ED rulemaking includes input on controversial ‘gainful employment’ rules

The Obama administration has seen legal setbacks in its push for gainful employment rules.

The U.S. Department of Education (ED) will kick off a new round of public hearings on the oft-discussed “gainful employment” regulations, which the for-profit college industry has successfully fought in ongoing legal battles.

ED announced April 15 that it would launch a series of rulemaking proceedings covering a number of higher education issues, including the rules pushed by the Obama administration that would have prevented career-training programs, mainly at for-profit colleges – many with expansive online programs — from leaving students with unaffordable debt and limited employment options.

The rules were first proposed by the administration in 2009 after growing evidence and congressional inquiries showed that as the for-profit college sector grew – bolstered by the easy access of web-based courses – completion rates remained dismally low at some schools and students proved unprepared for the workforce.

Under the rules eventually implemented – described by many in education as watered down – a career training program would have to fail to meet three thresholds before that program was deemed ineligible for federal student aid funds.

For-profit college critics point to the public funding of many schools, as the industry receives about 85 percent of its revenue from taxpayers.

“That means all of us are paying for their ubiquitous advertisements, which promise students a better future, for their big CEO salaries, and for their high-priced lawyers and lobbyists,” David Halperin, a senior fellow for United Republic, a site that tracks how money is used in national politics, wrote in an April 15 blog post. “If the gainful employment rule is helping to eliminate some of the worst excesses of the for-profit college sector, those that have truly been ruining students’ lives, can it go further and actually force the industry to offer programs that are reasonably priced and actually train students for careers? I think that will take some time.”

A contingent of advocacy groups, including several representing military veterans who have long supported more stringent regulations on for-profit schools, sent a letter to President Obama urging him to “promptly [propose] a strong new gainful employment rule.” The group said the federal court ruling that struck a blow to gainful employment rules also “confirmed the need for the regulation.”

“The Department has set out to address a serious policy problem, regulating pursuant to a reasonable interpretation of its statutory authority,” the federal court wrote after passing down its decision. “Concerned about inadequate programs and unscrupulous institutions, the Department has gone looking for rats in ratholes — as the statute empowers it to do.”

Advocates of the administration’s “gainful employment” regulations were disappointed last July when federal judge has struck down a key provision after a lengthy legal battle with lawyers representing some of the country’s largest for-profit college companies.

The court decision left “students and taxpayers exposed to unscrupulous schools that seek to swindle them and routinely saddle students with debts they cannot repay,” said Pauline Abernathy, vice president of the Institute for College Access and Success, a nonprofit research organization that seeks to make higher education more available and affordable saying it.

For-profit college enrollment has taken a hit in the interim.

Government figures released in October showed that total enrollment in higher education shrunk nationally in the fall of 2011 for the first time in at least 15 years. The overall decline was just 0.2 percent, but it was driven by a 2.9 percent drop in the for-profit sector, which offset an increase at 4-year non-profit colleges (for-profit colleges enroll about 11 percent of students overall).

Last fall, the Apollo Group, Inc., parent company of the University of Phoenix, announced it would shutter roughly half its physical locations, though current students will be able to continue in their programs. The announcement came after University of Phoenix enrollment numbers dipped from a high of 475,000 in 2010 to 328,000 students in 2012.