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--:-- Sean Rameswaram: Welcome to Today Explained. I'm your host, Sean Rameswaram.
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--:-- Sean Rameswaram: Support for the show today comes from Google Play. It's like a sandbox, but instead of sand in the box, it's filled with audiobooks, over a thousand of them to choose from. And you can get $10 off your first audiobook over $10 when you log in with your Google account at g.co slash play slash explained.
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--:-- Sean Rameswaram: Libby Nelson, your Vox's resident education expert.
--:-- Libby Nelson: Thanks for having me on the show.
--:-- Sean Rameswaram: A lot of college students are going back to school this week, and the country's top student loan official marked the occasion by quitting, saying that the current actions being taken by leadership betray families and sacrifice the financial futures of millions of Americans across the country. I think it's a good time to ask, what has Education Secretary Betsy DeVos been up to?
--:-- Libby Nelson: Mostly deregulation is what she's been up to, particularly of for-profit colleges.
--:-- Sean Rameswaram: Education Secretary Betsy DeVos is moving to eliminate rules that would put more accountability on poor-performing for-profit colleges.
--:-- Libby Nelson: Back on August 10th, Betsy DeVos moved to get rid of a regulation known as gainful employment. The Obama-era gainful employment regulations sought to keep schools from burdening students with debt without providing an education that would give them better job prospects. And that allows them to pay back their student loan debt.
--:-- Sean Rameswaram: Because for-profit colleges run on student loans pretty much?
--:-- Libby Nelson: Because for-profit colleges, like pretty much all of higher education, but especially for-profit colleges, run on federal student loans.
--:-- Sean Rameswaram: So how exactly was the gainful employment rule put in place?
--:-- Libby Nelson: To understand why this happened, you need to go back to the recession. Enrollment grew 66 percent between 2008 and 2011, damn okay, and between 2000 and 2010 it grew over 300 percent. What, yeah, so they absolutely blew up basically in the first decade of this millennium.
--:-- Sean Rameswaram: Is this like DeVry, who are we talking about here? Who are the big stars of for-profit colleges?
--:-- Libby Nelson: Yeah, the big names that you know. DeVry is one. Corinthian Colleges. Strayer University. Kaplan University. ITT Tech. The Art Institute of Phoenix. Art Institute of Colorado. Ashford University. Capella University. University of Phoenix. But also, there are a lot of, like, small beauty colleges, cosmetology schools, truck driving schools that people haven't heard of that aren't publicly traded or giant corporations that fall into this category, too.
--:-- Sean Rameswaram: Wow. And so, 300%, that sounds like, what? It's got to be tens of thousands, hundreds of thousands. Is it millions?
--:-- Libby Nelson: It is technically millions. So from 2000 to 2010, it went from 403,000 students at for-profit colleges to 1.7 million.
--:-- Sean Rameswaram: Wow. And 2010 is actually, I believe, when enrollment peaked.
--:-- Libby Nelson: So we're in this huge recession and people are saying, I'm going to go learn a skill because there's no jobs. I imagine they're also taking out loans to do it.
--:-- Sean Rameswaram: Yeah, absolutely, because for-profit colleges tend to serve students who don't have a lot of resources. You know, if you've been working retail and you want to go get your truck driving certification, you're not necessarily somebody who can shell out tens of thousands of dollars in tuition up front.
--:-- Libby Nelson: And so they're taking out a lot of loans, both federal student loans and private student loans, to do it. And then what they were discovering is a lot of students, either after they dropped out of their programs or after they finished, weren't getting jobs that allowed them to pay those loans back.
--:-- Sean Rameswaram: The Obama administration is expected to announce a new rule today that could have a big impact on for-profit colleges. They will lose access to federal student aid programs if those schools don't graduate students who can pay off their student loans.
--:-- Libby Nelson: And how radical an idea was it to put this sort of gainful employment rule to impose it on these for-profit colleges to say, you guys actually need to prove that you're delivering jobs?
--:-- Sean Rameswaram: Because, I mean, public universities, community colleges don't have to prove that they're getting anyone anything, right?
--:-- Libby Nelson: Well, they do vocational programs. So this rule actually applied to vocational programs at community colleges as well. But because students there take on so much less debt, it was really concentrated and was meant to be concentrated on the for-profit college sector.
--:-- Sean Rameswaram: To meet gainful employment standards, school programs will have to show typical loan payments do not exceed 20% of a graduate's discretionary income or 8% of total earnings.
--:-- Libby Nelson: And because of this, there also were a bunch of investigations into what for-profit colleges were doing, and they uncovered a lot of bad practices.
--:-- Sean Rameswaram: A recent federal probe revealed that students who enroll in for-profit schools received more than $20 billion in federal aid last year, and now they're defaulting on those loans at an alarming rate.
--:-- Libby Nelson: In addition, federal investigators went undercover and met with school recruiters who oversold the amount of money students can expect to earn. They told me I'd be able to get a better job, that I'd be making $35,000 to $40,000 a year. I work at Walmart in customer service. I feel like I've been lied to. It's decimated my financial life.
--:-- Sean Rameswaram: I couldn't get a mortgage if I wanted one. You've got in your head that after two years, you're going to be able to do something you've always wanted to do. And then you find out that it's not true.
--:-- Libby Nelson: I learned so much, but I can't do anything with it. They were misstating their job placement rates. They weren't being honest with students when they were enrolling. Students were dropping out or even if they graduated they weren't able to pay back their loans.
--:-- Sean Rameswaram: Did it work?
--:-- Libby Nelson: Yeah, so this is the weird thing. This is a rule that never actually led a program to lose funding. And at the same time, it still managed to help transform the for-profit college industry, which is – it's not exactly on life support. There are still lots and lots of students at these schools. But compared to where it was in 2010 when they wrote this rule, it is night and day. Enrollment is down 47 percent through 2016 and then another 10 percent the year after that.
--:-- Sean Rameswaram: Several big for-profit college chains have just completely closed or gone out of business.
--:-- Libby Nelson: 16,000 students are displaced after the sudden closure of 28 Corinthian college campuses. That includes Heald College in Fresno.
--:-- Sean Rameswaram: And that's for a lot of reasons. But one of them is, I believe, because the existence of this regulation and the threat that they were actually going to have to, like, be held to some standards.
--:-- Libby Nelson: But also, investors are looking at this. And they're like, oh, God, like, maybe this isn't actually a good business to be investing in if the government's going to be cracking down on them.
--:-- Sean Rameswaram: So it mattered with the public, but it also mattered with a smaller but very influential set of people for these institutions, which are the people who are buying stock in them.
--:-- Libby Nelson: Were there any other elements of the Obama administration's attempts to sort of regulate for-profit colleges?
--:-- Sean Rameswaram: Yes. So the gainful employment regulation was sort of about trying to stop some problems up front and trying to find the colleges or the programs that weren't serving students well or that weren't leading them to get jobs that they could pay back their debt and eventually shut them down.
--:-- Libby Nelson: The other problem was as these colleges started going out of business, there were a lot of people with loans that they were still carrying and loan debt that they felt that they shouldn't have to pay off because their colleges closed or were frauds or whatever. And so they also created a regulation that would make it easier for students to claim that they shouldn't have to pay back their loans because they were defrauded. It's called borrower defense to repayment.
--:-- Sean Rameswaram: And that also was scrolled back by the Trump administration earlier this year.
--:-- Libby Nelson: So it's now sort of both ends.
--:-- Sean Rameswaram: Why? That one feels like anyone could get behind it. Your school went out of business so you don't have to pay them your loan back?
--:-- Libby Nelson: The interesting thing is from like a pure fiscal conservatives perspective, there is more of a case for rolling back the borrower defense regulation because it's expensive to forgive student loan debt than there is to rolling back the gainful employment regulation because it is also expensive for the government to keep spending Pell Grants and student loans at colleges that aren't getting good results whose students probably aren't necessarily going to be able to pay back those loans.
--:-- Sean Rameswaram: If you're purely saying the government shouldn't be spending this money, there's at least a universe where that makes sense for borrower defense. For gainful employment, it's a much harder case.
--:-- Libby Nelson: What did Betsy DeVos say when she got rid of the rule?
--:-- Sean Rameswaram: She said that she didn't want to target schools by their tax status, which is something that you hear defenders of for-profit colleges say a lot.
--:-- Libby Nelson: And that she said that, you know, all students deserve to have important data when choosing a college. And it's better for consumers to make their own choices with sort of the subtext than for the government to try and direct them to one institution or another.
--:-- Sean Rameswaram: She also said that students deserve, quote, useful and relevant data to make decisions about their education.
--:-- Libby Nelson: That sounds reasonable. It is. It's really reasonable. And it's not just true for for-profit colleges. So is DeVos doing anything to give students more access to information about the schools they're choosing and the programs they're going to?
--:-- Sean Rameswaram: That's the thing. Really good data on outcomes for colleges. So whether students, what their jobs are, whether they can pay back their loans, requires basically linking up federal student loan information for like the loan you took out when you were in school with your tax data from later on so that they can see what you're earning.
--:-- Libby Nelson: There is a federal law that prohibits creating that database because of concerns about privacy.
--:-- Sean Rameswaram: The Trump administration has not come out and said that law should be repealed or we should create a system like that.
--:-- Libby Nelson: And that is really the block. There are things that you can ask colleges to disclose. But without that link, it's really hard to get solid results on graduation rates, on certainly things like student loan versus income calculations, job placement rates, the things that students really want to know about where they're going to school.
--:-- Sean Rameswaram: Is Betsy DeVos saying anything about regulating for-profit universities, or is that not really her jam?
--:-- Libby Nelson: Not her jam. Not really on the table from what I can tell.
--:-- Sean Rameswaram: And the president, of course, has his own experience with for-profit universities. At Trump University, we teach success. That's what it's all about. Success. It's going to happen to you.
--:-- Libby Nelson: He does, although calling Trump University a university is honestly like an insult to for-profit colleges. It's so much worse even than that.
--:-- Sean Rameswaram: Some former students sued, saying they paid tens of thousands of dollars believing they would become successful in real estate, but were misled.
--:-- Libby Nelson: Trump University has agreed to settle the civil fraud lawsuit for $25 million.
--:-- Sean Rameswaram: That's a little bit higher than the rumors that we were hearing earlier today.
--:-- Libby Nelson: According to a source quoted by Reuters who is familiar The education secretary is deregulating all these for schools and the country top student loan officer just quit in protest
--:-- Sean Rameswaram: Where does that leave students?
--:-- Libby Nelson: Yeah, I mean, I think this is one where I think we really are going to have to wait for the next recession. For-profit colleges are not what's driving the increase in student loan debt generally, but they were a huge engine in what drove student loan defaults. people not being able to pay their loans back in the recession in the years immediately after.
--:-- Sean Rameswaram: And so I don't think, you know, we're going to see a huge explosion of student loan debt because for-profit colleges have freer reign.
--:-- Libby Nelson: I think really the thing to watch for is when the economy inevitably gets bad again and people want to get better jobs, what colleges do they go to? How much debt are they taking on to do that? And where do they end up?
--:-- Sean Rameswaram: Google Play has audiobooks. I went just to make sure.
--:-- Libby Nelson: Right now you can get $10 off your first audiobook purchase over $10 when you go to g.co slash play slash explained.
--:-- Sean Rameswaram: One audiobook you could get $10 off on is Heart of Darkness by Joseph Conrad.
--:-- Libby Nelson: Horror awaits Charlie Marlowe, a seaman assigned by an ivory company to retrieve a cargo boat along with one of its employees, Mr. Kurtz, who is stranded deep in the heart of the Belgian Congo.
--:-- Sean Rameswaram: Marlowe's journey up the brooding Dark River soon becomes a struggle to maintain his own sanity as he witnesses the brutalization of the natives by white traders and then discovers the enigmatic Mr. Kurtz.
--:-- Libby Nelson: Joseph Conrad's haunting tale dramatizes the stark realities of Africa in the colonial period. It's also the basis of Francis Ford Coppola's Academy Award-winning film Apocalypse Now.
--:-- Sean Rameswaram: Another thing you should listen to is the Reveal podcast from the Center for Investigative Reporting.
--:-- Libby Nelson: It features long-form, in-depth investigative journalism, but in a podcast. A recent episode is called Cops on a Crime Spree.
--:-- Sean Rameswaram: Baltimore's police department was already notorious, but this year eight former police officers were convicted on federal racketeering charges stemming from an FBI investigation.
--:-- Libby Nelson: They belonged to an elite task force charged with getting guns off the city's streets, but instead the plainclothes cops roamed Baltimore's neighborhoods at will, robbing people on the street, breaking into their homes to steal money, drugs or guns, and planting evidence on their victims.
--:-- Sean Rameswaram: You can find the Reveal podcast wherever you get your podcasts, or you can go to revealnews.org.
--:-- Libby Nelson: Libby, when did these for-profit colleges as we know them now start popping up?
--:-- Sean Rameswaram: So for-profit colleges in some sense or another have been around forever as correspondence schools, business courses.
--:-- Libby Nelson: We saw a huge boom right after World War II with the GI Bill. There were a lot of fly-by-night chains that, as we would see later, popped up to take advantage of student loans.
--:-- Sean Rameswaram: But the chains that we're talking about now really got big in the 1990s and then in the early 2000s.
--:-- Libby Nelson: What happened in the 90s?
--:-- Sean Rameswaram: Your typical for-profit college in the 70s or the 80s was maybe a cosmetology school or a truck driving school, something local.
--:-- Libby Nelson: In the 90s, all of a sudden, they started to merge and go and become what they call super systems, chains with, you know, 200, 300 locations.
--:-- Sean Rameswaram: There are a couple of things that happened. One is that a lot of them started becoming publicly traded and having IPOs.
--:-- Libby Nelson: In 1990, there was one publicly traded for-profit. By 2000, there were 40.
--:-- Sean Rameswaram: So people started to see this as like a growth area for investment.
--:-- Libby Nelson: As the Internet started to grow, people obviously saw, and not just for-profit colleges, that there's tremendous potential for educating people that way.
--:-- Sean Rameswaram: And then in 2006, they ended the rule that colleges had to provide at least 50 percent of their education in physical classrooms in order to tap into student loans and grants.
--:-- Libby Nelson: And that's really when things started to blow up.
--:-- Sean Rameswaram: So how many Americans are enrolled at these for-profit schools right now?
--:-- Libby Nelson: Just under a million, about 915,000 in 2016.
--:-- Sean Rameswaram: And that's a little higher probably than this year because, like I said, we've been seeing those numbers decline.
--:-- Libby Nelson: So 850,000, 900,000 is probably a decent estimate.
--:-- Sean Rameswaram: How do they find students?
--:-- Libby Nelson: It's not like, oh, I'll go to that state school. I'll go to Ohio State.
--:-- Sean Rameswaram: Yeah, so they advertise.
--:-- Libby Nelson: That's a big one. Hey, you. Yeah, I'm talking to you. Why are you still sitting on that couch? You know you could be out there cooking for a living.
--:-- Sean Rameswaram: You speak food.
--:-- Libby Nelson: That's why you've got to call Le Cordon Bleu.
--:-- Sean Rameswaram: So my kids don't have to forage.
--:-- Libby Nelson: Got two jobs to pay a mortgage. And I've also got a brain.
--:-- Sean Rameswaram: Today, DeVry University continues our founder's spirit of innovation in all we do.
--:-- Libby Nelson: You can try, I'll do it faster.
--:-- Sean Rameswaram: I was born a multitasker.
--:-- Libby Nelson: I'm not just a college student. I'm a Strayer student.
--:-- Sean Rameswaram: There was a commercial jingle for a for college where I was growing up that I could still sing and that was it Go for it Get your degree set yourself free with National American University
--:-- Libby Nelson: And that was like that was in the 90s when they were growing.
--:-- Sean Rameswaram: So there you know you'll see them ads on the subway you'll see hear ads on the radio and the way that these ads work is they really trade on this idea that like you need to get an education.
--:-- Libby Nelson: You need to get a better life. It's a really powerful thing to say.
--:-- Sean Rameswaram: And community colleges are really the competitors, and they usually don't have the budgets to be buying tons of billboards, tons of airtime, you know, have people at call centers waiting for you to put your information into a form online and be on the phone with you that day and trying to get you into an office and signed up.
--:-- Libby Nelson: And the other thing is for-profit colleges can afford to hire enough people that it doesn't feel like this massive educational bureaucracy that you're walking into and staring down.
--:-- Sean Rameswaram: That like, if you're trying to enroll at a community college, you probably have to know where to go.
--:-- Libby Nelson: You have to know where or when to show up. Like you can't just enroll in November and like start class the next week. You've got to wait until the next semester.
--:-- Sean Rameswaram: For-profit colleges do away with a lot of that. You can walk in, you could be in a classroom in two weeks, somebody will hold your hand and help you fill out the forms.
--:-- Libby Nelson: And like, if you're somebody without a lot of resources or somebody who is like intimidated by the idea of navigating educational bureaucracy, that's a really powerful enticement.
--:-- Sean Rameswaram: What are the graduation rates like at these schools?
--:-- Libby Nelson: They're not great overall. So for four-year programs, bachelor degree programs, you're looking at 23% for for-profit colleges versus 59% for public colleges and 66% for private nonprofit colleges.
--:-- Sean Rameswaram: So for associate degrees, for-profit colleges actually do quite a bit better than community colleges.
--:-- Libby Nelson: About 60% graduate in three years for a two-year degree versus about 22% of community college students.
--:-- Sean Rameswaram: What do these schools cost, be it a two-year or a four-year program?
--:-- Libby Nelson: On average, for for-profit colleges, tuition in 2016-17 was $16,000 a year.
--:-- Sean Rameswaram: The average tuition and fees for a community college was about $3,500 the same year.
--:-- Libby Nelson: Community colleges are almost always, financially speaking, a better choice.
--:-- Sean Rameswaram: They also just are less funded. And so they don't have, you know, programs with a rolling start often that start every three weeks.
--:-- Libby Nelson: They can't guarantee you that you can get all of the prerequisites you need to, like, get through it and get done.
--:-- Sean Rameswaram: For-profits have really capitalized on the underfunding of community colleges in America.
--:-- Libby Nelson: Who goes to for-profit schools? Do we have, like, ideas of demographics?
--:-- Sean Rameswaram: Is it low income, middle income?
--:-- Libby Nelson: If you're comparing for profits to like who goes to college in general, it's more students who are low income, more students who are women, more students who are people of color, more students who are veterans, who are working, who are of nontraditional age and who want to find a program that's going to work for them when they probably don't have the time or the money to like drop everything and go back to school.
--:-- Sean Rameswaram: I mean, if we're talking about low middle income students and programs that cost $15,000 to $20,000, basically, how many people who go to these schools are taking out loans?
--:-- Libby Nelson: Like all of them?
--:-- Sean Rameswaram: Basically, all of them are taking out loans.
--:-- Libby Nelson: Yeah.
--:-- Sean Rameswaram: There's a rule that says that 90% of their revenue, only 90% of their revenue, only 90% can come from the federal government.
--:-- Libby Nelson: Excluding, by the way, excluding the GI Bill. So you could have everybody getting federal loans, you know, $90,000 from federal student loans and grants, and then $10,000 from the GI Bill, and you'd be in the clear.
--:-- Sean Rameswaram: They are basically completely dependent on the existence of federal student loans.
--:-- Libby Nelson: 100% no. Absolutely no way.
--:-- Sean Rameswaram: It's so funny. It just feels like another arm of the federal government then.
--:-- Libby Nelson: It's totally dependent on the existence of federal student loans and grants.
--:-- Sean Rameswaram: That's why the gainful employment regulation was such a threat.
--:-- Libby Nelson: If you're not totally dependent on the federal government, the idea that the federal government might cut off eligibility for student loans to students in one of your programs is like, oh, you know, like, we'll figure out another way to make up that money.
--:-- Sean Rameswaram: There's no other way to make up that money.
--:-- Libby Nelson: Is there like a broader message that Betsy DeVos is sending out to these schools by saying, hey, we think these regulations are bad?
--:-- Sean Rameswaram: If I were a for-profit college right now, I would not be feeling all that constrained by fear of what the federal government would do to me, not just for going against this regulation, which doesn't exist anymore, but like going against any rules.
--:-- Libby Nelson: She has sent a really clear message that she does not think the federal government should be involved in regulating any kind of higher education, but certainly not for-profit higher education.
--:-- Sean Rameswaram: Libby Nelson is a news editor here at Vox.
--:-- Libby Nelson: I'm Sean Rameswaram.
--:-- Sean Rameswaram: This is Today Explained.
--:-- Libby Nelson: There's all sorts of play out there. Cosplay, wordplay, swordplay. Also Google Play.
--:-- Sean Rameswaram: You can get $10 off your first audiobook over $10 at Google Play when you go to g.co slash play slash explained and log in with your Google account.
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--:-- Sean Rameswaram: Thanks for listening to Today Explained. If you want to support the show, you can subscribe to Vox on YouTube, or you can go to vox.com/explained.
