This week, in a conference room in Washington D.C., various stakeholders of the federal student aid programs will meet to discuss whether there should be any check on the cost and value of vocational training programs that receive public money. The negotiated rulemaking committee formed by these various stakeholders, and representatives of the Department of Education, will meet several more times before the for-profit college industry will get to write the “gainful employment” rule that will pose the least difficulty to its business model early next year.
Act one of a similar regulatory theater took place last month, when the Department convened a negotiated rulemaking on the topic of borrower defense, the process by which student borrowers who have been cheated by their schools can seek loan cancellation. This rulemaking will likely displace the borrower defense rule enacted just last year, which the Trump administration delayed after taking office.
As someone who represented the legal aid constituency in the most recent negotiated rulemakings on gainful employment and borrower defense, I understand why these two regulations are the focus of the Department’s regulatory agenda. If allowed to operate, both borrower defense and gainful employment would bring a measure of accountability to an industry that continues to do seemingly everything imaginable to discredit itself.
As a negotiator on the 2013 gainful employment rulemaking, I tried unsuccessfully to convince the Department that loan cancellation is a necessary component of any gainful employment regulation. It seems obvious that students who borrow to attend a program that purports to provide skills necessary for a vocation, but which on the whole fails, have been cheated. And the Department plays a role. It is supposed to act as a gatekeeper. No matter how many fine print disclaimers the Department may make, disavowing any role in assessing the quality of program a borrower decides to attend, the ability of a student to borrower loans from the government to pay for education sends a strong signal that the program must be a good one. Why else would the government be willing to lend money?
In 2013, on behalf of the legal aid community, I proposed that the Department recognize gainful employment metrics as the basis for an affirmative borrower defense by students who attended failing programs. In response, the Department proposed to amend the borrower defense regulation—not the subject of the rulemaking—to specify that gainful employment metrics could NOT form the basis of borrower defense. Then it went a step further, and proposed eliminating the borrower defense regulation altogether. We were able to defeat this proposal, but the final rules on gainful employment did not contain any provision for loan cancellation for students who attended programs that by the Department’s own definition provided more debt burden than value. Although the Department recognized “the desire to ease the debt burden of students,” the “issue requires further consideration” and therefore the Department “will continue to explore ways to provide debt relief to students in future regulations.”
This was in October 2014, almost two years after the Department had requested information from Corinthian Colleges, Inc. regarding its placement rate data, and several months after the Department placed the company on heightened cash monitoring, restricting its ability to draw down federal student aid. Within six months, before the gainful employment rules would even go into effect, the Department had fined Corinthian for misleading students, precipitating the school’s closure and bankruptcy.
Later in 2015, the Department convened the first borrower defense rulemaking because of a “building debt activism movement.” Every student loan contract since the mid-1990s has, in line with guidance from the Federal Trade Commission and Congress, provided for loan cancellation upon a showing that the loan was the product of school misconduct. The Department has said on multiple occasions that it was caught off guard by borrower defense, as it had only received a handful of such claims in the decades prior to 2015. But that year alone, it would receive tens of thousands of applications. The first tide of applications came from students organized by the Debt Collective, an organization that stepped into the void between rights and remedies for borrowers. The Department didn’t have any process or even a form for borrowers to assert this contractual right until the Debt Collective created one.
Thirty thousand people have gotten justice in the form of loan cancellation because of borrower defense. There are close to 100,000 applications pending. The majority of these claims have been from students of Corinthian Colleges. Second behind Corinthian is ITT, a school that declared bankruptcy in 2016. Not coincidentally, close to 80% of ITT’s programs would not have passed the gainful employment regulations.
The writing was on the wall when the Department tried to stealthily remove the borrower defense regulations in 2013. And it is no less clear today than it was then that there is a massive problem with the federal student aid program. This program was intended to alleviate rather than reify, or worsen, the wealth gap in our country. Those looking to obtain the basic skills and credentials that the labor market now requires for entry-level positions in trades should not have to take on massive amounts of debt that they will never be able to repay, even under the best-case employment scenario. And the Department should not enable this zero-sum game between students and an industry that takes taxpayer dollars as revenue and creates a near dollar-for-dollar wake of individual debt.
Thankfully, despite the current climate, I see no indication that this genie will ever go back into the bottle. Even the Higher Education Act reauthorization bill introduced in Congress last week, in all of its meanness, did not go so far as to take away the right of students cheated by for-profit schools to seek loan cancellation. The longer this industry survives, the more debt it creates without returning any value to society, the closer we come to a reckoning. No matter what happens this week in a conference room in Washington D.C.