For-profit colleges came under attack when the Obama Administration was in power, but easier sailing is expected under President Trump and Education Secretary Betsy DeVos.
In response, Illinois Attorney General Lisa Madigan and several other attorneys general sent an open letter to DeVos urging her to keep protections in place designed to stop predatory practices by for-profit schools. Joining Madigan in sending the letter to DeVos were attorneys general from Delaware, District of Columbia, Hawaii, Iowa, New Mexico, Maryland, Massachusetts, Minnesota, Oregon, Rhode Island, and Washington.
At the heart of their concerns, the attorneys general fear that the Department of Education under DeVos’ charge will roll back federal protections such as the gainful employment rule. The gainful employment rule requires schools including for-profit colleges to graduate students with certificates that lead to well-paying jobs. If that does not happen, then they run the risk of losing federal financial aid.
In addition to keeping the gainful employment rule intact, the attorney generals want to maintain strict oversight over for-profit school accreditors that provide quality assurances. They also expressed support for the continuation of the Borrower Defense to Repayment Rule which provides borrowers with a fair and transparent process if they have been defrauded by a for-profit school.
While urging DeVos to keep key for-profit regulations, these attorneys general may face an uphill battle in their quest. Not only do Secretary DeVos and President Trump have ties to the for-profit college industry, but DeVos wasn’t committed during her senate confirmation hearings when asked if she would keep the gainful unemployment rule in the books.
The letter pointed to thousands of complaints that these attorneys general had received on higher education each year. It was noted that a large number of these complaints revolved around students taking out student loans to attend for-profit schools only to graduate with a worthless degree.
“I am urging Secretary DeVos and the Congress to protect New Mexico students from the great harm that is inflicted when these corporations put profits of over people,” said New Mexico Attorney General Balderas in a press release this week. “I will continue to fight at the state level to protect New Mexicans from abusive practices that can ruin their finances and harm their families, but Secretary DeVos must act at the federal level to ensure federal protections for our students.”
The state of these attorney generals’ student borrowers reveals the motivations behind their actions. For-profit colleges have been viewed as a serious catalyst to the issues brought on by student debt. According to government data, a significant portion of defaulted student loans funded for-profit college education.
New Mexico’s average student loan debt of $20,000 may be less than the national average, but 57% of its graduates owe at least one student loan according to LendEDU’s data. Attorney General Madigan’s students owe roughly $30,000 on average with 65% of students borrowing loans.
How much of this debt is due to for-profit colleges exactly? The exact number cannot be known. One thing is for certain. Student debt is growing considerably every year, and looser regulations on for-profit industries could open the door up for increased student lending.
Despite this pessimistic scenario, there is another interesting take on the situation. While looser regulations on for-profits could lead to more student loans, the privatization of student loans could potentially eliminate student lending for for-profit attendance.
It is generally speculated that President Trump favors privatizing the student loan industry. Making such a transition would theoretically lead to a student loan underwriting process that is much stricter than the current system.
Such a scenario would actually lead to fewer loans taken out for schools that are deemed too risky by some private lenders. Since for-profit graduates were found to make less and are more likely to default, obtaining loans to attend for-profit schools would be much harder.
Author: Dave Rathmanner
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