The president of the United States is the former proprietor of a for-profit pseudo-university that encouraged cash-strapped single parents to buy worthless degrees in real-estate investing by taking on massive credit card debt. His secretary of Education is a longtime champion of private schools, who has invested part of her (considerable) fortune in for-profit education ventures.
In a shocking development, some states say that these individuals are trying to reshape federal policy to put the interests of for-profit schools above those of their students.
On July 1, the Education Department was supposed to begin enforcing rules written in the final days of the Obama administration that make it easier for students defrauded by for-profit colleges to have their debts forgiven. The regulations would also prohibit schools from making their students sign mandatory arbitration agreements. But Donald Trump’s pick to lead that agency, Betsy DeVos, opted to postpone the enactment of those regulations, arguing that they created “a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.” Legally, the administration justified its delay by citing a pending legal challenge to the rule from a California association of for-profit colleges.
Eighteen states and the District of Columbia reject that rationale. On Thursday, 19 Democratic attorneys general, led by Massachusetts’s Maura Healey, filed a lawsuit against the Trump administration in federal court, accusing DeVos of refusing to enforce duly enacted regulations in violation of the Administrative Procedures Act. They are hoping to convince a federal judge to order the administration to implement the new rules.
Federal law already allows borrowers to apply for loan forgiveness if they attend a school that deployed fraudulent advertising or violated state consumer-protection laws. But the process for securing such forgiveness can be cumbersome. And some schools limit their students’ capacity to win settlements in fraud cases, by forcing them to pursue justice through arbitration instead of the court system.
These defects became conspicuous during the Obama administration’s final years, as hundreds of for-profit colleges collapsed amid accusations of widespread fraud. The demise of the mega-chain Corinthian Colleges, alone, led to more than 15,000 loan discharges, totaling $247 million.
DeVos isn’t wrong that such massive debt forgiveness “puts taxpayers on the hook for significant costs.” The best thing for students and taxpayers alike would be for the government to avoid sending federal student-aid money to fraudulent schools in the first place. To that end, the Obama administration launched the “gainful employment” rule in 2015. Under that regulation, colleges whose graduates routinely find themselves with low incomes and high debt would lose access to federal student-loan dollars. In January, the Obama administration found that one in four courses of study that it reviewed were either failing or borderline. The vast majority of poor performers were for-profit colleges.
Alas, for some strange reason, DeVos announced last month that she will not be enforcing the gainful employment rule, either.