Bob Shireman, a senior fellow at the Century Foundation and an architect of the rule when he was in the Obama administration, called the repeal “disturbing and shortsighted.”
“They are opening the door to operators whose singular focus on gobbling up federal grants and loans for their investors will steer the business toward manipulative recruiting and poor quality training,” he said.
The Obama administration began drafting the regulations when the for-profit college sector was booming, with large chains enrolling 500,000 students at a time. But it was seen as a crucial safeguard against predatory colleges after the collapse of ITT Tech and Corinthian Colleges beginning in 2015.
The Obama administration also tried to channel loan relief to graduates who were defrauded by their colleges. Ms. DeVos has moved to overhaul that “borrower-defense” rule as well, hoping to give some students only partial relief. That process has been tied up in court proceedings, leaving more than 150,000 student claims in limbo.
One part of the gainful employment rule that had already been put into place has identified hundreds of failing programs, many of which went on to close after they were measured against the new standards. In the Education Department’s first assessment of debt-to-earnings ratios for college graduates, about 98 percent of programs that failed to meet standards for earning power were for-profits. An analysis included in the department’s final rule also shows that for-profits continued to have a significantly higher failure rate.
But the department argued in its final rule that the debt-to-earnings formula created by the Obama administration was “fundamentally flawed” and did not account for factors other than the quality of an education that could affect students’ earning potential. The department also said that the rule did not properly account for other kinds of programs that have poor career outcomes and high debt, such as some liberal arts degrees.
For-profit leaders have said that although the Obama rule was never fully enforced, its intent already shut down the worst-performing schools in their sector. Since 2010, when the Obama administration began deliberating the rules, more than 2,000 for-profit and career programs — nearly half — have closed, and the industry’s student population has dropped by more than 1.6 million.
“The U.S. Department of Education’s final decision commits our nation’s entire higher education system to full transparency,” said Steve Gunderson, the president of Career Education Colleges and Universities, the for-profit trade group. “Instead of picking and choosing winners and losers in higher education, the department will make available, in a student-friendly and transparent manner, key data points at a program level for all programs at all schools.”