Three Ways the PROTECT Students Act Defends Students & Taxpayers
On March 26, 2019, Senators Maggie Hassan (D-NH) and Dick Durbin (D-IL) introduced the PROTECT Students Act, a bill that would add federal guardrails to safeguard students from attending—and taxpayers from subsidizing—low-value institutions of higher education that engage in unfair, deceptive, and predatory practices.1 If enacted, the legislation would ensure students have better options for federally-funded programs in which to enroll and more protections if they become a victim of predatory practices. While there are many policy changes needed to ensure students and taxpayers are getting a return on their investment across our higher education system, this comprehensive proposal takes a step in the right direction in many areas—concentrating on places where students are currently left hanging when low-quality institutions put their own interests over those of students. Specifically, the PROTECT Students Act aims to: 1) Protect Veterans and Students from Predatory Practices; 2) Ensure Career Education Programs Prepare Students for Good-Paying Jobs; and 3) Strengthen Protections for Student Loan Borrowers if They Have Been Cheated or Defrauded.
1. Protecting Veterans and Students from Predatory Practices
Right now, for-profit institutions across the United States are allowed to receive up to 90% of their revenue from federal grants and loans issued by the US Department of Education (Department). Commonly referred to as the 90/10 rule, this funding ratio was designed to guarantee that for-profit colleges were proving both their financial stability and the quality of their education by bringing in revenue from sources other than the federal government (by showing that students and employers also see value in spending their own money on the program). The PROTECT Students Act strengthens the existing 90/10 rule by returning to the original 85/15 ratio, which was initially put in place in 1992 to combat waste, fraud and abuse by predatory institutions.2 In addition to requiring institutions to foot more of the bill or find someone who thinks the service they provide is valuable enough to pay for, the PROTECT Students Act closes a major loophole that many predatory schools have abused by also counting GI benefits from the US Department of Veterans Affairs as federal revenue within the 85/15 ratio. This will help put a stop to the aggressive recruitment tactics some predatory schools have used to target veterans so that they can stay just below the 90% federal funding cutoff.3
2. Ensuring Career Education Programs Prepare Students for Good-Paying Jobs
In December 2014, the Department published a regulation to ensure that students who graduate from career education programs were able to earn a high enough salary to pay down their educational debt after they attend.4 The rule, known as Gainful Employment, was critical, as data show there were approximately 800 career education programs that leave a majority of their students with debt they are unable to repay, many even leaving their graduates earning below the federal poverty line.5 Without this rule in place, those low-value programs remain eligible to receive federal grants, and students will continue to take out federally-funded loans to attend. And while Secretary DeVos has done everything in her power to stop this rule from ever being implemented, the PROTECT Students Act codifies it into law and requires that federally-funded career education programs leave graduates earning at least enough to justify their educational investment.6 If a program leaves most of its graduates with unmanageable debt and a credential or degree that doesn't yield a good-paying job, the PROTECT Students Act ensures that it is ineligible to receive Pell Grants and federally-funded loans going forward.
3. Strengthening Protections for Student Loan Borrowers if They Have Been Cheated or Defrauded
Following widespread fraud at Corinthian College, which eventually collapsed in 2015, the Department put a rule in place to facilitate the discharge of federal educational loans for students who have been victim of fraud or deception.7 Just as the Federal Deposit Insurance Company (FDIC) protects the funds that people place in checking or savings accounts, the Department wanted to ensure that student borrowers would be also covered if their federally-backed institution engaged in unscrupulous practices and left them with debt they'd likely never be able to repay.8 The Department also restricted the use of mandatory arbitration agreements, a tool used by a lot of predatory institutions to prevent lawsuits from students who have been wronged.9 Yet, similar to the Gainful Employment Rule, the current Administration has worked to weaken these rules—known as borrower defense to repayment—and make it even harder for defrauded students to receive the relief they deserve.10 The PROTECT Students Act would strengthen the borrower defense regulations put in place in 2016 and put them into law. This will ensure that students who were defrauded, through no fault of their own, will be able to seek relief from their federal debts while also seeking justice from the institutions who cheated them.
In addition to the key provisions outlined above, the PROTECT Students Act takes many other steps to provide safeguards for students and taxpayers. For example, it makes it more difficult for for-profit institutions to convert to non-profits while still operating as a for-profit company, a practice many have attempted to skirt existing rules. The bill also bans the use of federal dollars for marketing and recruitment activities and strengthens the prohibition on incentive compensation, forbidding institutions to base a recruiter’s salary on the number of students they enroll, a tactic that encourages deceptive recruitment activities. Every year, the federal government provides more than $120 billion in federal grants and loans to institutions of higher education across the United States. With so much at stake for students and taxpayers, it’s critical that the government limits federal funding to institutions that offer a good value for the time and money invested. And if a federally-funded institution engages in predatory and fraudulent practices that harm consumers, the institution—not the student—should be held accountable for its unscrupulous actions. The PROTECT Students Act puts policies in place that better protect our higher education investment and do more to ensure students aren't being left worse off than when they enrolled.
United States, US Senate, “Senators Hassan and Durbin Introduce Comprehensive Legislation to Protect Students and Taxpayers from Predatory Higher Education Practices.” Press Release, 26 Mar 2019, https://www.hassan.senate.gov/news/press-releases/senators-hassan-and-durbin-introduce-comprehensive-legislation-to-protect-students-and-taxpayers-from-predatory-higher-education-practices. Accessed 23 Apr 2019.
Vivien Lee and Adam Looney, “Understanding the 90/10 Rule: How reliant are public, private, and for-profit institutions on federal aid.” Jan 2019, https://www.brookings.edu/wp-content/uploads/2019/01/ES_20190116_Looney-90-10.pdf. Accessed 23 Apr 2019.
“What is the 90/10 Loophole?,” Veterans Education Success, web page, https://veteranseducationsuccess.org/90-10-loophole. Accessed 23 Apr 2019.
United States, US Department of Education, “Program Integrity: Gainful Employment.” Federal Register Notice, 31 Oct 2014, https://www.federalregister.gov/documents/2014/10/31/2014-25594/program-integrity-gainful-employment. Accessed 23 Apr 2019.
United States, US Department of Education, “Education Department Releases Final Debt-to-Earnings Rates for Gainful Employment Programs.” Press Release, 9 Jan 2017, https://www.ed.gov/news/press-releases/education-department-releases-final-debt-earnings-rates-gainful-employment-programs. Accessed 23 Apr 2019; See also, Michael Itzkowitz, et al, “Limiting Federal Fudning to Higher Ed Programs that Leave Students in Poverty.” Third Way, 6 June 2018, https://www.thirdway.org/report/limiting-federal-funding-to-higher-ed-programs-that-leave-students-in-poverty. Accessed 23 Apr 2019.
Michael Itzkowitz, “Death by Delay: DeVos’ Playbook for dismantling the Gainful Employment Rule.” 29 Sep 2017, https://medium.com/third-way/death-by-delay-devos-playbook-for-dismantling-the-gainful-employment-rule-814fe10e2ed6. Accessed 23 Apr 2019.
Danielle Douglas-Gabriel, “Feds found widespread fraud at Corinthian Colleges. Why are students will paying the price?” 29 Sep 2016, https://www.washingtonpost.com/news/grade-point/wp/2016/09/29/feds-found-widespread-fraud-at-corinthian-colleges-why-are-students-still-paying-the-price/?utm_term=.a76c58ab4e56. Accessed 23 Apr 2019.
United States, Federal Deposit Insurance Corporation, “Deposit Insurance,” web page, https://www.fdic.gov/deposit/. Accessed 23 Apr 2019. See also, United States, US Department of Education, “U.S. Department of Education Announces Final Regulations to Protect Students and Taxpayers from Predatory Institutions.” Press Release, https://www.ed.gov/news/press-releases/us-department-education-announces-final-regulations-protect-students-and-taxpayers-predatory-institutions. Accessed 23 Apr 2019.
United States, US Department of Education, “U.S. Department of Education Announces Final Regulations to Protect Students and Taxpayers from Predatory Institutions.” Press Release, https://www.ed.gov/news/press-releases/us-department-education-announces-final-regulations-protect-students-and-taxpayers-predatory-institutions. Accessed 23 Apr 2019.
Andrew Kreighbaum, “DeVos to Rewrite Overhaul of Obama Loan Rule.” Inside Higher Ed, 21 Jan 2019, https://www.insidehighered.com/quicktakes/2019/01/21/devos-rewrite-overhaul-obama-loan-rule. Accessed 23 Apr 2019.