WASHINGTON — The Trump administration intends to scrap limits on the debt students amass in career training programs, undoing an Obama-era initiative that sought to tighten federal oversight of for-profit colleges, according to people familiar with the plan.
Education Secretary Betsy DeVos had previously signaled her skepticism about what is called the “gainful employment” rule, delaying enforcement of key provisions as the Education Department studied revisions.
A department spokeswoman said Friday that the course of action has not been finalized. But two sources familiar with the matter, who spoke on the condition of anonymity, confirmed the plan to rescind the rule.
SCHOOLS LOBBY CONGRESS
Under the Obama-era rule, issued in October 2014, for-profit colleges face cutoff of federal funding if they fail to meet conditions that limit debt relative to income after students leave school. The rule aimed to ensure that graduates moved into gainful employment, not low-level jobs that fail to provide enough income to pay off student loans.
The Obama administration spent years battling for-profit colleges as it developed the rule. The industry mobilized to fight the crackdown on Capitol Hill and in the courts. Republicans in Congress denounced the rule as an executive branch overreach intended to hobble a sector of higher education that serves many low-income adults. But most congressional Democrats contended it was a win for consumers.
When the final version was released, Arne Duncan, who was education secretary at the time, said the rule was necessary because “too many hardworking students find themselves buried in debt with little to show for it.”
LIMIT ON LOAN PAYMENTS
The rule covers programs at for-profit colleges and nondegree career programs at public and private nonprofit colleges. Nearly all programs in jeopardy of violations are at for-profit colleges.
The rule stipulates that loan payments for a typical graduate cannot exceed 20 percent of discretionary income or 8 percent of total earnings. Programs not meeting those benchmarks face warnings and sanctions. Repeated violations over a few years could lead them to be ineligible to participate in federal student aid, which could sound the death knell for schools that rely on students’ being able to obtain federal grants and loans.
The rule also requires schools to disclose more information on the likelihood of graduation and on former students’ earnings and debt.
The Trump administration’s plan represents a major victory for a sector battered by years of declining enrollment and the implosions of for-profit Corinthian Colleges and ITT Technical Institute. Tens of thousands of students were left in the lurch when those chains closed.
Nationwide, about 1.4 million students were enrolled in for-profit institutions in fall 2016, down 40 percent from the peak in 2010. Public colleges had 14.7 million students in 2016, while private, nonprofit colleges had 4.1 million.
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