‘Troubling History’

Will Trump Clamp Down on For-Profit Colleges—or Reverse Obama’s Regulations?

The incoming president of the United States paid $25 million in November to settle lawsuits with people who believed they were ripped off by his for-profit ‘university.’

01.17.17 5:00 AM ET

That has lawmakers like Sen. Elizabeth Warren worried that a Trump administration won’t exactly be the most ferocious watchdog of the for-profit college industry, which has developed a reputation for peddling bogus diplomas and draining billions from federal coffers.

It’s an issue that should get national attention this week, as Betsy DeVos goes before the U.S. Senate for her confirmation hearing to be Trump’s secretary of education.

DeVos has not commented on the issue in the past, leaving a group of advocates for restrictions on for-profit colleges holding their breath, wondering what will become of the effort President Obama began to rein them in just over a year ago.

In a wide-ranging letter to DeVos last week, Warren made it clear she expects answers at the hearing.

“One of the most important functions of the Department of Education is oversight of public, non-profit, and for-profit colleges and universities that are eligible for the federal student aid program,” Warren wrote. “The Department administers billions of dollars in student aid and loans; in return, it has a legal responsibility to ensure that every institution of higher education that participates in the federal student aid program meets minimal standards to ensure that students receive the education they are promised and that taxpayer dollars are not wasted on loans to students who attend bogus schools.”

Warren said that in 2015, $8.1 billion was “shoveled” into student loans at “fraudulent, for-profit institutions under investigation or being sued for outright fraud, including billions to Corinthian Colleges before the company went bankrupt—the largest collapse of an institution of higher education in American history.”

After noting that “President-elect Trump’s only real foray into higher education was his own predatory sham ‘university,’ for which he paid $25 million for cheating students,” Warren pointed to DeVos’s lack of public comment on the issue.

“Given the troubling history of for-profit colleges in this country, it is critical that federal student aid dollars come with strong accountability mechanisms to ensure that students and taxpayers are receiving a return on their investment,” she said.

The letter includes a series questions that, Warren indicated, may come up during the hearing next week—including whether DeVos would commit to enforcing the new rules and the effort to hold schools with questionable records accountable for “defrauding” students.

While the tone of Warren’s letter betrayed some pessimism, to say the least, outside advocates said they were hopeful that Trump’s promise to weed out waste, fraud, and abuse would outweigh his penchant for fewer regulations in this case.

“As with everything with Trump, it’s a little unpredictable you have on the one hand that Trump ran Trump University, which was a predatory operation that used deceptive marketing to lure people into expensive programs and didn’t do much at all for their careers,” said David Halperin, a Washington, D.C., lawyer, critic of predatory college practices, and former speechwriter for the Clinton White House.

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The model of Trump U, he said, was “very much what many of the big for-profit colleges and even small for-profit colleges have been like over the last 20 years.”

But, Halperin added, “On the other hand, Trump campaigned against waste, fraud, and abuse with taxpayer dollars and for smaller government, [and] that is exactly what these for-profit colleges have been engaged in.”

Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, was hesitant to guess what Trump’s policy may be given the president-elect’s lack of positions on the issue.

“To my knowledge, neither Trump nor anybody associated with the campaign has addressed the epidemic of waste, fraud, and abuse in the for-profit sector,” Nassirian said. “Given that many of the millions of victims of the for-profit feeding frenzy may well represent Trump voters, I’m hoping that once settled in, his administration will also see the need for addressing the sector’s numerous problems.”

In 2014, the Obama administration announced that for-profit colleges would have to prove they were preparing students for careers or face having their federal aid revoked.

“Too many of these programs fail to provide students with the training they need—at the taxpayers’ expense and at the cost of these students’ futures,” then-Education Secretary Arne Duncan said at the time, according to CBS News. “That’s why we are taking action to protect Americans from poor performing career programs that burden students with debt and leave them few opportunities to succeed.”

“We had a significant rise in student loan defaults, and complaints about schools that were luring people into education programs that were really in their best interest,” said Bob Shireman, a senior fellow at The Century Foundation.

As the student debt rose, for-profit universities were expanding rapidly—and according to Shireman were aggressively pushing more people into degrees that would do little or nothing to forward their careers.

That’s when the Obama administration stepped in.

For-profits had to begin keeping track of how much debt their students were taking on versus their employment—the regulation, called the “gainful employment” rule, took effect in 2015.

A second rule, “defense to repayment,” was implemented in November 2016 and stated that if a student could prove that a school misled them or “engaged in other misconduct in violation of certain state laws,” their federal student loans could be forgiven.

Government investigations and crackdowns on for-profit colleges eventually led to the shuttering of several schools—including the massive Corinthian Colleges, which had its federal aid frozen after it failed to show that its advertisements were backed up with results for students.

The for-profit college industry has pushed back on the Department of Education’s moves, saying the regulations were unfairly administered. They hope that Trump’s administration will relax some of the restraints they see as unjust.

“The president-elect and his team have been clear that they will be taking a very close look at overregulation and ways to address that,” said Noah Black, a spokesman for Career Education Colleges and Universities, a trade organization that represents for-profit colleges.

“Additionally, in the weeks leading up to the election, and right after, we have seen the current Education Department step up efforts to shut down more institutions and in one case an accreditor,” Black said. “So any easing of these unilateral actions that provide institutions with little appeal or resource and cut off student access would be welcome.”