DOE Makes It Easier for Predatory For-Profit Coding Schools to Dupe Students

Department of Education (DOE) Secretary Betsy DeVos is making a critical rule change that will allow for-profit schools and career certification providers to prey on unwitting students. It could also mean the proliferation of even more suspect coding schools.

In the summary of a document titled “Program Integrity: Gainful Employment,the Office of Postsecondary Education, Department of Education writes:

The Secretary of the Department of Education (Department) amends the regulations on institutional eligibility under the Higher Education Act of 1965, as amended (HEA), and the Student Assistance General Provisions to rescind the Department’s gainful employment (GE) regulations (2014 Rule).

The rule change is set to take affect July 1, 2020.

The “Gainful Employment” (GE) rule is a critical one. It requires for-profit colleges to make debt-to-earnings ratios available to students or potential students. This per-program ratio displays students’ earning potential so they could better understand their earnings and debt carried after graduation. (It was also a mandatory disclosure for schools that wanted federal funding.)

For example, if someone were to sign up for a 10-month web developer program at a cost of $18,000, the Gainful Employment rule meant the school would have to tell them what they’d make upon graduation (if they even found a job). The student (or potential student) would then know they were assuming $18,000 in debt, in addition to their potential earnings, which allowed them to make a more informed decision about whether they could afford the program.

Schools had to publicly post their debt-to-earnings figures, too, which the DOE now says is unfair. From its report:

The Department has determined that the GE regulations rely on a debt-to-earnings (D/E) rates formula that is fundamentally flawed and inconsistent with the requirements of currently available student loan repayment programs, fails to properly account for factors other than institutional or program quality that directly influence student earnings and other outcomes, fails to provide transparency regarding program-level debt and earnings outcomes for all academic programs, and wrongfully targets some academic programs and institutions while ignoring other programs that may result in lesser outcomes and higher student debt. Although the GE regulation applies to less-than-degree programs at non-profit institutions, this represents a very small percentage of academic programs offered by non-profit institutions

The DOE is arguing that for-profit schools are playing by different rules than non-profit schools, and that’s unfair. It’s also asserting a four-year degree in Computer Science and a 10-month certification in web development are not the same thing… but that both institutions should follow the same governance for reporting data, because for-profit schools are wrongfully targeted by the GE rule.

But there’s good reason for the GE rule: For-profit schools are notoriously suspect; for-profit certification provider ITT folded because it couldn’t display an appropriate debt-to-earnings ratio, which affected its federal funding and financial aid status. More recently, Woz U has raised eyebrows.

The DOE also tried to argue students’ inability to repay debt from for-profit schools was a socioeconomic concern, leaning on numbers that show those who enroll at for-profit schools (“proprietary,” in the snippet below) are less likely to come from stable, financially solvent backgrounds:

Students who enroll at proprietary institutions are far more likely to be financially independent (80 percent vs. 59 percent); part of an underrepresented minority group (52 percent vs. 44 percent); or a single parent (33 percent vs. 18 percent) than students enrolled at community colleges. Students enrolled at proprietary institutions are also slightly less likely to have a parent who completed high school (84 percent vs. 87 percent); and are much less likely to have a parent who completed a bachelor’s degree or higher (22 percent vs. 30 percent). These differences in characteristics may explain disparities in student outcomes, including higher borrowing levels and student loan defaults among students who enroll at proprietary institutions.

If your takeaway is that GE should apply to all post-secondary education programs, the DOE says that’s impossible because:

“The Department could not simply expand the GE regulations to include all title IV programs since the term ‘gainful employment’ is found only in section 102 of the [Higher Education Act of 1965]. This section extends title IV eligibility to non-degree programs at non-profit and institutions and all programs at proprietary institutions, and at the same time restricts the application of the GE regulations to those same programs and institutions. Therefore, without a statutory change, there was no way to expand the GE regulations to apply to all institutions.”

TL;DR: The DOE wants to take GE away rather than expand on it. Instead of making all schools more responsible, it wants to allow for-profit schools more opportunity to obfuscate their true value (or lack thereof) to students.

Third-party services such as CIRR serve as a destination to view the same data reported by schools under the GE rule, but it’s all based on voluntary reporting. If schools aren’t required to disclose such data, they may just not go through the trouble… or worse, use voluntary reporting as a means to outright lie.

Ditching the GE rule may be the most alarming step for DeVos’s DOE in its continued march to allow for-profit schools (including coding schools) to proliferate, but it’s not the first. In April, the DOE ended a program that forced for-profit schools to set aside funds in the event the school abruptly closed. This program was designed so those schools couldn’t take federal funding and run, but DeVos made it possible for schools to operate as fly-by-night swindlers.

As for the ‘why’ in all of this, we should remember Betsy DeVos was heavily invested in a company contracted by the DOE to hound students about loan repayments before being appointed to her post as Secretary – though it’s not clear if she’s completely divested from her holdings, or if they’re just in a trust to avoid the appearance of a conflict of interest. She also has (or had) holdings in an investment firm with direct ties to Laureate Education, which boasts of 875,000 students worldwide, including Minneapolis-based Walden University and its 40,000-plus students.