The first is an incremental approach. In its first 100 days, the Biden administration must prioritize reinstating improved versions of the Obama-era regulations to enact incremental change. Here are several actions the administration could begin to take on day one:
Last year, the Department of Education repealed the gainful employment rule, which stipulated that institutions could be disqualified from federal financial aid if a significant share of their graduates don’t earn enough to pay off their debt
- Reinstate a revamped gainful employment rule: This rule is important because it holds institutions accountable for the outcomes of their graduates, which more closely aligns the incentives of students and for-profit colleges. For institutions whose graduates don’t meet a certain debt-to-earnings ratio, federal funds should be cut. However, as the rule was written under the Obama administration, it did not hold institutions accountable for the roughly 40% of students who do not graduate. A new gainful employment rule should be expanded to account for the outcomes of non-graduates as well.
- Amend the 90-10 rule: The 90-10 rule states that no more than 90% of for-profit college revenues can come from Title IV programs. This ensures that institutions are not entirely dependent on federal subsidies and can manage to attract at least some students who are willing to pay the full price of their education without federal aid. However, federal funds that come from the GI Bill and other programs run by the Department of Defense do not count towards the 90% limit for federal revenue. This loophole has led for-profit colleges to aggressively target veterans. An amended 90-10 rule should ensure that funds from the Department of Defense and the Veteran’s Affairs subsidy programs are counted as part of the allotted 90% of revenue that can flow from federal programs.
- Improve the College Scorecard: The College Scorecard has become less transparent over the past 4 years. It should be improved to clearly include data on graduate earnings relative to high school earnings as well as loan repayment rates for each school (which the Trump administration began to add in March) . This site is an important tool for consumers and it must be used to combat deceptive marketing strategies.
- Implement institutional risk-sharing: Many experts argue that institutional risk-sharing policies would better align the incentives of for-profit colleges with those of students. These policies require schools to pay the Education Department a percentage of students’ outstanding loan balances with negative outcomes. These policies should be accompanied with incentives for enrolling at-risk students so that the payday advance loans Everest KS risk-sharing does not have the adverse effect of disincentivizing institutions from taking in higher-risk students.
Data comparing the earnings of each school’s graduates to the earnings of high school graduates was removed, making it more difficult for students to make informed choices
The Biden administration should act fast on these issues and go beyond the level of regulation that existed during the Obama years. The policies listed above could improve the for-profit college sector by ensuring that federal funds only go towards effective programs and by helping students make informed decisions about their educational paths.
The second approach to reform is more targeted and forceful. There is enough evidence of poor performance in the for-profit sector to justify removing the entire sector from federal funds eligibility. Sherrod Brown and Elizabeth Warren’s Students Not Profits Act proposes to do exactly that. This approach is more viable than ever now that Democrats have gained control of the Senate.
The for-profit college sector has failed to prove its worth time and time again. Issues around racial inequity and the cost of higher education are at the forefront of America’s current political debate. Now is the time for the Biden administration to prioritize fixing the for-profit sector to make America’s higher education system better and more equitable.
Unfortunately, the Department of Education under Trump has scaled back on many regulations that were put in place during the Obama era to protect students and improve the outcomes of the for-profit sector. The Trump administration also weakened the borrower defense rule, which established a process for cancelling student debt for students that have been defrauded by their schools. In 2018, the Department of Education changed the information displayed on the College Scorecard, a government website created to inform prospective students on the costs and performances of different schools. Given the disproportionate amount of money for-profit colleges spend on recruiting and the predatory nature of their recruiting tactics, the government must step in to provide prospective students reliable information.
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