President Joe Biden’s Education Department is doubling down on its defense of a for-profit college giveaway made by Trump Education Secretary Betsy DeVos that allowed these businesses to continue ripping off students, contributing to the growing student debt crisis.
During the Trump years, one of the most consequential of DeVos’s many gifts to the for-profit college industry was the repeal of an Obama-era rule that required schools that wanted to participate in federal student loan programs to prove that their graduates could find good enough jobs to pay off their student debt.
The Obama administration rule was designed to crack down on predatory career and certificate programs, about a third of which are for-profit institutions, that often leave students with high debt and poor job prospects.
Under the rule, these institutions had to disclose information about how much their graduates typically earned versus how much debt they held upon graduation. If schools did not prove that their students could find “gainful employment” upon graduation adequate to pay off their debt, the institutions could be cut off from the federal student loan program — which for-profit schools rely on to survive.
After DeVos repealed the rule in 2019, the American Federation of Teachers and the California Federation of Teachers sued, along with two teachers who are members of both unions, arguing that the repeal was illegal. (The unions have been removed from the lawsuit, so now only the individuals are listed as plaintiffs.)
When Biden took office, the lawsuit was ongoing. Last fall, his Education Department moved to defend DeVos’s repeal of the rule against the suit.
Ahead of a hearing in the case next month, the Biden administration argued in a recent brief that reverting to the Obama rule would be “disruptive” to the Education Department, students, and vocational programs.
Instead of reinstating the Obama rule, which had gone through a lengthy rulemaking process and survived multiple legal challenges, the Biden Education Department has pushed to leave the DeVos repeal in place while crafting an entirely new rule. That rulemaking process has been slow, so a new rule wouldn’t come into effect until July 2023 at the earliest, and more likely not until the following year.
“In the meantime, you have cohorts and cohorts of students going through these programs and getting stuck in the situation that the rule says is unacceptable: way too much debt, way too little earnings,” said Eileen Connor, director of the Project on Predatory Student Lending, who co-filed an amicus brief in the case calling upon the Education Department to abandon the DeVos rule.
Her amicus brief cited Education Department data which shows that hundreds of thousands of students will likely go through for-profit programs that don’t meet the gainful employment standards set out in the Obama rule, taking out billions of dollars of federal loans, while a new rule is being written.
An Education Department spokesperson defended the agency’s current approach, saying, “The regulatory process will produce the best, most durable rule to protect students.”
As for-profit schools continue to drive the student debt crisis, the Biden administration has dragged its feet on implementing rules that could protect students against predatory institutions. More than a year into Biden’s presidency, his Education Department is still defending the move by DeVos to repeal the Obama administration’s “gainful employment” rule.
Higher education institutions must meet basic standards in order to be eligible for federal student loans. Those standards are spelled out in the Higher Education Act, and include the stipulation that such institutions must “prepare students for gainful employment in a recognized occupation.”
Until 2014, the term “gainful employment” had not been defined, making it impossible to withhold student loans from career and certificate programs whose graduates were failing to secure suitable jobs to pay off their loans.
That year, the Obama administration finalized a gainful employment rule requiring institutions where the average student’s debt was more than 8 percent of their earnings or more then 20 percent of their disposable income to make changes to their programs if they wanted to continue receiving federal student aid.
The rule was criticized by consumer advocates for only looking at students who had graduated from the institutions, and not those who had dropped out. But it was effective enough that for-profit colleges challenged it in court, leading to the rule being upheld by two separate federal district courts and a circuit court.
In 2017, the first and only set of gainful employment data was published by the Education Department, showing that nearly 10 percent of career and certificate programs failed to meet the acceptable debt-to-earnings ratio — about 800 schools out of nearly 9,000 analyzed. More than 98 percent of schools that didn’t meet that ratio were for-profit colleges. An additional 1,200 schools were designated to be on the verge of failing and at risk of losing federal student aid.
When Trump came into office, the Education Department largely stopped enforcing the rule, before fully repealing the measure in 2019.
While Biden’s Education Department had said in legal filings that it was working to issue its own gainful employment rule, the department did not publish a proposal until last month.
Last week, the Department concluded its series of rulemaking sessions allowing stakeholders to give input on a new gainful employment rule. Based on rulemaking timelines, the earliest the new policy could come into effect is July 2023.
That means if Republicans win majorities in Congress in 2022, as they are expected to do, they would be able to overturn the administration’s new gainful employment rule using the Congressional Review Act.
In a brief filed in the teachers union lawsuit last fall, Biden’s Education Department said that reinstating the Obama rule in the interim would be too burdensome and that “the Department’s resources are better spent on the rulemaking process itself.”
Now, the Education Department is arguing that vacating the DeVos rule would be disruptive to students and for-profit schools. In a brief filed on February 18, Justice Department lawyers argued that issuing a new rule would be “disruptive both to the Department and to those impacted by the Department’s regulations, as the Department has previously explained.”
“We are committed to restoring a strong gainful employment rule as quickly as possible and, to that end, have outlined our vision for negotiators,” said a department spokesperson. “Our proposal would strengthen the standards for career training programs and require that program graduates earn more than had they never attended college, a move that we believe would ensure students get value for their tuition dollars.”
Biden administration officials have indicated that tackling the student debt crisis is a priority. For nearly a year, the Education Department has publicly indicated it is reviewing its authority to cancel student debt and considering changes to how it handles student debt bankruptcy cases. But so far, the department has not yet taken action on either issue, and has also declined to use its authority to hold executives at for-profit colleges accountable for fraud.
Officials have taken some actions around the margins to help students, including forgiving $16 billion of student loans for disabled borrowers, public servants, and people who attended for-profit schools that were later shuttered. But that’s only a small fraction of the $1.7 trillion in outstanding debt.
“The Departments of Justice and Education together seem to be operating on a kind of apathetic autopilot, unwilling to divest from Trump-era positions and invest the energy needed to protect students’ interests,” said Hannah Story Brown, a researcher at the Revolving Door Project, an executive branch watchdog.
As Story Brown previously wrote for The American Prospect, the lead Justice Department lawyer on the gainful employment lawsuit has close ties to the for-profit college industry. Brian Boynton, Biden’s appointee to oversee the Justice Department’s Civil Division, previously counted for-profit schools as clients. He also wrote a memo while working at the corporate law firm WilmerHale arguing that the Obama Education Department didn’t have the authority to write a gainful employment rule.
“A Terrible Policy Outcome”
Ahead of a hearing in the gainful employment rule lawsuit on April 21, Justice Department lawyers have continued to make the case that the DeVos rule should be left in place while a new one is being written.
But advocates say that move could cause problems for hundreds of thousands of students in the interim period, which could last for years.
“The government is effectively arguing that Betsy DeVos’ illegal repeal should remain in place for the first three and a half years of Biden’s presidency — potentially, almost all of it,” said Story Brown. “That’s a terrible policy outcome for students, and for what it’s worth, a terrible political message for Democrats to send.”
The plaintiffs are asking for what is known as a “remand with vacatur,” meaning they want the rule remanded to the Education Department in order for it to be redone, and for the DeVos repeal to be abandoned in the meantime.
Biden’s Education Department is not fighting against the remand — it wants to write its own rule anyways — but it is challenging the demand that the DeVos rule be vacated in the meantime.
“The harm caused to student borrowers if the repeal rule is left in place is far from hypothetical,” wrote Connor of the Project on Predatory Student Lending in her amicus brief. “The department’s collected data illustrates with stunning clarity how many students have been, and will continue to be, harmed by failing education programs without the [gainful employment] rule’s protections.”
In just one school year, hundreds of thousands of students could be harmed by the absence of a rule, Connor explained. “For the 2010-11 and 2011-12 school years in California alone, 56,129 students were enrolled at failing programs or programs close to failing,” she wrote. “Those 56,129 students borrowed well over $934 million to attend failing or near-failing programs — and because that money may never be paid back, the cost will fall on the shoulders of taxpayers instead.”
Across the country, that adds up to billions of dollars: “That is just one state,” noted Connor. “In the U.S. as a whole, the number was 354,002 students at over $7.4 billion.”
During the Obama years, for-profit schools were decimated by economic factors and regulatory scrutiny, leading to dwindling enrollment. Some schools closed their poorly performing programs or froze tuition in response to the 2014 gainful employment rule, The Washington Post reported.
But these programs experienced a resurgence during the Trump administration, as DeVos slashed and burned regulations designed to protect students, and the COVID-19 pandemic made online and flexible options more appealing to students.
Data show these schools are responsible for a disproportionate share of the student debt crisis. For-profit schools enroll 10 percent of students, but account for 70 percent of defaults on student debt. And students at for-profit schools on average have more debt and take out more loans than students at public schools, while earning less money upon graduation.
Connor and other consumer advocates also fear that leaving the DeVos repeal in place heightens the risk that legal challenges will leave students without protections.
“If the industry challenges the Biden administration’s forthcoming rule, and they win, you’re going to go back to the status quote ante — which will either be the DeVos rule or the Obama rule,” said Connor. “And it seems better for it to be the Obama rule.”
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