DeVos to Revise Two Obama-Era Rules Regulating For-Profits

The Education Department announced on Wednesday that two Obama-era rules aimed at regulating for-profit colleges would be changed, and that it will convene special committees to rewrite them.

The rules to be revised are the Gainful Employment rule and the Borrower Defense rule, which both aim to protect students from being taken advantage of by predatory for-profit colleges student loan practices.

“Unfortunately, last year’s rulemaking effort missed an opportunity to get it right,” Education Secretary Betsy DeVos said in a statement. “The result is a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs. It’s time for a regulatory reset.”

Under the Gainful Employment rule, which was put into effect in 2015, schools are regulated to ensure that graduates can pay off their loans when they graduate; estimated annual loan repayment of a typical graduate has to be at or below 20 percent of his or her discretionary income or 8 percent of his or her total earnings.

The Borrower Defense rule attempts to protect students from predatory policies and fraud by for-profit schools. It was set to take effect on July 1, but is now being paused by the department due to the planned revisions.

For-profit schools have complained that the definition of misrepresentation and breach of contract under the current rules are too broad and lack due process. Hearings on the regulations will be held in July.

Many consumer advocacy groups are troubled by the news and released statements criticizing the move. DeVos made an assurance that the 16,000 defense claims currently being processed by the department are still going to be fulfilled. “Promises made to students under the current rule will be promises kept,” she stressed.



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