DeVos’s Gainful Redeployment
Liberals are howling that Education Secretary Betsy DeVos has pulled back the Obama Administration’s gainful employment and borrower defense rules that were aimed at destroying for-profit colleges. But the rules did far more to ensure gainful employment for lawyers and government than they helped students.
The Obama Administration imposed both rules after advisory committees of higher education stakeholders—students as well as public, nonprofit and for-profit colleges—failed to reach a consensus. Ms. DeVos on Wednesday ordered a pause while new committees consider changes to better “protect students from predatory practices while also providing clear, fair and balanced rules for colleges and universities to follow.”
After a federal judge in 2012 tossed the Obama Administration’s first gainful employment rule, vindictive department officials imposed more draconian regulations that cut off federal aid to vocational programs—nearly all for-profit—in which graduate debt-to-earnings ratio exceeds 12%. A nursing program whose graduates finish with an average of $35,000 in debt and earn $35,000 a couple years out of school would fail.
Many public and nonprofit colleges that educate large numbers of low-income students could have failed under the rule. The department estimated that about 1,400 programs serving 840,000 students would be forced to close. Yet many dislocated students would wind up at community colleges with far worse records.
Then there’s the borrower defense rule, which would have enabled borrowers to discharge their loans if they claimed that their college had duped them. Department officials would have both defended and adjudicated claims. Colleges could have been hit to pay for discharged loans, though the department estimated that taxpayers would also be on the hook for between $9.5 billion and $21.2 billion. Plaintiff attorneys would have made out since the rule banned class-action waivers and arbitration agreements. Imagine the cable-TV commercials soliciting clients.
While the rule technically applied to all colleges, department officials would have had enormous discretion. While bureaucrats might let, say, NYU off the hook for misrepresenting graduate outcomes, DeVry University probably wouldn’t be as lucky. Yet even many nonprofits and public colleges were worried about how the rule could apply to them.
One irony is that many more students might be gainfully employed today if the Obama Administration hadn’t spent so much energy pursuing an ideological crusade against for-profits. Any new rule should hold colleges equally accountable. Once upon a time, liberals believed in equality under the law.
Appeared in the June 17, 2017, print edition.