The Education Department announced Wednesday it was proposing a rule that would take away federal money from for-profit colleges and certificate programs where data shows graduates don’t make enough to pay back their student debts or the debt is excessively high.
The rule, which was first brought up under the Obama administration, is commonly known as gainful employment. It was bulldozed under former President Trump’s administration as Republicans argue it unfairly targets for-profit colleges.
The proposal by the Department of Education would make it so all for-profit schools and select certificate programs at nonprofit colleges would have to go through two tests to determine whether students will be burdened with “unaffordable debt or insufficient earnings.”
For a program to pass the first test, a graduate’s average student loan payments can’t exceed 20 percent of their discretionary income or 8 percent of their total income. To pass the second, more than half of the graduates from the college program need to make more than others in their state who have only a high school degree.
If a program fails one test, it would have to tell students their program is at risk of losing federal money. If a program fails both tests twice in a three-year period, it would get federal money taken away.
“[We] need to hold colleges accountable for unaffordable costs and better protect students from programs that fail to deliver real value and upward mobility,” said Secretary of Education Miguel Cardona. “The rules proposed today are about helping ensure that when students invest in a postsecondary education, they get a solid return on investment and a greater shot at the American dream.”
The proposal is already getting pushback for mostly going after for-profit schools.
“The rule unfairly targets programs at proprietary institutions and fails to account for the unique challenges facing students and communities that career-oriented programs serve,” said Jason Altmire, president and CEO for Career Education Colleges and Universities President, adding it “continues to exempt the majority of postsecondary education programs and fails to protect millions of students.”
The department says the proposed rule would help around 700,000 students who go into the estimated 1,800 programs deemed low-quality by the administration.
The rule will have to go through a 30-day public comment period and be finalized before Nov. 1 to go into effect by July 1, 2024. An education administration official said the department is confident they will meet all the deadlines.