Government

What DeVos’s ‘Reset’ on 2 Major Consumer Rules Means for Colleges

June 14, 2017

Chronicle photo by Julia Schmalz
Secretary of Education Betsy DeVos announced on Wednesday that the Education Department will renegotiate the gainful-employment and borrower "defense to repayment" rules, two key consumer-protection regulations of the Obama era.

Immediately after President Trump was elected, borrower advocates and lawmakers expressed concern about what would happen to the Obama-era regulations aimed at holding for-profit colleges accountable.

“The atmosphere suggests that the department is being far more responsive to the claims of the for-profit sector than to the plight of victims and their advocates.”

On Tuesday, their concerns were validated. The Education Department announced that it would delay and renegotiate two of the previous administration’s signature regulations: the borrower "defense to repayment" rule and the gainful-employment rule.

Here’s what the two rules do: The gainful-employment regulation, which is already in effect, aims to penalize programs whose graduates’ loan payments exceed a set percentage of their earnings. The defense-to-repayment regulation, which was set to take effect July 1, gives borrowers who say they have been defrauded by their colleges a simpler process for having their loans forgiven by the federal government.

"My first priority is to protect students," said Betsy DeVos, the education secretary, in a statement announcing the moves. "Fraud, especially fraud committed by a school, is simply unacceptable. Unfortunately, last year’s rule-making effort missed an opportunity to get it right." Ms. DeVos said that it was time for a "regulatory reset."

The rollback of these regulations presents a host of questions, said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities. Chief among them: What happens to students who have been defrauded, and how will the regulations be rewritten? "I don’t want to prejudice the outcomes," Mr. Nassirian said, "but the atmosphere suggests that the department is being far more responsive to the claims of the for-profit sector than to the plight of victims and their advocates."

The department has faced intense scrutiny for its relationships with for-profit colleges. One example is Robert Eitel, a former executive at Bridgepoint Education, a for-profit college group, who now serves as senior counsel to Ms. DeVos. Though Mr. Eitel is no longer employed by Bridgepoint, lawmakers have questioned his ability to be impartial on rules that might affect his former employer.

Reopening the gainful-employment rule to negotiation could waste taxpayer dollars, said Ben Miller, senior director for postsecondary policy at the Center for American Progress, a liberal think tank. Moreover, the rule has already gone into effect and must still be enforced while the department reconsiders it. "Gainful employment is still a legal regulation on the books, and we will be watching closely to ensure the administration follows the law," Mr. Miller said in a statement.

Whether or not the department will follow through with enforcing that regulation is still an outstanding question, and might be outstanding for some time. The primary way the department has been communicating with the public on higher-ed initiatives has been through responses to letters from Democratic members of Congress — and those lawmakers say the department has been frustratingly slow to respond.

How Sectors Are Affected

For-profit colleges are the clear winners in the department’s decision to roll back these rules, observers say, but those institutions are not the only ones pleased with the department’s decision.

Steve Gunderson, president of Career Education Colleges and Universities, a lobbying group for for-profit colleges, hailed the department’s decision at a positive step forward. The group has long been one of the primary critics of both the borrower-defense and gainful-employment regulations.

Mr. Gunderson said the Obama administration had used the concept of protecting students from academic fraud as "a vehicle to continue their ideological assault" on for-profit colleges. "Now we can correct that with a clean borrower-defense regulation that protects both students from academic fraud and their schools from ideological efforts geared to destroy postsecondary career education."

“HBCUs and for-profits have always been strange bedfellows on a number of topics, and borrower defense is no exception.”

For-profits have not been alone in opposing the rules, though. Advocacy groups for historically black colleges and universities and other predominantly black institutions have consistently asked the department to reconsider the regulations. On Monday, the United Negro College Fund and the National Association for Equal Opportunity sent a letter to Ms. DeVos expressing hope that the department would delay putting the borrower-defense rule into effect.

"HBCUs and for-profits have always been strange bedfellows on a number of topics, and borrower defense is no exception," said Clare McCann, a senior policy analyst with New America’s Education Policy program. Most of the concerns that HBCUs have expressed, she said, were addressed in the final version of the rule — and their lingering worries may be due to continuing concerns about their financial futures. "Effectively, the one thing that wasn’t addressed was weakening the standard to make it essentially useless," Ms. McCann continued.

Mr. Nassirian, of the state-colleges group, agreed that the concerns might be overblown. "It really strains credulity to think that any legitimate institutions should be worried about borrower defense."

Gainful employment, however, is a different story, he said. "I can see concerns around gainful, not because you get caught up in it directly, but because there is significant reporting responsibility for nondegree programs."

That added burden is a primary reason why advocates for community colleges have been pleased that the rule will be reconsidered. The American Association of Community Colleges "has consistently remained opposed to gainful-employment reporting requirements," Walter Bumphus, president and chief executive of that group, said in a statement to The Chronicle. "While the intent of the massive reporting structure was to provide students with meaningful data, it imposed expensive reporting and administrative costs on community colleges that continue to provide low-cost, high-quality training and technical programs."

The association wants institutions to be held accountable and more accurate information for students, he said, but the group found the rules, as written, to be onerous. Community colleges — which fared well in the gainful-employment results released by the department in January — would be able to allocate more of their resources to the service of students, the group argues.

“Over all, the sectoral-level story is a positive one for community colleges, but when you get down to a program level, it gets a bit more dicey.”

Another challenge for community colleges is that gainful-employment data "puts more of a spotlight on their programming," said Magda Rolfes, practice manager of EAB’s Community College Executive Forum. Some programs, she said, stood to benefit from the rule being in place. "Over all, the sectoral-level story is a positive one for community colleges, but when you get down to a program level, it gets a bit more dicey."

Still, many observers remain worried about what will be done to help borrowers should these rules be neutered. "These rules were put in place to protect taxpayers and students — particularly low-income students and students of color — who are most likely to be taken advantage of by unscrupulous institutions," said John B. King, a former secretary of education under President Obama, in a statement. "This action indicates, yet again, that this department is abdicating its responsibility to students and taxpayers."

Senate Democrats, who last week wrote a letter to Ms. DeVos in hopes that she would allow the borrower-defense regulation to take effect, fumed at the department’s decision to roll back the rules. "President Trump spent years defrauding and misleading students with his sham Trump University, so it’s no surprise his administration wants to sit by while other predatory colleges defraud their students," said Sen. Patty Murray of Washington, the senior Democrat on the U.S. Senate education committee.

Those in favor of a clean slate for negotiating these regulations, however, were not without support on Capitol Hill. Sen. Lamar Alexander, a longtime critic of regulatory burdens on colleges, said, "It’s entirely appropriate for each new administration to review the previous administration’s regulations and policies." Mr. Alexander, a Tennessee Republican who chairs the Senate education committee, added that it is "especially important" that the borrower-defense and gainful-employment rules be reviewed.

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