Dozens Of Organizations Come Out In Support Of Gainful Employment, Borrower Defense Rules

Image courtesy of (D. Michelson)

A week after two separate lawsuits were filed by 19 state attorneys general and a group representing students accusing Education Secretary Betsy DeVos of breaking the law by delaying protections for student loan borrowers, a coalition of more than 50 consumer groups have stepped forward to join the opposition against a “reset” of regulations put in place to protect students at for-profit colleges. 

The group, composed of our colleagues at Consumers Union, the Institute for College Access & Success, Higher Ed Not Debt, Public Citizen, and other organizations, submitted comments [PDF] to Secretary DeVos today expressing their “strong opposition” to the “delay, dismantling, and weakening” of the Gainful Employment and the Borrower Defense to repayment regulations.

The Rules

The Gainful Employment rule, which requires that for-profit educators demonstrate their former students are making a living wage after they graduate, has already been enacted.

The finalized rules [PDF] set standards for career colleges – those schools that offer specialized training programs in recognized occupations – to do a better job of preparing students for Gainful Employment, or risk losing access to taxpayer-funded federal student aid.

Under the rules, for-profit educators are required to demonstrate that their graduates are actually going on to jobs that can pay the bills.

For-profit colleges are at risk of losing their federal aid should a typical graduate’s annual loan repayments exceed 20% of their discretionary income, or 8% of their total earnings. Discretionary income is defined as above 150% of the poverty line and applies to what can be put towards non-necessities.

So for example, say the typical recent graduate of a career education program earns $25,000. That student would need to average annual student loan payments less than $2,000, or the school would be at risk for losing federal financial aid.

First proposed in June 2011, the rules spent years being written, lobbied against, scuttled and rewritten. They were finalized in Oct. 2014, and then repeatedly battled over in court before finally going into effect in July 2015.

The overhauled Borrower Defense rule [PDF] grew out of the recent collapses of major for-profit chains — like Corinthian and ITT — amid allegations that they had used inflated graduation and job-placement rates to mislead new students into paying top dollar for their education.

The previously seldom-used regulations provide a number of specific benchmarks for situations in which Borrower Defense process would be available to students. The Department’s intention was to draft a new process that would make it easier for students to have their federal loans discharged if the school they attended was found to have used illegal or deceptive tactics to persuade them to borrow funds to finance their education.

The retooled rules were unveiled in June 2016 and finalized in Oct. 2016, aiming to hold schools accountable in a court of law when they screw over students.

The 927-page rule touched on everything from how and when a student should be reimbursed for loans when their school unexpectedly closes to how schools can employ anti-lawsuit arbitration clauses, it was set to take effect July 1.

The Delay

That is until DeVos announced in June that the rules would be indefinitely delayed as she revealed her intention to establish rulemaking committees starting a process to “reset” the rules, claiming the previous rulemaking process “missed an opportunity to get it right,” resulting in a “muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.”

DeVos also claimed that “postsecondary institutions of all types have raised concerns” about the borrower defense rule. However, only the for-profit industry has sued to stop this rule.

Don’t Do It

However, the 55 organizations providing comment to DeVos disagree, noting that “students, veterans, and taxpayers have waited far too long already for these critical protections from unmanageable student debt, sudden school closures, and waste, fraud and abuse in higher education.”

Instead of rewriting the rules, the organization believe the best way to help students and borrowers is to move forward with enforcement of current rules.

The rules, the groups say, have already gone through extensive input and analysis, negotiated rulemaking, and public comment.

Additionally, the groups cite “multiple investigations” as evidence of need for the rules, noting that probes have revealed federal “taxpayers are subsidizing schools an programs that consistently leave students and veterans with loans they cannot repay and credentials they cannot use.”

Gainful Employment
In the case of the Gainful Employment rule, the groups say the regulations have already had a significant impact.

Since the rule went into effect in June 2015, the coalition claims that nine in 10 colleges with rated Gainful Employment programs have no failing programs, and eight in 10 for-profit colleges have no failing programs.

In addition to improving schools’ performance, the group claims the Gainful Employment rule has uncovered failing programs.

“Delaying or weakening the Gainful Employment rule will lead to a new race to the bottom as unscrupulous schools compete to enroll as many students as possible without regard to the quality of the training, the student’s preparation, or the job prospects,” the groups write, estimating that dismantling the rule will cost $1.3 billion over 10 years.

Borrower Defense
When it comes to the Borrower Defense rule, the groups say there is “simply no justification for revisiting it.”

“Rather than wasting government resources on a new negotiated rulemaking process, we urge the Department to use its limited resources to immediately implement the rule, including the provisions on forced arbitration and class action waivers,” the coalition wrote.

The rules ensure that neither defrauded students or taxpayers are left on the hook for schools’ bad deeds.

Issue Forgiveness
In addition to expressing support for the current rules, the group also urged DeVos to stop the delay of loan forgiveness to tens of thousands of students who submitted claims under the current Borrower Defense rule.

“We are deeply disturbed by news reports that the Department has not approved a single new borrower defense claim since January 20,” the letter states. “Many borrowers have been waiting for more than a year for the Department to act.”

Back in April, the AGs from dozens of states sent letters to former students of defunct for-profit college chain Corinthian Colleges reminding them to apply for federal student loan discharges.

Last month, a number of those same state officials called on DeVos to stop delaying loan forgiveness. The AGs estimated that more than 27,000 students nationwide who had already been approved for loan forgiveness had yet to see their loans discharged.

The delay, as detailed previously by a number of lawmakers, could cause students to rack up additional costs as many are nearing the end of a 12-month forbearance time period on their loans. Once this timeframe is over, the students face restarting monthly payments on debts that should be canceled.