Skip to main content

For-Profit Colleges Are Back From the Brink

The Trump administration just handed an olive branch to the battered industry.

By Michael Fitzgerald


(Photo: Scott Olson/Getty Images)

The Trump administration appears poised to undo one of its predecessor’s most ambitious attempts to rein in for-profit college rapacity. The Department of Education is delaying the so-called “gainful employment” rule, in place since 2015, the Wall Street Journal’s Josh Mitchellreports.

Under the Obama-era rule, the Department of Education would shut off the financial-aid spigot for higher education institutions if their typical graduate reported spending more than 30 percent of after-tax cash or 12 percent of total income on student loan payments. In other words, if a college saddles too many of its students with debt and shabby job prospects — if graduating classes debt-to-income ratios don’t look good for a few consecutive years — it will be barred from receiving Stafford loans, Pell grants, and other forms of taxpayer funding for higher education.

The more than 800 schools that the Department of Education threatened in January with sanctions under the rule—98 percent of which are for-profit institutions like Full Sail University and University of Phoenix — will now have until July 1st to hire independent auditors to investigate whether the government’s damningdata on their students career outcomes is wrong or flawed. Since most for-profit colleges derive most of their revenue from students’ federal financial aid packages, thousands of the schools may have eventually had to close their doors without reconsideration by the Department.

The extended timeline to appeal, and the department’s promise to review the rule, could be a lifeline for an industry that was facing an unprecedented crackdown via states attorneys generallawsuits and federal enforcement actions. But, as Pacific Standardreported in 2015, this wouldn’t be the first time the industry has bounced back from a regulatory beating. For-profit college parent companies stocks have surged since Donald Trump’s election in November. Now, shareholder faith looks like it could get rewarded.