UPDATE, August 28, 9:45 a.m.: The nation’s top student loan regulator, Seth Frotman, resigned Monday. In his resignation letter, the former student loan ombudsman at the Consumer Financial Protection Bureau accused the agency’s acting director, Mick Mulvaney, and the Trump administration of “undermining the CFPB and its ability to protect student borrowers,” NPR reported. “Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting,” Frotman wrote in his letter addressed to Mulvaney. “Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.”
Betsy DeVos gets a lot of notice for her terrible anti-trans stances and her lessening of protections for victims of campus assault. Less reported is how she is also making moves to create a perpetually indebted and undereducated underclass. It’s a quieter way of undermining education in America, but it’s no less dangerous: the propping up of for-profit colleges that fail to provide a meaningful education but do a great job at taking student money and rolling back Obama-era protections for borrowers duped by those colleges.
At the same time, the Trump administration is working on other fronts to ensure that higher education is undermined by a profit motive. The president’s son-in-law Jared Kushner is now apparently overseeing a White House special office dealing with higher education.
Make no mistake, these efforts are being driven by greed, plain and simple. And, like with other policies under the Trump administration, these changes will have a negative disparate impact on people of color—and veterans.
Earlier this month, Education Secretary DeVos scrapped an Obama-era regulation that required for-profit schools to prove that their students were able to get actual decent-paying jobs after their course of study. Known as the “gainful employment” rule, for-profit colleges fought it every step of the way, including multiple lawsuits. The rule packed quite a punch: Schools that were doing nothing but saddling students with debt could see their federal funding revoked.
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Federal funding is vital to the for-profit college scheme. It takes public dollars and diverts them to private companies and leaves students on the hook. Roughly 200 for-profit colleges get almost all their funding from the federal government. They’re also a large percentage of the schools that failed the requirements of the gainful employment rule.
The worst of the for-profit schools get students in the door by falsely claiming they have very high rates of post-school employment. Corinthian Colleges famously claimed placement rates as high as 92 percent for one of their accounting programs in Florida when the rate of placement was actually 12 percent. (And lest you think that was limited to that program, they also claimed an 85 percent placement rate for a medical assistant program in Los Angeles when the actual rate of placement was zero.) Under Obama, the federal government fined Corinthian $30 million for that fake job data, while the Consumer Financial Protection Bureau sued them for using those same imaginary placement rates to get students to take out expensive private loans as well.
If these for-profit schools had to follow the gainful employment rule as instituted under Obama, they’d stand to lose $5.3 billion in federal funding over the next ten years. Now, that money will continue to flow to for-profit schools regardless of whether they’re deceiving students or are genuinely able to place students in the jobs for which they are ostensibly trained.
Under the Obama administration, students also at least had a possibility of some recourse if they were buried in loans that they only took out thanks to the deceptiveness of institutions like these. However, DeVos is getting rid of that too. She’s planning on rolling back the loan forgiveness rules the U.S. Department of Education (DOE) put in place prior to Trump taking office. Those rules allowed students deceived by schools like Corinthian to get out from under some of those loans. Now, they’ll have to prove they’re financially distressed or that their school intentionally misled them. Those are both awfully high bars to clear. Indeed, in order to prove them, students would have to provide information such as drug test results and job performance evaluations, both of which could impact their future employment.
If that wasn’t bad enough, DeVos has found other ways to roll back Obama-era protections that helped reduce systemic abuses, clearly as part of her comprehensive effort to favor for-profit schools.
Many for-profit schools are accredited by the Accrediting Council for Independent Colleges and Schools (ACICS). Being accredited means that federal dollars will flow to the school. But in this instance, the accreditor itself was bad. Under Obama, ACICS was stripped of the right to accredit, particularly because it had accredited Corinthian and ITT Tech, both of which eventually shut down after lying about their job placement statistics. Recently, DOE career staff determined that ACICS didn’t meet 57 of 93 federal compliance standards and issued a lengthy report revealing their findings. DeVos reinstated their right to accredit anyway, even though the report showed that ACICS still didn’t have a standard for when it reported fraud and abuse to the department, nor had it resolved certain conflicts of interest, and nor did it have appropriate procedures for determining whether the institutions it oversaw were following with federal financial aid laws. Bad accreditation principles lead to bad schools being accredited.
Now with Kushner overseeing a special office dealing with higher education in the White House, all bets are off. A few weeks ago, he held a meeting about accreditation. Kushner, of course, has no particular experience whatsoever with higher education policy. Unsurprisingly, the meeting included groups like Strada, a nonprofit that works with the United States Chamber of Commerce. The Chamber would like to see businesses take a greater role in the accreditation process, perhaps even replacing traditional processes with an employer-driven “quality assurance and supplier certification system” based on what employers have learned about supply chain management. This isn’t the language of higher education, of helping people thrive. This is the language of allowing employers to dictate to institutions what they want in a worker.
Finally, for-profit schools need to, obviously, turn a profit. That means they’re often driven by a goal of enhancing their bottom line rather than educating students. Many of them have historically spent substantially more on marketing and recruitment then they do on actual student instruction. Perhaps because of that shoddy instruction, students leave in droves. A U.S. Senate report from 2012 found that nearly 63 percent of students seeking an associate degree at for-profit colleges left before they earned that degree—but not before they were saddled with debt.
These schools target nontraditional and already economically disadvantaged or historically marginalized students and give them nothing in return. African American and Latino students make up a disproportionate amount of the enrollment at for-profit colleges. For example, 28 percent of all African American students attending a four-year college attend a for-profit institution, compared with only 10 percent of white students. Additionally, students at those institutions pay tens of thousands of dollars more than if they’d attended a public school such as a community college. Enrollees at for-profit schools also end up with significantly lower earnings than their counterparts that attend public schools. For-profit schools also target veterans because then they can scoop up GI Bill funding in addition to federal loan funding. (In 2014, a Senate report showed that, of the top ten schools receiving GI Bill funding, eight were for-profit schools).
All of this adds up to something more awful than the sum of its terrible parts: the creation of a permanent underclass—disproportionately made of up people of color and veterans—that is undereducated and over-indebted. Putting people in that position ensures that they will need to continue to work at whatever job they can find—jobs that are often low-wage positions. Indeed, an absurd one in three students who complete a for-profit certificate program earn less than if they just took a full-time minimum wage job.
Even for people that do complete a degree at a for-profit school, employers often look askance at degrees obtained from for-profit institutions and are 22 percent less likely to advance those individuals through the hiring process. It also disadvantages them in other ways. Carrying student loan debt can affect the ability to purchase a house, for example.
The new Gilded Age we’re currently in requires a massive workforce of people that don’t make a lot of money but desperately need jobs. Amazon, for example, wouldn’t be nearly as profitable if it didn’t have people competing to be an Amazon warehouse employee to make around $14 per hour. The same goes for Walmart.
If people could actually get a meaningful training-based education, as for-profit schools promise but fail to deliver, it can improve one’s chances to enter the middle class. Targeted career assistance to first-time students—something for-profit schools sorely lack—helps them find jobs that are both a good fit and increase their earnings substantially over time. Research suggests for-profit schools do just the opposite.
Betsy DeVos is a perfect avatar for the Trump era and Gilded Age 2.0. She is personally worth $1.3 billion, wealth largely obtained by employing people in the pyramid scheme that is multi-level marketing company Amway. Who better to ensure a constant supply of low-wage, low-prospect workers? And what better than Donald Trump’s grifter-laden administration to oversee a massive transfer of taxpayer dollars—in the form of federal aid—to private for-profit schools? And the ancillary effect of harming people of color, in particular, is just icing on the cake for an administration that has proved to be shockingly racist.
In the end, Betsy DeVos will enrich her cronies and the administration will back her doing so. And that means for-profit schools will always continue to win, and their students will continue to lose.