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Critics give proposal to lower student debt a failing grade

Bobbi Dempsey

In its attempts to hold colleges, universities and vocational schools more accountable for the student debt they generate, the U.S. Department of Education has so far pleased few. Its proposed gainful employment rule is suffering a Goldilocks syndrome in which the public complains it’s either too hot (goes too far) or too cold (not far enough). So far no one seems happy with the temperature as it stands.

The rule would cut off financial aid to for-profit career programs and nonprofit or public institution certificate programs whose students are deemed to spend too much of their annual earnings on student debt or who have high default rates on student loans. The rule is intended to motivate schools to keep student debt at a reasonable level by requiring them to show they are preparing students for jobs that would allow them to realistically repay their debt.

Opponents — mainly for-profit schools — say the rule will end up harming students and restricting access to the education they need. Those in favor of the measure say that while the spirit of the rule is good, the latest version is too watered down and will allow many people to fall through the cracks. Proposal to lower student debt leaves many dissatisfied

It seems obvious that there is a need for something to be done to help protect students against massive amounts of debt they will be unlikely to repay. Student debt is soaring, with “career colleges” and for-profit schools accounting for a large share of that debt. According to the U.S. Department of Education (DOE), students at for-profit colleges account for about 31 percent of all student loans and nearly half of all loan defaults, even though they represent only about 13 percent of the total college population.

Complaint: ‘Too hot!’
Critics say the proposed rule would harm minority, female and low-income students as well as students who are veterans. In May, the Association of Private Sector Colleges and Universities submitted a package of comments (more than 200 pages long) to the DOE, making its case. In the letter accompanying those comments, the APSCU says, “The proposed rule is unlawful and will needlessly harm millions of students who attend private sector colleges and universities. APSCU respectfully requests that the Department withdraw the proposed regulations and instead engage in meaningful dialogue with private sector schools and other stakeholders, in an effort to reach shared, attainable goals.”

The organization says 7.5 million students could lose access to higher education by 2024 under the proposed regulation. It complains that while the DOE assumes that nearly all of those students would find alternative programs, APSCU’s analysis shows that few alternatives exist — especially since, the organization insists, the gainful employment rule would create incentives for schools to avoid low-income students.

The most high-profile example of federal aid accountability enforcement at for-profit schools involves Corinthian Colleges, which suffered a three-week freeze on financial aid payments in June after allegedly failing to comply with DOE requests to provide aid-related documentation. The freeze proved too much for the already financially distressed company and Corinthian announced in July that it will sell 85 of its U.S. schools and gradually close the remaining dozen as part of an agreement with the DOE. The decision affects the more than 70,000 students who attend schools across North America run by Corinthian.

Complaint: ‘Too cold!’

Even those in favor of a gainful employment rule are far from happy with this latest effort. They say that while the spirit and purpose of the rule is good, the wording is so watered down that it will miss many of the students it was designed to help.

Rory O’Sullivan is deputy director of Young Invincibles, a national organization designed to help young people take an active role in important issues. “I’m frustrated at the most recent draft,” he says, but adds he was encouraged by the strong reaction from young people in favor of action to protect students. “The for-profit schools have a well-funded, effective lobby, but our side made a huge push as the public comment period closed. We made sure student voices were heard and had well over 100,000 signatures.” The organization was collecting signatures in support of its request for a stronger version of the rule, with no loopholes and tougher accountability standards.

Get involved
The final version of the gainful employment rule won’t be released until this fall, so it’s too early for students (and soon-to-be students) to know exactly what impact, if any, the rule will have on them. Meanwhile, O’Sullivan encourages students and debt-strapped graduates to become active in Young Invincibles or one of the other organizations — such as The Institute for College Access & Success or the U.S. PIRG Higher Education Project — designed to give people struggling with student debt a voice in future student debt legislation and policy changes.

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