In 2012, the U.S. Senate Committee on Health, Education, Labor and Pensions issued a report on for-profit higher education, which by then enrolled some 2 million students, 10 percent of degree matriculants in the United States. Targeting single moms, veterans, dislocated and unemployed workers with low incomes and inadequate academic preparation who qualified for federally-funded grants and loans, the for-profit colleges and universities provided substandard teaching and virtually no counseling or academic services, the committee revealed. Over half of the students in these institutions withdrew within two years. Graduates found they did not qualify for work in the chosen fields. The default rates of graduates and drop-outs on student loans was 46 percent.
California and New York prosecuted some for-profit companies for fraud. Congress responded in 2015 with legislation establishing a Gainful Employment rule, requiring colleges that run career education programs to disclose debt and earnings data on their graduates to prospective and current students. In 2017 more than 800 programs — virtually all of them at for-profit schools — failed the accountability standards, putting in jeopardy their eligibility for federal loans.
Most of the increase in loan defaults over the last decade has come from for-profit institutions. In 2014, for example, University of Phoenix students owed $35.5 billion to the federal government; 45 percent of those who were supposed to begin repayments in 2009 had defaulted; only 1 percent of this cohort had repaid their debts.
For-profit colleges and universities, however, have found a friend in Secretary of Education Betsy DeVosBetsy DeVosGOP lawmakers urge Cardona against executive student loan wipeout More insidious power grab than one attempted Jan. 6? Betsy DeVos not running for Michigan governor MORE.
With former administrators from and lobbyists for for-profit colleges serving in prominent staff positions, DeVos’s Department of Education adopted a market-based accountability caveat emptor approach to this sector of higher education. The DOE dropped a requirement for risky for-profits to set aside funds (or purchase insurance) in case the schools closed. The decision allowed several institutions to limp along on life support, continue to enroll students, and to shut down without owing the government any money. The Department’s effort to get rid of an Obama-era rule making it easier for students to file for debt relief on loans when colleges had defrauded them was put on hold by a federal judge, who deemed its freeze of claims “arbitrary and capricious.” And DeVos’s rescue squad has re-instated the Accrediting Council for Independent Colleges and Schools (removed by Obama’s DOE), whose seal of approval allowed — in at least two major instances — for-profit schools to secure federal student loans despite public allegations of fraud, false advertising, and grotesquely low graduation rates.
This month, Secretary DeVos, who had previously declared that in order to be responsible consumers, students “need to have the best possible tools, data, advice, and support,” cancelled the Gainful Employment rule, which required career schools to publish data on their graduates’ earnings and debt. The rule, she asserted, imposed a considerable burden on schools and, in turn, costs on those seeking degrees.
Soon after she was confirmed as Secretary of Education, Ms. DeVos pledged, in an op-ed published by the Wall Street Journal, that every decision she made would be considered “through a single, focused lens: How does it affect an individual student? When a program isn’t working in the best interests of students, I fight to change it.” She subsequently promised as well to “increase accountability of institutions by making it more difficult [for them] to misrepresent program outcomes.”
Secretary DeVos’s policies toward for-profit colleges and universities have not lived up to these standards.
Eliminating sanctions for low-performing career programs will, by the Trump Administration’s own estimate, cost taxpayers more than $5 billion over the next decade in student loans and Pell grants. DOE policies will leave hundreds of thousands of students worse off than they had been before they encountered a for-profit college recruiter — and, in essence, will blame the victims for their unmanageable debt and poor job prospects.
Glenn C. Altschuler is the Thomas and Dorothy Litwin Professor of American Studies at Cornell University. He is the co-author (with Isaac Kramnick) of Cornell: A History, 1940-2015.