrite it.

“Any significant delays or enforcement retreat from that regulation would allow predatory programs to operate with impunity pending the adoption of whatever alternative may emerge from this process,” Nassirian said.

Kelly McManus, government affairs director at the Education Trust, expressed similar concerns.

“The best-case scenario would be if the rule-making process uses the current rules as a floor and strengthens the rule,” McManus said. “But every signal we’ve seen from this Department is that they are looking to weaken the rules that hold institutions accountable for how they serve students.”

Steve Gunderson, president and CEO of Career Education Colleges and Universities, which represents the for-profit college sector, had no problem with the department’s move to delay borrower defense and to reopen the negotiated rulemaking process on both borrower defense and gain employment.

“We commend the Department for moving forward to begin conversations that will really protect students from academic fraud,” Gunderson said. “Our sector has consistently supported this premise.  Unfortunately, the Obama Department of Education chose to use this basic concept as a vehicle to continue their ideological assault on our sector’s very existence.”

Gunderson said the gainful employment regulation in its current form “hurt students by denying access and by defining success in dramatically different terms depending upon the location of that student’s school.”

“We look forward to working constructively to identify ways to provide students with the information they need on occupational incomes and program costs in ways that enable them to make the right decisions for their career,” Gunderson said.

Others had a more balanced and restrained response without any commendations or criticisms.

“We take the Secretary at her word that the Department is interested in renegotiating these regulations in good faith to ensure adequate protections for borrowers while balancing fair accountability standards for colleges,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators, or NASFAA.

“We have several questions regarding the regulations currently on the books that we will be sending to the Department of Education in the near future,” Draeger said. “The financial aid community plans to be active participants in these upcoming regulatory processes.”

Jamaal Abdul-Alim can be reached at [email protected] or you can follow him on Twitter @dcwriter360.