Donald Trump and Kamala Harris disagree on many policy issues, but one topic is particularly personal to both: for-profit colleges. Mr. Trump once owned a for-profit college predictably called Trump University. He agreed to pay $25 million in 2016 to settle lawsuits filed by students who claimed their alma mater had failed to teach them. Three years earlier, as California's attorney general, Ms. Harris attended another for-profit college. She sued the now-defunct Corinthian Colleges for “predatory and unlawful practices” and won $1.2 billion.
The outcome of the upcoming elections could have consequences for for-profit institutions. Ms. Harris would likely want to crack down, while Mr. Trump would likely loosen the reins. Both would argue that they acted in the name of fairness.
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For-profit colleges have grown rapidly, but their progress has not been steady (see chart). Enrollments generally increase the most during difficult economic times. Between 2000 and 2010, enrollment in for-profit colleges quadrupled, from 450,000 students to 2 million. Interest also grew in 2020 during the pandemic. Despite all the attention politicians pay to them, for-profit colleges are small players in the postsecondary market. For-profits accounted for just $14 billion in tuition and fees revenue in 2021-22, compared to $81 billion from private nonprofit institutions the same year.
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For-profit colleges tend to get outsized attention, and not the positive kind. Many are performing as expected, but the industry has been ravaged by scams. In 2018, the Century Foundation think tank studied federal borrower defense claims, which allow federal loan forgiveness for students who successfully prove they were defrauded. It found that 98% of successful applications came from students attending for-profit institutions.
For-profit colleges are more dependent on student tuition and fees than other institutions. As such, “there is a big incentive [for for-profit institutions] to bring in students and enroll them,” says Stephanie Riegg Cellini of George Washington University. “And there's not a big incentive on the back end to make sure students get good results.” Compared to their nonprofit peers, for-profit graduates have higher loan default rates and lower income and labor force participation rates.
In 2014, Barack Obama's administration implemented the gainful employment rule to address these problems. The regulations required for-profit colleges to prove the value of their degrees or risk losing federal funding. This posed a threat to for-profit colleges, which get 70% of their revenue from Pell grants — federal aid for poor students. Data released by the Department of Education in 2017 shows that about a tenth of programs, almost all at for-profit institutions, would have passed Many's test of these programs were closed voluntarily. But then Trump took office and changed course. In 2019, his administration officially revoked the “gainful employment” rule, which it said unfairly penalized for-profit universities. Trump also vetoed a bipartisan resolution that would have facilitated student loan forgiveness for those who attended allegedly fraudulent colleges.
And just as quickly as they were taken away, the rules returned with the election of Joe Biden. Instead of just restoring Obama-era rules, the Biden administration proposed new rules. The updated regulations eliminate federal funds for colleges that saddle students with debt they cannot repay. A new provision also denies federal student aid for career programs that require more training than required by state law. This part of the rule was supposed to go into effect on July 1 of this year, but in June a judge issued a temporary injunction.
Teachers for Trump
A Harris administration would continue in this vein. In addition to suing a for-profit university as attorney general, Ms. Harris has at various times pushed for student loan forgiveness and free college for all. A second Trump administration would again undo regulations on for-profit schools.
Democrats want federal financial aid targeted to high-quality programs, while Republicans want it spent on as many programs as possible, says Dominique Baker of the University of Delaware. Both parties claim they are doing what is best for students: the Democrats by regulating predatory colleges and the Republicans by expanding access to a wider range of options beyond the traditional four-year degree.
“The world has been stuck in an unhappy, unproductive back-and-forth scenario for the past few governments without any creativity,” said Daniel Currell, a former senior adviser at the Ministry of Education. Still, at least some teachers will be in favor of Mr. Trump.
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