The Trump administration is set to eliminate Obama-era rules targeting for-profit schools that left students with high amounts of debt, according to Dow Jones.
The first rule in question, known as Gainful Employment, was meant to ensure students enrolled in for-profit schools and non-degree programs at community colleges are prepared for “gainful employment in a recognized occupation.”
It stipulates that student debt repayment from these programs cannot exceed 8 percent of annual earnings or 20 percent of discretionary income, or else they risk losing eligibility for federal student aid programs.
Of the 800 failing programs identified by the Department of Education before Trump took office, 98 percent were at for-profit colleges.
The second rule, Borrower Defense to Repayment, eliminates federal loans if a school illegally or deceptively persuaded students to borrow money.
The rule was created in response to the downfall of Corinthian Colleges and ITT Technical Institute, charged with fraud and predatory lending, which left thousands of students to navigate an overly complex federal debt relief program.
Borrower Defense to Repayment is already in effect, but Gainful Employment’s effective date was delayed by the Trump administration to July 1.
The Trump Administration
Education Secretary Betsy DeVos has championed private schools and supports vocational training in higher education.
Education department spokespeople have expressed DeVos’ commitment to protect students, but DeVos indicated early on that she was unlikely to enforce the rules.
“I will review that rule and see that it is actually achieving what the intentions are. The last thing any of us want is to unnecessarily close down important programs,” DeVos said during her confirmation hearing.
Trump himself ran a for-profit college, Trump University, which was involved in a lengthy lawsuit by students claiming they’d been defrauded. Trump refused to admit any wrongdoing, but did agree to a $25 million settlement.
Education Stocks Move
Education stocks jumped on the news before pulling back.
Career Education Corp. CECO saw the sharpest move. Shares went up 10.3 percent in 5 minutes before dropping back to the high-$9 range.
Other companies that moved include:
- AEP Industries Inc AEPI
- Adtalem Global Education Inc ATGE
- Bridgepoint Education Inc BPI
- Capella Education Company CPLA
- Grand Canyon Education Inc LOPE
- Strayer Education Inc STRA
- Universal Technical Institute, Inc. UTI
Investors should continue to expect volatility in for-profit education stocks as Trump and the Department of Education unveil details.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.
All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.
Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.
Rate collection and criteria: Click here for more information on rate collection and criteria.