The Department of Education's proposed "gainful employment" rule is a step forward but falls short of protecting consumers from unaffordable debt created by predatory educational programs at for-profit colleges, according to the Center for Responsible Lending.
"The rule, as it stands now, does not adequately protect students," said Maura Dundon, senior policy counsel at CRL. "It allows too many students to emerge from for-profit institutions with no ability to repay their loans. No career-college student should ever say that 'going to college was the worst mistake in my life' because of her student loans."
"While we welcome the Department of Education's focus on for-profit colleges, the proposed rule does not measure up to the gravity of the abuses faced by consumers in the higher education market," continued Dundon. "Students at these for-profit institutions are incurring tens of thousands of dollars in debt. Their inability to repay their loans indicates that the programs have not prepared them for the workplace."
In the days leading up to the proposed rule's release, CRL and a coalition of over 50 organizations advocated for a strong, comprehensive rule that would gauge the outcomes of both graduates and non-graduates of for-profit institutions, improve debt-to-income standards, and create a process to disqualify low-performing schools from receiving federal financial aid.
Chief among the coalition's concerns was the ability of students to repay the often unaffordable levels of student loan debt necessary to attend for-profit schools.
The rule would disqualify programs only if graduates reached high levels of debt over multiple years or if graduates and former students default at high levels – however, the acceptable debt-to-income ratios are set too high for students to curb their excessive loan burdens and the rule does not prevent schools from manipulating default rates. Moreover, it does not provide any relief to students enrolled in failing programs, nor does it adequately screen programs in advance to ensure they prepare students for employment.
"This is an important rule – one that requires considerable foresight and deliberation" said Dundon. "And while we believe the rule is on the right track in measuring debt outcomes, it simply does not do enough. Students at for-profit colleges, including low-income and students of color, are racking up tens of thousands of dollars of bad debt with little to show for their investment. With a strong, robust gainful employment rule, we can ensure that education truly improves a student's financial future."
For more information, contact Catherine An in DC at 202-349-2878 or catherine.an@responsiblelending.org.