Should For-Profit Colleges Have to be Accredited & Show That Graduates Find Gainful Employment? (S. 3371)

What is S. 3371?

(Updated September 21, 2019)

This bill — known as the Protecting Students from Worthless Degrees Act — would expand consumer protections for students and ensure that students and taxpayers are not left footing the bill for predatory and worthless degree programs. It would close a loophole that allows for-profit colleges to take federal financial aid dollars for students to attend unaccredited degree programs that often leave students deep in debt and unable to work in their chosen field, and require all programs to meet any federal or state licensure requirements and programmatic accreditation that is necessary for graduates to enter their intended field. Institutions failing to meet this consumer protection requirement would be ineligible to receive and federal student financial assistance, including Pell Grants, Stafford Loans, G.I. Bill benefits, or Department of Defense Tuition Assistance Funds.

It would also codify the certification requirements of the Gainful Employment rule, which Education Secretary Betsy DeVos has proposed eliminating. These requirements prevent career education programs from receiving Title IV federal student aid dollars if they fail to keep their promise that students will graduate with the requisite skills to find employment.

Argument in favor

All higher education institutions, regardless of tax status, should uphold their obligation to students by providing quality educations that lead to gainful employment in students’ fields of study. Making federal funds contingent upon institutions fulfilling this obligation is a commonsense consumer protection that will help students make informed decisions.

Argument opposed

Secretary DeVos’ proposed national database of all higher education institutions, not just for-profit and career programs, is a more comprehensive approach to helping students make educated decisions about their futures. The “gainful employment” standard may be inappropriate for certificate programs in certain professions, such as salons, which are tipped.

Impact

Recipients of federal student financial assistance; for-profit colleges; federal student financial aid programs; and the Department of Education.

Cost of S. 3371

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Jeff Merkley (D-OR) introduced this bill to protect students from predatory for-profit colleges that offer worthless degrees:

“Higher education should be a path to the American Dream, but that dream is shattered if when students graduate, they find that their degrees are worthless. Predatory programs that claim to provide career preparation but instead leave students unable to work and holding the bag have no business being funded by American taxpayers… Congress needs to stand up to these predatory programs that hurt students more than they help.”

The Education Department adopted rules threatening severe penalties to programs that mislead students on accreditation in 2011. However, New America Foundation’s Stephen Burd noted in 2012, “the Education Department doesn’t appear to be too eager to enforce these rules.” 

Under Education Secretary Betsy DeVos, the Education Department has softened its stance on for-profit colleges further, gutting a major Obama-era regulation that cut off funding to low-performing programs, appointing a former for-profit college official to lead the team charged with policing fraud in higher education, halting the approval of new student-fraud claims brought against for-profit schools, weakening “borrower defense” for students of college or universities shut down for fraud and announcing plans to eliminate regulations forcing for-profit colleges to prove that they provide gainful employment to the students they enroll in July 2018.

In place of the “gainful employment” rule, Secretary DeVos’ new rule would provide students with more data about all of the United States’ high education institutions — not just career and for-profit college programs — including their average graduates’ debt, expected earnings after graduation, completion rates, program costs, accreditation, and other measures of institutional quality. In a statement about the proposed rule change, Secretary DeVos said:

“Students deserve useful and relevant data when making important decisions about their education post-high school. That’s why instead of targeting schools simply by their tax status, this administration is working to ensure students have transparent, meaningful information about all colleges and all programs. Our new approach will aid students across all sectors of higher education and improve accountability.”

Overall, Secretary DeVos defends her loosening of regulations on for-profit colleges as an effort to preserve for-profit schools as an option for non-traditional students. Her spokeswoman, Liz Hill, said Secretary DeVos is “committed to protecting students from bad actors while also ensuring they have multiple pathways to quality higher education,” adding that “it’s important that we continue to expand, not limit, paths to higher education for students. We can do that while also continuing to hold accountable those institutions that do not serve students well, no matter the institution’s tax status.”

Even some for-profit education leaders concede that the gainful employment rule has had its intended effect, improving the overall industry. Steve Gunderson, President of Career Education Colleges and Universities, the for-profit industry’s trade association, said that for-profit institutions adjusted programming to be more affordable and responsive to job markets, resulting in a better for-profit sector:

“The other side should declare victory and go home. The reality is every school that has a program that was failing gainful employment metrics — and they knew it couldn’t be fixed — they’ve already closed. The sector today is so much better.”

However, others in the for-profit education industry argue that gainful employment rules had substantial collateral damage. Michael Halmon, who founded the American Institute of Beauty to train people not cut out for college for careers as beauticians and barbers, is one of those people. Halmon’s American Institute of Beauty was among several schools that successfully sued the Education Department over the gainful employment rule, arguing that Education’s earnings data did not accurately reflect all sources of income, including the tips that are unique to the salon industry. Halmon said: 

“We are mom-and-pop businesses, not these huge Wall Street entities getting rich off of tens of thousands of students. We have a thriving industry, and it could have been decimated [by the gainful employment rule].”

The American Federation of Teachers (AFT), The Institute for College Access and Success (TICAS), and Veterans Education Success (VES) support this bill.

Of Note: Currently, due to a loophole in federal financial aid laws, schools that are institutionally accredited may offer individual programs that lack the state licensing or programmatic accreditation required for graduates to enter the field for which they were trained. Students who enter these programs are told they will be prepared for a particular job, only to discover after graduating — often with heavy student loan debt — they that are not qualified to work in their intended field, or even to take a licensing exam to work in their intended field.

In July 2012, the Senate Health, Education, Labor and Pensions (HELP) Committee released a report on the findings of a two-year investigation of the for-profit higher education industry which revealed widespread problems throughout the sector. Former Sen. Tom Harkin (D-IA), then-Chairman of the HELP Committee, summarized the findings upon the report’s release:

“In this report, you will find overwhelming documentation of overpriced tuition, predatory recruiting practices, sky-high dropout rates, billions of taxpayer dollars spent on aggressive marketing and advertising, and companies gaming regulations to maximize profits.  These practices are not the exception -- they are the norm; they are systemic throughout the industry, with very few exceptions… As a result of this investigation, a wide range of Americans – including taxpayers, prospective students and their families – are waking up to the troubling realities of this industry.  I hope that for-profit colleges will be moved by this final report to reform and focus on students’ success instead of just their financial aid dollars. But that will not be enough -- real, bold legislative reforms are critical. We need to know how every student is faring. We need to ensure that resources intended for education are spent productively.  We need colleges to provide the services that students need to succeed. And for companies so reliant on taxpayer revenues, we need to start requiring they demonstrate results for students, not just shareholders.”

Some experts have suggested that for-profit universities enroll students from underserved populations, and that heavily regulating these institutions will decrease opportunities for those students to receive post-secondary educations. However, the Brookings Institution found that while regulations limit enrollment and enrollment at for-profit colleges overall drops when one is sanctioned, the students enroll elsewhere — often at lower-cost and better-performing community colleges.