Financial Advice

Trump Department of Education Gives a Holiday to For-Profit Schools

Back in 2014 the Obama administration attempted to push forward the rule that would have required for-profit colleges to demonstrate the value of the education they were selling or get cut from federal student loan access.

This final rule was intended to protect students at for-profit schools and colleges from becoming burdened by student loan debt they cannot repay.

The Wall Street Journal said, “The move delays new rules known as “gainful employment” that formed a key piece of former President Barack Obama’s higher-education agenda. It could ultimately help for-profit colleges avoid sanctions if they prove the government data underpinning the rules is flawed.”

“Career colleges must be a stepping stone to the middle class. But too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable,” U.S. Secretary of Education Arne Duncan said in 2014. “These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes. We will continue to take action as needed.”

Under the regulations finalized in 2014, a program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings. Programs that exceed these levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.

Yesterday the Department of Education under Education Secretary Betsy DeVoss issued a pass to impacted schools whose Gainful Employment data was due by Friday.

Schools will now have until July 1, 2017 to submit data but we will have to see if this delay turns into the slow death of this program.

One opinion is that schools should not have to be responsible for selling effective education and gives students a chance at future success instead of debt. In a free-market system it is thought consumers should have to fend for themselves and if they make bad decisions and take out loans for ineffective schools or education, oh well.

What’s your opinion, should schools have a responsibility to make sure their students don’t get buried in debt and their education is effective or should it just be every person for themselves?

Steve Rhode
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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.