Thomson Reuters
"These situations turn a benefit for struggling students into a de facto taxpayer-funded bailout," according to an analysis.
The US Department of Education appears ready to alter the gainful-employment rule established during the Obama Administration, The Chronicle of Higher Education reported.The rule, which aims to hold for-profit and other career-oriented colleges accountable, has been a focal point for the Trump Administration, who indicated last month that they were "studying carefully and looking" at the rule.
The Chronicle learned that at the end of May, James Manning, the under secretary of education, sent a letter to Senate Democrats regarding the regulation.
"We have some level of concern regarding the gainful employment regulations promulgated by the previous administration and are reviewing them carefully," the letter read, in the clearest indication yet from the administration that changes may follow.
Gainful employment describes a school as failing if its students pay more than 30% of their discretionary income in student-loan payments. It was created address for-profit colleges that charged high-tuition payments, but left graduates with poor career opportunities, or low-paying jobs.
In 2015, Business Insider spoke with an Everest College graduate who amassed $37,000 in student loans for an associates degree in network administration. Once out of school, he was unable to find a job in the field. Everest, a subsidiary of the larger Corinthian College chain, eventually shuttered its doors amid claims of defrauding students. The federal government has been on the hook to forgive tens of millions of dollars of student debt.
A new analysis from the Center for American Progress, a liberal think tank, claims that the rollback of the gainful employment rule will place even more burden on the federal government, and therefore taxpayers, relating to income-driven repayment plans.
These plans, touted as a solution for managing debt if you don't have a high-paying job, allow you to pay 10% to 15% of your discretionary income and have your debt forgiven after 20 to 25 years (depending on the plan).
The analysis claims that if the government does away with the gainful employment rule, there will be more individuals that use income driven repayment plans, ultimately shouldering the federal government with the burden of forgiving more debt. The analysis projects this figure to be $1.5 billion.
"These situations turn a benefit for struggling students into a de facto taxpayer-funded bailout for institutions that overcharge students," the analysis reads.