For-profit colleges caught in regulatory tug of war

FULCRUM

Kristen Axtman

December 13, 2023

Axtman is a undergraduate student for Medill on the Hill, a program of Northwestern University in which students serve as mobile journalists reporting on events in and around Washington, D.C.

The Biden administration has taken aim at the for-profit college industry with a new rule to help prevent students from being saddled with massive debts. The fate of the program, however, could lie in who occupies the White House in 2025.

In September, the Department of Education announced its final Gainful Employment Rule (GER), which compels for-profit institutions and certificate programs to demonstrate that students who attend their schools fare better than if they had not attended.

Experts say the rule will save taxpayer dollars and hold for-profit institutions accountable. The Biden administration predicts the plan will protect approximately 700,000 students; however, the plan has not garnered support from both sides of the political aisle.

The GER, which was first enacted by the Obama administration in 2014, limits a student’s debt based on the borrower’s income, but the Trump administration abandoned this rule.

The Biden administration reinstated the rule and added a new provision requiring half of the graduates of the college programs to have higher earnings than someone who only has a high school diploma, which is about $25,000 nationally, but varies by state.

If a school fails these measures twice in a three-year period, it lose federal aid eligibility, which is a serious blow to their profits. According to estimates from the Brookings Institution, all for-profit colleges generate at least 70 percent of revenue from federal sources.

“The idea is that students will probably be less likely to enroll in those programs because they will no longer have access to the aid that they need to afford them, which will redirect students into programs that are more affordable and have better outcomes,” said Lydia Franz, a policy associate for the Institute for College Access & Success, a nonprofit that advocates for students to receive affordable and quality higher education.

Unlike nonprofit universities, for-profit institutions are not required to invest students’ tuition back into the school. They function as a business, meaning investors and stakeholders can make financial gains from the school. As a result, for-profit institutions are often more expensive.

Representatives of the for-profit sector say the gainful employment regulation unfairly targets their industry. Jason Altmire is president of Career Education College and Universities, a national association representing over 1,100 campuses. He said several programs at public and nonprofit colleges do not yield high wages after graduation, yet they are not subject to the same rules.

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