Government

Education Dept. Gives Firm Hint at Rollback of Gainful-Employment Rule

June 08, 2017

The Education Department recently gave the clearest indication to date that it may roll back, or at least alter, the hotly contested gainful-employment regulation. The rule, an initiative of the Obama administration, was billed as a way to better hold career-oriented programs accountable. In a letter obtained by The Chronicle, James Manning, acting under secretary of education, wrote to Democrats in the Senate that the department had "some level of concern" regarding the rules and that officials were reviewing them carefully.

It comes as no surprise to many observers that the Education Department, under Secretary Betsy DeVos, would revisit the rules. The department released the first iteration of gainful-employment rates in January, prior to the inauguration of President Trump. By March, it had announced that it would extend the deadline for appeals by programs that had failed the rule’s accountability standards.

Under the gainful-employment rule, institutions are considered to be "failing" when graduates’ annual loan payments exceed 12 percent of their annual earnings or 30 percent of their discretionary income. If a college was found to be in violation of that debt-to-earnings ratio in two of three consecutive years, the institution could become ineligible for some types of student aid, including Pell Grants and several forms of federal loans.

Democrats on Capitol Hill and student advocates railed against the department’s decision to delay the appeal deadline. "This delay needlessly stalls important protections for students and taxpayers, and creates more uncertainty for schools," said a letter to Ms. DeVos from a dozen prominent Democrats in the Senate.

Critics of the rule, however, celebrated the decision, as they have argued that the policy creates an undue burden on programs and unfairly targets for-profit schools. Steve Gunderson, president of Career Education Colleges and Universities, a lobbying group for for-profit institutions, said in a statement: "We very much appreciate the Department and the Administration recognizing the problems with this rule. We have asked them to delay the enforcement and to conduct a review of the unintended consequences of this rule as it begins to play out." The group recently proposed converting the rule into an "informational metric for all career programs at all schools."

Cost to Taxpayers

When the Trump administration released its 2018 fiscal-year budget proposal, which included steep cuts to higher-education programs, officials said they had hoped to put taxpayers first. But an analysis released Thursday by the Center for American Progress, a liberal think tank, highlights one way that rolling back the gainful-employment rule could have the opposite effect.

Many graduates of programs that "fail" the gainful-employment regulation would benefit from income-driven repayment plans, which allow borrowers to pay back only a fixed percentage of their student loans each month. While income-driven repayment helps borrowers, the reasoning goes, the government ultimately forgives more money in loans after borrowers have paid on them for a determined number of years. The report projected that "the median failing program would have a typical graduate that repays $15,000 less to the government" on such plans than he or she would on a standard loan-repayment plan.

CJ Libassi and Ben Miller, the authors of the analysis, predict that the government could be saddled with $1.5 billion in loan-forgiveness costs when multiplied across all of the students who graduated from programs that fall under the umbrella of the gainful-employment rule.

In short, without the gainful-employment rule, colleges would have little accountability for programs that produce low-earning graduates and could continue to funnel people into ones that ultimately cost taxpayers more money. And that prospect is another reason observers worry about the rule’s removal.

"It would be a huge step back for protections for students and taxpayers," said Amy Laitinen, director of higher-education policy at the nonpartisan think tank New America. "There’s a lot of harm to students that we’re trying to make up for on the back end, and there are a lot more protections that need to be made on the front end. Gainful is trying to do something in between."

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