What Biden Lacks On For-Profit College Debt

(CNN) – The Biden administration is committed to making college more affordable. But he chose not to reinstate an Obama-era rule meant to prevent students from taking on too much debt to attend predatory for-profit colleges.

The rule was repealed by former Education Secretary Betsy DeVos, who was subsequently taken to court over the decision. The Biden administration asked a judge late last year to uphold the repeal while it undertakes a months-long process to draft a new version.

It was a move that surprised some advocates of student loan borrowers.

“If the Biden administration is serious about protecting students, it doesn’t make sense for them to continue fighting them in court,” said Aaron Ament, president of the National Student Legal Defense Network, which filed the lawsuit in 2020. .

“They can help right now, all they have to do is stop defending Betsy DeVos’ illegal decisions,” added Ament, who was previously an attorney for the US Department of Education during the Obama administration. .

For-profit colleges have helped fuel America’s student debt problems. According to the latest data from the Department of Education, about 11% of for-profit students default, compared with 7% of students who attend public colleges and about 5% who attend private non-profit colleges.

Many for-profit programs do not lead to higher paying jobs, forcing some students to struggle to pay off their debt. The Education Department found that several for-profit schools had defrauded their students, and as a result, forgave thousands of those borrowers – a move that relieves debt but also costs taxpayers money.

Known as “paid employment,” the rule was intended to identify for-profit colleges and certificate programs that were performing poorly at non-profit colleges – that is, those whose graduates had repayments. high student loans relative to their income. Those who fail to meet government standards would lose access to federal funding. As a result, their students would be prevented from borrowing federal student loans and receiving other types of federal financial aid.

DeVos repealed the rule in 2019, arguing that it ignored factors that could affect a graduate’s earnings other than the quality of the program. She also criticized the rule for keeping for-profit colleges at a higher standard than nonprofit institutions.

Biden administration wants to rewrite the rule
The Ministry of Education intends to put in place a new rule that sets standards for gainful employment. It does this by starting a formal rule-making process next week. The process, known as negotiated rule making, involves a series of meetings followed by a public comment period that typically takes months.

“We are committed to restoring a strong rule of gainful employment as quickly as possible,” Education Department Under Secretary James Kvaal said in a statement to CNN.

“While we respect and appreciate outside feedback on the best way forward to achieve this goal, our judgment is that focusing on the regulatory process will produce the best and most durable rule to protect students,” Kvaal added, who played an important role in drafting the first rule of paid employment.

But while the ministry follows the rulemaking process, the student protections provided by the previous paid employment regulation will not be in place, allowing people to potentially enroll in at-risk college programs between- time.

In a court document, Kvaal argued that, from an operations perspective, it would likely take at least a year, if not longer, to fully implement the old rule. It is not known if this could happen until a new rule takes effect, he wrote.

If the previous rule is restored, the department expects it will have to fight new lawsuits, according to court documents.

Targeting for-profit colleges
Other steps taken by the Biden administration suggested that it intended to target the for-profit college sector. The Federal Trade Commission, for example, sent a letter to 70 for-profit colleges in October, warning them that the agency is considering cracking down on any false promises they make about their graduates’ job prospects and earnings. .

Additionally, a Biden-backed plan to expand the Pell Grants – a type of federal aid given to students with exceptional financial need – would make for-profit students ineligible for the money. The plan was included in Democrats’ Build Back Better legislation, which has stalled in the Senate.

“I think it’s a priority for them, but I think they could do more. It was a little surprising that they didn’t revive gainful employment,” said Carolyn Fast, lawyer and senior researcher at the Century Foundation. , where she works on higher education policy.

“The timeframe for putting in place a new rule is quite long. It makes sense to have the old rule in place in the meantime to make sure students don’t enroll in programs that won’t meet standards, ”she said.

How the rule was supposed to work
The gainful employment rule required for-profit colleges and nonprofit college career certificate programs to display debt-to-earnings ratios, proving that their students could find well-paying jobs upon graduation. If the average ratio did not meet government standards for two out of three consecutive years, the school’s federal funding would be revoked.

Reviews were published in 2017, finding more than 800 programs that did not meet departmental standards. But DeVos repealed the rule before one of the institutions lost federal funding.

The rule has had some effect again in disclosing which programs students are struggling with debts they cannot afford. A graduate theater program at Harvard University, for example, froze enrollment after receiving a failing grade in the government report.

Cancel debt or tackle college affordability
To date, the Biden administration has written off about $ 2.8 billion in student loan debt owed by students who have been defrauded by their for-profit colleges, according to the Education Department. He did so by overturning a DeVos policy that limited the amount of relief owed to defrauded borrowers and by determining that 115,000 former students of the ITT Technical Institute, a now defunct for-profit organization, were eligible for an automatic discount.

But these actions only offer relief after someone has been the victim of fraud. The paid employment rule attempts to prevent the problem from occurring in the first place, protecting students from taking on debt they cannot afford to pay off.

“Instead of cleaning up the background issues, they could also clean things up upstream and save a lot of people from heartache,” Fast said.

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