Less than three weeks before it was set to kick in, the Trump administration has rolled back a regulation designed to protect students who were defrauded at for-profit colleges and announced plans to rework a related law already on the books.
The new rule would have set up a clear path for students to report fraud and have their student loans forgiven; made it easier for a group of students to make claims together (if, for instance, a school folds); and gotten rid of a “rip-off clause” in contracts that prevented students from suing the colleges.
The other Obama-era regulation, which would penalize for-profit “career college” programs that leave graduates drowning in debt, is going back to the drawing board, too.
Secretary of the Department of Education Betsy DeVos called the regulations muddled and unfair in a statement announcing her department will rework the rules.
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“Fraud, especially fraud committed by a school, is simply unacceptable. Unfortunately, last year’s rule-making effort missed an opportunity to get it right,” DeVos wrote on Wednesday.
One of the new rules, known as the “borrower defense to repayment regulation,” is now in “suspended animation” for at least two years, the fastest possible pace to revamp it, said Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities.
De Vos said the overhaul won’t impact ongoing review of claims filed by nearly 16,000 defrauded students who’ve already asked the education department to refund their loans. Some could see their loans forgiven “within the next several weeks,” she said.
But there are many more students with similar complaints, said Nassirian, who was at the table for the talks behind the Obama-era rules.
“The problem is there are tens of thousands of others who have significant cases to make,” he said. “What happens to them?”
In Jay Frierson’s case, he isn’t sure. The 30-year-old from Broward County’s Oakland Park said he owes $10,000 for a the handful of nursing classes he took for six months at Dade Medical College in 2010. The program shut down almost overnight in 2015, and the man who headed the school, Ernesto Perez, later pleaded guilty to campaign finance fraud.
“They were focused on people making payments, and not teaching us the curriculum,” he said. Frierson joined the Army Reserves to help pay back that debt.
He said he applied for loan forgiveness, but he never heard back. Legally, students like him can still take their fraud case to the state and try to get their debt wiped out, but the process can be arduous.
The Obama-era regulations came after the collapse of two titans in the for-profit college industry: Corinthians Colleges and the ITT Technical Institute. Some for-profit colleges have been accused of predatory and fraudulent practices, ranging from hiring strippers as recruiters to forging students’ signatures on loan documents, practices revealed in the Miami Herald investigation Higher Ed Hustle.
Still, the “career college” industry has boomed. It enrolls nearly one in five students in Florida, donates generously to politicians, and get nearly 90 percent of its revenues from taxpayers, in the form of federal Pell grants and student loans.
The latest moves by the education department are a relief to for-profit colleges, which argued the rules unfairly targeted an industry that primarily serves low-income and minority students.
Curtis Austin, the executive director of the Florida Association of Postsecondary Schools and Colleges, said for-profit students account for less than a third of student debt nationwide.
“You kind of wonder about a program that targets student debt that doesn’t target all debt,” Austin said.
Austin said he hopes to see the education department’s committee come back with new fraud-fighting regulations that are focused on helping students at any institution — not just for-profits.
“This is a refining process, not an elimination process,” Austin said.
Other critics, like the groups behind 186 primarily black colleges, universities and institutions, say the Obama-era regulations were too broad and could hurt good programs along with the bad.
But the overhaul leaves debt-saddled students from for-profit colleges in limbo, and it’s to early to tell what the Trump administration’s solution will be.
The other rule DeVos plans to review is the “employment regulation,” which would have financially punished career programs when graduates’ loan payments are higher than a certain percentage of their income. The law is still on the books until the department officially replaces it, which would be in June 2019 if the committee proceeds at “breakneck speed,” Nassirian said.
But the question is how rigorously the department of education will enforce the current law, something the administration hasn’t made clear.
For now, students can continue to submit fraud claims, but the road to new regulations to protect them is a long one.
“At the end of the day, my view is people will end up responding to the facts,” Nassirian said. “The evidence has piled up so high that it would take an act of will not to see it.”