Government

DeVos Will Roll Back 2 Obama Regulations, a Blow to Consumer Advocates

June 14, 2017

Chronicle photo by Julia Schmalz
Betsy DeVos, the secretary of education: "Fraud, especially fraud committed by a school, is simply unacceptable. Unfortunately, last year’s rule-making effort missed an opportunity to get it right."
The U.S. Department of Education is beginning the process of rolling back two Obama-era regulations aimed at holding for-profit colleges accountable and helping students who may have been misled or defrauded by them: the borrower-defense-to-repayment regulation, which was scheduled to go into effect on July 1, and the gainful-employment regulation, which was already in effect.

The gainful-employment regulation was meant to hold career-preparation programs accountable for the outcomes of their graduates. Specifically, if the estimated loan payments of a program’s graduates exceed a certain percentage of their income over a period of years, then the program would risk losing federal student aid.

The borrower-defense-to-repayment regulation was meant to allow borrowers who feel they have been defrauded by their college or program to have a simpler process for having their student loans forgiven by the federal government.

The specific processes by which the department would roll back the rules were laid out in two notices in the Federal Register: for gainful employment and for borrower defense to repayment.

The department said it anticipated that a committee would begin negotiations to rework the gainful-employment rule in November or December of this year, meaning a revised rule could not take effect until July 2019. Observers were uncertain of whether the department would enforce the prior rules until that point.

In a news release on Tuesday, Ms. DeVos said: “Fraud, especially fraud committed by a school, is simply unacceptable. Unfortunately, last year’s rule-making effort missed an opportunity to get it right.” She added that the current rules had created a “muddled process that’s unfair to students and schools.”

“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,” said Ms. DeVos. “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.”

By both rolling back the borrower-defense rule and reworking the gainful-employment rule, the department has handed a victory to for-profit colleges. Lobbying groups for those institutions had fought the existing regulations.

Several lawmakers and observers saw the department's withdrawal of the borrower-defense rule as unfairly tipping the scales in favor of for-profit colleges. Senate Democrats sent a letter to Ms. DeVos last week asking her to keep the regulations in place. "Delaying the borrower-defense rule would be a monumental dereliction of the duty you have to protect students and taxpayers," the senators wrote, "and would increase the risk of repeating the recent history of students left holding the bag while executives at collapsing institutions made away with millions in profits."

Some groups representing other sectors of higher education, outside of for-profits, however, disagreed that the rules, as written, should have been carried out. The United Negro College Fund and the National Association for Equal Opportunity in Higher Education, which represent historically black colleges, sent a joint letter to Ms. DeVos on Monday asking that she delay the regulations.

"We remain concerned about the sweeping scope of the regulation and vague standards for determining ‘misrepresentation’ that could unfairly leave HBCUs and PBIs liable for frivolous claims, unwarranted fines, and unfounded penalties," the groups said in the letter. "Such provisions could result in significant costs that would divert precious resources better spent on serving the needs of students."

Adam Harris is a breaking-news reporter. Follow him on Twitter @AdamHSays or email him at adam.harris@chronicle.com.