Friday 2 December 2016

For-Profit College Industry Eyes Resurgence Under Trump Administration

At its height, the for-profit college industry represented about 25% of all federal student aid, even though these schools only accounted for about 8% of U.S. college students. Meanwhile, these schools were spending the large majority of their money on advertising instead of education, and their students were defaulting on loans at double the rate of other borrowers. Since then, several education chains have shuttered due in no small part to federal investigations and regulations, but investors are seeing sunnier days ahead under a business-friendly Trump White House.

A number of for-profit chains are already seeing their stock values rebound, notes the Wall Street Journal, including educators that have recently come under fire for questionable business practices.

For example, the market value of DeVry Education Group has jumped by 25% since Election Day, even though the company recently reached an agreement with the Department of Education that it would stop boasting that 90% of its graduates had found jobs in their respective fields within six months of graduation.

The school chain also volunteered to limit how much federal aid it accepts, but only after it had been suspended from the Dept. of Veterans Affairs’ “Principles of Excellence” program.

Trump’s pick of Betsy DeVos — a Michigan billionaire and school-choice advocate with no employment or academic background in education — for Secretary of Education is seen by many as an indication that the incoming administration will not continue to scrutinize for-profit educators, and may indeed roll back some of the current administration’s efforts to rein in the industry.

For-profit colleges and their supporters fought for years to block or water down the Education Dept.’s Gainful Employment Rule. This rule, which requires for-profit educators to demonstrate that their graduates are actually going on to jobs that can pay the bills, was first proposed in June 2011, but spent years being written, lobbied against, scuttled and rewritten, then repeatedly battled over in court before finally going into effect in June 2015.

The Journal notes that Sen. Lamar Alexander (TN), Chair of the Senate Health, Education, Labor & Pensions Committee — the same committee responsible under Obama for shining a light on the bad practices of the for-profit industry — has recently indicated that he hopes the Trump White House will figure out a way to roll back that rule.

In October, the Education Dept. also finalized rules that would make it easier for students at failed for-profit to seek financial relief, and to prevent these schools from using arbitration clauses in their enrollment agreements to strip students of their right to file lawsuits.

Because that rule was finalized so recently, it will be eligible for possible rollback under the Congressional Review Act. That 1996 law gives Congress the authority to review and voice their displeasure with any new major agency rules. If Congress issues a joint resolution of disapproval and it’s signed by the President, the rule is rolled back.

The Review Act has only been used successfully once in its two decades of existence, but many believe that — with both the White House and Congress aligned politically — the law could be used to undo a number of rules put into place during the final months of the Obama White House.

One Credit Suisse analyst puts investors’ vision of the Trump administration succinctly, telling the Journal, “It’s fair to think that you’re going to have a more benign enforcement regime, certainly with respect to consumer protections.”


by Chris Morran via Consumerist

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