How Will the Feds Protect Student-Loan Borrowers in the Future? 2 Visions Are Aired

The Education Department announced in June that it would delay and renegotiate a pair of Obama-era regulations aimed at reining in abuses by colleges. And Monday marked the tipoff of that process.

Advocates for students and college groups came here, to the department’s headquarters, on Monday to voice their concerns or support for the decision. Some chided Betsy DeVos, the education secretary, for rolling back the gainful-employment and borrower defense-to-repayment rules; others praised the actions, arguing that renegotiation would help make the process fairer for institutions. And all of those who spoke shared their thoughts of what the consumer rules should be.

Through nearly seven hours of comments, the recommendations tended to fall into one of two categories: Carry out the rules as written, or renegotiate the rules to ensure "equity" across all sectors.

Department officials saw the hearing as an opportunity to move forward from "troublesome" regulations. "The secretary has made clear that her first priority is to protect students," said Kathleen Smith, acting assistant secretary in the office of postsecondary education, in remarks opening Monday’s hearing. "And while she firmly believes that fraud is simply unacceptable, she also recognizes that last year’s borrower-defense rule-making effort missed an opportunity to get it right."

For that reason, she said, "it’s time to take a step back and make sure these rules achieve their purpose: helping harmed students."

Waited Long Enough

Student and borrower advocates pulled no punches when discussing their belief that the rules should be put in place as written. "To be perfectly frank, I can’t believe we’re doing this again," said Alexis Goldstein, a senior policy analyst at Americans for Financial Reform, which describes itself as nonpartisan, nonprofit organization.

Many in attendance pointed to two shuttered for-profit educators — ITT Technical Institute and Corinthian Colleges — as examples of the kind of abuse from which students needed protection. Further, they argued, the rules, as written, would protect students if instituted.

"The department has looked into these issues," said Karla Gilbride, a staff attorney at Public Justice, a public-interest law firm. The resulting rules are not perfect, she said, "but they represent a huge step forward in holding recipients of federal financial aid accountable."

And according to Ben Miller, director of higher-education policy at the Center for American Progress, a liberal think tank, they still must be enforced, even as renegotiation proceeds.

"The Department of Education must keep generating completer lists, obtaining data from the Social Security Administration, and following other parts of the rule during the entirety of this negotiation and rule-making process," said Mr. Miller.

The Education Department has argued, since the announcement in June of the "regulatory reset," that pausing the rules and renegotiating would make for a more equitable system for students and institutions.

Elizabeth Hill, a spokeswoman for the department, told The Chronicle that the reworking of the rules is not a zero-sum game. "We can protect students from bad actors and ensure they have access to multiple pathways to quality higher-education options while also ensuring that colleges and universities are held to clear, fair, and balanced rules," she said. "We are willing to put in the hard work to get this right for everyone involved."

But Jennifer Wang, director of the D.C. office of the Institute for College Access and Success, a consumer-advocacy group, argued that students, veterans, and taxpayers had waited long enough. "They cannot afford a ‘pause’ in the Education Department’s progress against fraud and waste."

Renegotiating Rules

Many of those who applauded the department’s decision to take a second look at the rules said they hoped a new process could help clear up confusion and make the rules less punitive.

"I know some people in this room disagree, [but] this decision was responsible and needed," said Aaron Shenck, executive director of the Pennsylvania Association of Private School Administrators. Mr. Shenck said he worried that while the regulations were well intentioned, they created "hundreds of pages of rules and red tape on schools," leading to problems and confusion in compliance matters. Resources dedicated to complying with the rules, he said, could be better used in the classroom.

Representatives of other groups, such as UNCF, which represents historically black colleges, and the American Association of Community Colleges, argued that certain provisions of the borrower-defense rule were of "deep concern" because of the potential "unintended consequences."

"UNCF remains concerned about the overly broad definition of ‘misrepresentation’ in the current regulation, which could unfairly leave HBCUs financially liable — with no time limitations — for frivolous claims for debt relief," said Cheryl Smith, the group’s vice president for public policy and government affairs. The comment echoed the organization’s joint letter to Ms. DeVos in June before the department’s rollback of the rule.

Marc Jerome, president of Monroe College, a for-profit institution in New York, argued that the rules, and those supporting them, conflated institutions that had harmed students with outcome data. Mr. Jerome, and others who supported revisiting the regulations, also said that for the regulations to be effective, all parts of the rules would have to apply to all sectors of higher education, not just for-profit colleges.

The new process, they argued, presents the opportunity to do that.

The department will hold a second public hearing, in Dallas on Wednesday, which is the deadline for the submission of public comments on the regulations.

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