The Trump Administration Has Set Up Students To Be Harmed by Unscrupulous Colleges During This Recession
During the Great Recession, tens of thousands of college students were in financial danger. A bad economy plus aggressive recruitment efforts led to massive spikes in enrollment, especially among low-income, first-generation, and students of color attending private for-profit colleges. Too often, students were lured in by mirages—promises of high-quality programs that turned out to be expensive paths to nowhere.
Now, another recession, the result of the COVID-19 pandemic, has created the same temptations for greedy college executives, and students are no better protected, thanks to the efforts of the Trump administration to dismantle safeguards put in place to protect students after the Great Recession. Enrollment is now ticking up at private for-profit colleges after years of significant declines, while several public colleges have purchased former for-profits, helping those institutions obtain nonprofit tax status even as they allegedly keep operating like private businesses. Policymakers should be very worried about the potential harms unwitting students face in the months ahead.
The Department of Education under the Obama administration took several steps to address the worrisome behavior colleges displayed during and after the Great Recession. While decidedly imperfect and arguably not aggressive enough in many cases, these reforms did strongly signal to colleges the need to shape up, and the federal government shut down some of the worst actors.
The highest-profile efforts to improve college accountability were through regulations. This included the gainful employment rule, which prevented career training programs from receiving federal financial aid if their graduates had too much debt as a percentage of their earnings. It also included the borrower defense regulation, which set up a process for canceling loans held by students whose colleges took advantage of them and then seeking to recoup the costs from the institutions. And there was the state authorization rule, which tried to make states bigger players in overseeing online colleges in which their residents were enrolled, regardless of where those institutions were headquartered.
There were less attention-grabbing changes that also mattered. Included in the borrower defense regulation was a provision to prevent colleges from using mandatory arbitration—a tactic that makes it much harder for students to have their day in court. Another provision offered borrowers an automatic path to loan discharge if their college closed, so they wouldn’t lose relief for lack of filing paperwork. At the start of the Obama administration, the Education Department also closed loopholes around recruitment practices, making it harder for colleges to pay incentives or bounties to recruiters based on student enrollment.
Importantly, the Department of Education also changed how it operated. The Federal Student Aid Office created an enforcement unit headed by a highly experienced investigator from the Federal Trade Commission and brought in a team of lawyers to investigate colleges. It set up cross-agency collaborations to share information and address issues related to private for-profit colleges. It attempted to prevent an accreditation agency that had given rubber-stamp approval to too many lousy colleges from continuing to grant access to federal financial aid for institutions. It unveiled an ambitious plan to better hold student loan servicers accountable. And in perhaps the highest-profile moves, it oversaw the ends of both Corinthian Colleges and ITT Technical Institute—two of the worst large for-profit college chains.
These efforts weren’t always perfect—in particular, the more aggressive actions against places such as Corinthian and ITT Tech should have been undertaken years earlier—but they did send a signal that oversight and accountability should be taken seriously.
Until the Trump administration took over.
No plan, just undoing
A college looking to take advantage of its students couldn’t have asked for a better four years than what the Trump administration afforded. Rather than promoting any sort of meaningful agenda for higher education, it simply pursued a goal of undoing anything the prior administration had done.
Consider the rulemaking front. The regulations related to gainful employment and borrower defense? The administration eliminated them. This administration’s version of the borrower defense rule set standards for student borrowers to prove they were harmed that are functionally impossible to meet, allowed colleges to keep using mandatory arbitration, and even got rid of the automatic path to loan forgiveness after a college closes. This move was so unpopular that Congress passed a bipartisan resolution to overturn the rule, prompting President Donald Trump’s first domestic policy veto.
The administration partly justified the undoing of the gainful employment rule on the grounds that it would provide consumers with greater transparency to guide student choice. That hasn’t really happened either. It did add data on the first-year earnings for graduates of different types of programs to the College Scorecard website. But it also took away data on repayment rates and how college graduates’ earnings compared to those of high school graduates from the easy-to-use public tool, burying that information in large spreadsheets no student will navigate. It’s also stopped regularly updating the most important data.
The current administration has also undone or weakened most of the nonregulatory mechanisms to protect students. The enforcement unit was disbanded in all but name, and most of its personnel left. After a court decision required the Education Department to reevaluate the agency, the department reinstated the troubled accreditor the Obama administration tried to bar from granting access to the federal aid programs. The cross-agency work also stopped. Instead of shutting down problematic colleges, the department approved the sale of a troubled chain of for-profit colleges to an inexperienced nonprofit that ran the institutions into the ground and left thousands of students in the lurch. A competition for improved student loan servicing has stalled among multiple cancellations and leaves servicing for 33 million students heading toward disaster next year.
Meanwhile, the agency rewrote long-standing rules on accreditation in ways that significantly weaken standards. Its changes allow colleges that do not meet standards significantly more time with and continued access to federal financial aid, extend taxpayer money to schools even after the Education Department or another regulator deems the institution unqualified to participate in the federal aid programs, make it easier for companies to purchase and revive failed schools, and reduce oversight when colleges expand or outsource programs to unaccredited entities. The changes also reduce oversight of accreditation agencies and public transparency into the federal recognition process for accreditors, increasing the odds of a race to the bottom in quality assurance. Finally, the agency limited states’ ability to conduct oversight of online programs operating within their borders.
Essentially every major administrative reform put in place to protect students following the last recession is gone. As the country hits another economic downturn, this should raise serious concerns that students may become significant targets for predation with little to protect them.
The best hope at this point is that prior actions had a large discouraging effect on bad college behavior. That’s possible, but it’s not a lasting guarantee. A desperate institution could always choose to go back to the previous style of business—a risk that only increases if colleges are pressed to find more students.
The Department of Education has not even completed its responsibilities to help students overcome the damage done by predatory actors during the last recession. It is still working through a backlog of tens of thousands of applications from borrowers seeking relief because of allegations their colleges took advantage of them. Now, thousands more students are being set up for similar harms—many of which could have been prevented were it not for the actions of the Trump administration.
Ben Miller is the vice president for Postsecondary Education at the Center for American Progress.
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.
Vice President, Postsecondary Education