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July 01, 2019 at 10:05 AM
At a time when student loan debt has soared to $1.5 trillion, affecting 43 million Americans, and has become a key issue in the Democratic presidential nomination race, Department of Education Secretary Betsy DeVos has decided to end a program that helps student loan borrowers.
Late Friday afternoon, June 28, DeVos announced she is rescinding the Gainful Employment Rule, which was created by the Obama administration to police programs that saddled students with excessive debt relative to their incomes after graduation. The rule applied to all non-degree programs at for-profit and nonprofit institutions, but for-profit institutions were most at risk of losing federal student aid funds if the DOE found they violated the rule.
DeVos had delayed implementation of the rule three times, with the last delay due to end Monday. Instead of extending the delay or moving to implement the program, she announced its demise, effective July 1, 2020.
(Related: 16 States Blast DeVos Over Third Delay of For-Profit College Rules )
In a 316-page final regulation published on July 1 in the Federal Register, the Department of Education says the rule uses a “fundamentally flawed” debt-to-earnings (D/E) ratio formula, “unfairly” targets “career and technical education programs” and uses cohort default rates (CDRs) that may be more influenced by demographics and socioeconomic status of the borrowers rather than the quality of the institution. Instead, the DOE plans to include some of the GE disclosures in an expanded College Scorecard providing data on school costs, graduation rates and typical debt levels.
For-profit schools, however, will no longer be required to publish disclosure of data used in the calculation of the D/E rates such as program length, program enrollment, loan repayment rates, total program costs and job placement rates, and they will no longer lose ability for students to obtain federal loans if graduates’ debt-to-earnings and debt-to discretionary income exceed certain thresholds.
Bob Shireman, senior fellow at The Century Foundation and former deputy undersecretary of education in the Obama administration, said DeVos’ repeal of the gainful employment rule “means it is open season for predatory schools to take advantage of students and taxpayers. Schools will no longer risk having their federal funding cut off for loading up students with debts they cannot repay.”
