*Updated, July 27:
TIME’s Elizabeth Dias has this report:
The Department of Education has poured more gas on the for-profit career college fire. Today it unveiled proposed regulations designed to protect for-profit students from debt traps and taxpayers from footing the bill when students default on their loans. For-profit schools must demonstrate how they prepare students to be gainfully employed to qualify for financial aid. “Gainful Employment” will be determined by student loan repayment and the relationship between loan debt and average earnings. (Catch up on TIME’s developing for-profit story here.)
Senator Tom Harkin, who is leading the Senate Health, Education, Labor and Pensions Committee’s oversight investigations into for-profit schools, cautions that while the DOE regulations may be a productive start, they may not go far enough. “At first glance, the regulation appears to set a low bar. If we are allowing a school to continue to walk away with taxpayer dollars, despite the fact that less than a third of its students are able to repay their loans, that would seem to be a case of shockingly low expectations,” Harkin said in a statement.
The Career College Association has deeper gripes with the gainful employment regulations, called them “unwise, unnecessary, unproven,” “likely to harm students, employers, institutions and taxpayers,” and “unlawful, since the Department of Education lacks the statutory authority to impose such a new measure.” The Career College Association declined to comment further on the DOE, but told TIME last week that Senator Harkin’s office and the HELP committee education policy team has become increasingly closed to hearing CCA perspective and research. Sen. Harkin’s spokesperson, Bergen Kenny, points to their office’s openness to hear for-profit college perspective. “Our policy team has met with CCA members and lobbyists numerous times this year, and have considered all of the research they have sent. We have requested information from them, and are still waiting for that
data. We continue to be open to their perspective, and to hearing an explanation for the current abuses in the for-profit sector.”
Other critics continue to insinuate that hedge funds and investors may be underhandedly driving these proposals in order to capitalize on the for-profit education sector’s regulation. Today, Citizens for Responsibility and Ethics in Washington filed a Freedom of Information Act request to see communication records between DOE officials, prominent for-profit entities, and individuals/firms who may have criticized the for-profit sector for financial gain, including the following: investor Steve Eisman (who testified at the HELP committee hearings and is openly short the for-profit education sector), Eisman’s firm FrontPoint Partners, Morgan Stanley Investment, Inc, and Johnette McConnell Early, who ProPublica reported was working for an undisclosed investment company to solicit homeless shelters’ signatures on a letter to the DOE alleging for-profits exploit their clients.
The HELP committee will continue to investigate the for-profit education sector in a second hearing on August 4.
Here are details on the proposed regulation.