On May 27, 2014, the Center for Responsible Lending submitted a comment to the Department of Education in response to their proposed gainful employment rule.

In the comment, senior policy counsel Maura Dundon highlights:

  • how for-profit colleges may fail to provide students the skills or education necessary to seek gainful employment, yet still be the beneficiaries of federal financial aid
  • how the resulting indebtedness disproportionately impacts servicemembers and students of color

The 14-page comment also includes detailed recommendations on how best to improve the gainful employment rule with specific suggestions about how it can improve outcomes for student borrowers.

An excerpt of the comment is below:

Gainful Employment Regulations Needed to Protect Students

Reforming for-profit college lending is a critical consumer protection need. For-profit colleges aggressively market their education programs and, in many cases, fail to provide a useful education to the students they enroll. For-profits target low-income students, students of color, and military servicemembers, who disproportionately bear the costs of for-profits' unfair and deceptive practices. Similar to predatory mortgage loans in the early 2000s, easy access to credit paired with strong, risk-free financial incentives to place consumers into those loans set the stage for consumer abuse. In the case of mortgages, predatory lenders profited from placing borrowers in unaffordable loans; just as for-profit colleges rely on students to take on debt that they are unable to afford.

The Department must take definitive action to protect the integrity of the federal student loan program. Because of wide-spread abuses, largely in the for-profit sector, the Title IV student aid program has been grossly perverted from its original purpose of helping low-income students achieve "gainful employment" through higher education. Compared to other institutions, they leave students with higher debt, lower graduation rates, lower earnings, and more unemployment. And as has been well-established by federal and state investigations, for-profit colleges often engage in misrepresentations and high-pressure sales tactics to enroll students and convince them to take out loans.

With 46% of all student loan defaults emanating from for-profit colleges, this federal program intended to help students is hurting them instead – wasting taxpayer dollars in the effort. The balance must be shifted back towards facilitating the promise of higher education, rather than exposing student borrowers to a failed market where they bear significant risk.

In the course of our work, we have reviewed hundreds of emails from former for-profit college students. They tell stories of hardship, embarrassment, despair, and anger; weddings, childbearing, and homeownership deferred; and sometimes deep depression and suicidality. Borrowers feel a grievous sense of betrayal, not only towards the for-profit colleges, but also towards the government that failed to protect them from predatory programs. Implicitly, student loan borrowers believe that the government would not extend them a loan for higher education that did not provide even a slim promise of a return on their investment. We urge the Department to enact a strong rule, one which results in far fewer students reporting that "[g]oing to college was the worst mistake in my life."

The Department's proposed regulations would be an important step towards changing this harmful dynamic. While there is room for improvement, the Department's proposed rule properly identifies those programs that fail to use Title IV funds to prepare students for gainful employment, and so should not be permitted to further participate in Title IV programs.

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