DeVos to redo two Obama-era rules on for-profit schools

The Trump administration is planning to redo two Obama-era rules aimed at ensuring students at for-profit colleges get the education they pay for.

Education Secretary Betsy DeVos said Wednesday the department is establishing rulemaking committees to rework the gainful employment and the borrow defense to repayment rules.  

The gainful employment rule requires schools to ensure their career training programs actually prepare students for good-paying jobs that allow them to pay for their student loans.

{mosads}Under the rule, which went into effect in 2015, the estimated annual loan payment of a typical graduate has to be at or below 20 percent of his or her discretionary income or 8 percent of his or her total earnings or an institution risks losing its ability to participate in taxpayer-funded federal student aid programs.

The borrower defense to repayment rule set out to better protect student borrowers against misleading and predatory practices by giving creating consistent, clear, fair and transparent processes to file claims.

Due to pending litigation the Education Department said it’s delaying the borrower defense to repayment rule, which was set to take effect on July 1.

For-profits have slammed the rule as unfairly punitive because it establishes automatic triggers that would require a school to put up a letter of credit — a large sum of money — every time a lawsuit is filed against it to protect taxpayers if the institution fails.

In a statement, DeVos said her first priority is to protect students but that last year’s rulemaking efforts missed an opportunity to get it right.

“The result is a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs,” she said.

“It’s time to take a step back and make sure these rules achieve their purpose: helping harmed students. It’s time for a regulatory reset.”

Consumer and student advocacy groups called the department’s decision troubling.

“It is the duty of the Department of Education to insist on consumer protections for these borrowers, and if they believe improvements are needed to existing regulations, they should continue to protect borrowers from these predatory practices while another lengthy negotiated rulemaking plays out to improve the regulations,” Betsy Mayotte, director of consumer outreach and compliance for American Student Assistance’s Center for Consumer Advocacy, said in a statement.

“Students shouldn’t have the pause button hit on their consumer protections, and this isn’t the time for the Department of Education to step back from their responsibility to protect federal loan borrowers.”

Career Education Colleges and Universities, a group that represents for-profit schools, welcomed the news.

“We commend the Department for moving forward to begin conversations that will really protect students from academic fraud,” Steve Gunderson, CECU’s president and CEO, said in a statement. “Our sector has consistently supported this premise. Unfortunately, the Obama Department of Education chose to use this basic concept as a vehicle to continue their ideological assault on our sector’s very existence.”

The department noted that while negotiated rulemaking occurs, applications for student debt relief will still be processed under the current borrower defense rules.