DeVos to Eliminate Rules Aimed at Abuses by For-Profit Colleges

DeVry University in Miramar, Fla. It is a for-profit school that offers courses online and at locations across the United States.

WASHINGTON — Education Secretary Betsy DeVos plans to eliminate regulations that forced for-profit colleges to prove that they provide gainful employment to the students they enroll, in what would be the most drastic in a series of moves that she has made to free the for-profit sector from safeguards put in effect during the Obama era.

The so-called gainful employment regulations put into force by the Obama administration cut off federally guaranteed student loans to colleges if their graduates did not earn enough money to pay them off. That sent many for-profit colleges and universities into an economic tailspin because so many of their alumni were failing to find decent jobs.

The Obama regulations — years in the making and the subject of a bitter fight that pulled in heavy hitters from both parties who backed the for-profit schools — also required such schools to advertise whether or not they met federal standards for job placement in promotional materials and to prospective students.

Now, a draft regulation, obtained by The New York Times, indicates that the Education Department plans to scuttle the regulations altogether, not simply modify them, as Ms. DeVos did Wednesday with new regulations that scaled back an Obama-era debt relief plan for student borrowers who felt duped by the unrealistic appeals of for-profit colleges.

The move would punctuate a series of decisions to freeze, modify and now eliminate safeguards put in place after hundreds of for-profit colleges were accused of widespread fraud and subsequently collapsed, leaving their enrolled students with huge debts and no degrees. The failure of two mammoth chains, Corinthian Colleges and ITT Technical Institutes, capped years of complaints that some career-training colleges took advantage of veterans and other nontraditional students, using deceptive marketing and illegal recruitment practices.

The draft “gainful employment” rule obtained by The Times is the most recent iteration of a proposal more than a year in the making from the Education Department, which as recently as last week had considered preserving at least some of the provisions in the Obama-era regulations, according to officials familiar with the department’s plans. A final rule could look different, and the department plans to solicit public comment on the proposal.

In the draft rule, the department proposes to hold institutions accountable by publishing information on a new federal database, or an existing government website called the College Scorecard. The sites would list student debt burdens, federal loan repayment rates, degree completion rates and the average post-college earnings of alumni, which the College Scorecard already does.

The existing database, created under the Obama administration, includes such data for more than 7,000 institutions, but it does not include program-by-program success rates for such certificates as nursing assistance, cosmetology or auto maintenance, nor does it contain the detailed employment statistics that the gainful employment regulations targeted.

The Education Department wrote in the draft rule that it planned to update the scorecard with information about specific programs for all colleges and universities that are eligible for federal financial aid, “thus improving transparency and providing information to students to inform their enrollment decisions through a market-based accountability system.”

But it would eliminate the powerful threat to withhold access to guaranteed student loans from colleges whose graduates cannot find the work to pay them back. Few higher-education institutions could survive without federal student aid.

“The gainful employment regulations were enacted to protect career college students from being trapped in programs where they incur mountains of debt for little or no benefit,” said Aaron Ament, the president of the National Student Legal Defense Network. “Any attempt to eliminate this common-sense rule is an enormous mistake that will cost students and American taxpayers dearly.”

Education Department officials did not respond to requests for comment on the draft rule.

The DeVos approach would undo nearly a decade of efforts to create a tough accountability system for the largely unregulated and scandal-riddled for-profit sector of higher education. In recent years, large for-profit chains have collapsed under mountains of complaints and lawsuits for employing misleading and deceptive practices. The most high-profile chains, ITT Tech and Corinthian Colleges, generated tens of thousands of complaints from student borrowers who said they were left with worthless degrees. The Obama administration forgave at least $450 million in taxpayer-funded student debt.

The Obama administration began drafting the regulations when the for-profit college sector was booming, with large chains enrolling 500,000 students at a time.

That prompted intensive campaigns by the for-profit sector to kill the rule, dozens of hearings, more than 90,000 public comments and lawsuits. House Republicans targeted the regulation for elimination in their reauthorization of a new higher-education bill. And Republican Senate leaders — including Senator Lamar Alexander, Republican of Tennessee and the chairman of the education committee — have said that they believe that accountability measures should be applied to all schools, not just one sector.

Ms. DeVos has tended to agree with critics and industry leaders who say that the Obama rules unfairly targeted for-profits. In statements, officials have maintained that Ms. DeVos is committed to “weeding out bad actors and doing what’s best for students, not capriciously targeting schools based on their tax status.”

Ms. DeVos has also stacked her top ranks with advisers from the sector, including Diane Auer Jones, a senior adviser on postsecondary education, whose ethics filings show that she lobbied against funding the rule while working for an operator of for-profit schools, Career Education Corporation.

Ms. Jones has not recused herself from advising on the gainful employment rule or on any matters involving career education, according to her list of recusals provided to The Times in May. In an April letter, 10 congressional Democrats wrote to Ms. DeVos asking her to address Ms. Jones’s apparent conflicts of interest.

Ethics watchdogs have called also raised alarms about Ms. Jones’s previous roles at for-profits, including the legal watchdog Democracy Forward, which revealed her lobbying activities to The Times. The Education Department has defended Ms. Jones’s record, which includes working at community colleges and public universities.

One of Ms. DeVos’s first acts as secretary was delaying the main provisions of the Obama-era for-profit rules. In March 2017, she announced that colleges would have three more months to appeal gainful employment data that was released at the end of the Obama administration. She delayed the rules a second time, in June last year, about a month after announcing that she would renegotiate the gainful employment regulations. She delayed the disclosure provision again last month, giving institutions until July 2019 to comply.

For-profit school leaders have praised the delays, as they have argued the rules were meant to put them out of business at the expense of students who enrolled in career education schools.

When Ms. DeVos announced the first delay of the Obama rules last spring, Steve Gunderson, the president of Career Education Colleges and Universities, praised the decision. He said the group, which represents more than 1,000 for-profit schools, would present evidence to the department that the rules “treats identical programs differently.”

Last year, Ms. DeVos pointed to a court ruling in favor of scaling back after the American Association of Cosmetology Schools won a lawsuit against the Education Department. The association said the gainful employment rule unfairly penalized its members because the department’s data did not capture all of their graduates’ income, such as tips, that would skew earnings data.

“We need to get this right for our students, and we need to get this right for our institutions of higher education,” Ms. DeVos said at the time. “Once fully implemented, the current rules would unfairly and arbitrarily limit students’ ability to pursue certain types of higher-education and career-training programs.”

In 2014, when the Obama administration announced gainful employment rules, it estimated that about 1,400 programs serving 840,000 students — of which 99 percent were at for-profit institutions — would not pass its new accountability standards.

In January 2017, the department announced that about 800 programs, or 10 percent of those examined, had failed to meet the requirements; 98 percent of those were for-profits.

An analysis of the programs, conducted by New America, shows that hundreds of programs that failed the federal test went on to shut their doors shortly after.

Consumer protection advocates said that there is enough evidence to show that the gainful employment rule is meeting its goal of weeding out the poorest performers.

“It took nearly a decade of rule making, litigation and public debate to write a gainful employment rule that protects hundreds of thousands of students from unaffordable debt,” said James Kvaal, the president of the Institute for College Access & Success, who helped draft the rules as an Obama administration official. “Now the Trump administration may just scrap these essential student protections. The evidence is in, and the gainful employment rule has helped students find better choices and forced colleges to improve the value of their career education programs.”

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