Regulations proposed by the U.S. Education Department (ED) would cause millions of students to lose access to higher education and leave American taxpayers on the hook for billions of dollars, according to Steve Gunderson, president and CEO of Career Education Colleges and Universities (CECU).
“How this will increase the number of career-ready graduates is unclear,” Gunderson said.
ED’s proposed rules would ban for-profit and nonprofit colleges that receive federal funding from using mandatory arbitration clauses and class action waivers in enrollment contracts and other common agreements that force students to resolve disputes in private, he said.
The proposed regulations are aimed at efforts to clarify, simplify and strengthen existing regulations that grant students loan forgiveness if they were defrauded or deceived by a postsecondary institution; hold financially risky institutions accountable for their behavior; and ban schools’ use of legal clauses to sidestep accountability, according to the department.
Specifically, the proposed regulations would streamline relief for student borrowers and create a process for group-wide loan discharges when whole groups of students have been subjected to misconduct, according to the ED, and they would establish triggers that would require institutions to put up funds if they engage in misconduct or exhibit signs of financial risk.
Additionally, the proposed regulations would require financially risky schools and proprietary schools in which students have poor loan outcomes to provide warnings to prospective and current students and the public.
Finally, the proposed regulations would prohibit the use of so-called mandatory pre-dispute arbitration clauses and class action waivers that deny students their day in court if they are wronged.
Under these regulations, according to the ED, schools would no longer be able to use their enrollment agreements, or other pre-dispute arbitration agreements or clauses in other documents, in order to force students to sign away their rights to pursue relief as a group, or to impose gag rules on students.
“We agree that poor-performing institutions, as well as those institutions that are financially at risk, should be monitored closely to protect students,” Gunderson said. “But what (ED) fails to acknowledge is that these issues exist across all of higher education, not just private-sector institutions.”
Gunderson added that ED is attempting to mislead Congress
and taxpayers about the impact of this proposed regulation.
“The truth is the steps the department is taking … puts the future of career education in America at risk,” he said. “If the department limits career education opportunities for new traditional students, it will deny millions of Americans a pathway to improving their lives and growing the American economy.”
According to the ED, the proposed regulations build on the Obama administration’s commitment to protect taxpayers’ and students’ investments by ensuring that all Direct Loan borrowers may engage in a process that is efficient, transparent and fair when applying for a loan discharge that is based on the misconduct of an institution.
“The complex and burdensome nature of this regulation will crush career education with financial requirements not imposed on others in higher education -- including institutions that have lower graduation rates and higher default rates,” Gunderson said.
And as the final months of the Obama administration wind down, he continued, all that ED is trying to advance is “an ideological effort” rather than finding meaningful ways to work cooperatively with Congress and various higher education stakeholders to advance a more significant reauthorization of the Higher Education Act.
“We hope they will put aside this foolish and costly proposed regulation, but based on their poor track record, we doubt they will listen to voices of reason,” Gunderson said.