House panel's spending plan revives clash over student debt

Updated 6/20/2015 8:02 AM

WASHINGTON -- A spending plan released by a House committee Tuesday would prevent the Obama administration from moving forward with new regulations limiting the amount of debt students can carry in career-training programs, two weeks before the rules take effect.

For nearly six years, administration officials have fought to institute regulations to protect students from winding up with tens of thousands of dollars of debt for a certificate. The Education Department is on the verge of enforcing these rules for the first time at a time when some for-profit colleges, such as Corinthian and ITT, are under fire for leaving students drowning in debt.


But on Tuesday, the House Appropriations Committee renewed the fight by unveiling a spending bill that prohibits the Education Department from enacting the new policy. The prohibition is one of several policy provisions directed at the department, which Republicans also want to block from establishing a college rating system and dictating how states must license institutions of higher education.

"This legislation continues our efforts to reduce wasteful spending, to stop harmful and unnecessary regulations that kill jobs and impede economic growth, and to make wise investments in proven programs on behalf of the American taxpayer," House Appropriations Chairman Hal Rogers said in a statement.

Despite the committee's prohibition, the Education Department's rules will still take effect July 2015. But if the provision makes it into the final budget and is signed into law, the rule could be repealed in October. It is highly unlikely that the president would agree to dismantle a piece of regulation that administration has fought so hard to enact, but lawmakers' continued efforts to scuttle the rules shows the fight is far from over.

"With students across the country reeling from the predatory behavior of failed and fraudulent 'career' colleges, it's truly mind-boggling that House Republicans are still fighting tooth and nail to protect schools that take advantage of students and leave taxpayers with the bill," Education Secretary Arne Duncan said in a statement. "Make no mistake: A vote for this proposal is a vote to leave students in the dark and taxpayers holding the bag. Both deserve better."

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It has been a long and difficult road for the Education Department since it first formulated the rules in 2009. The for-profit industry lobbied to block the regulations, with the support of many congressional Republicans and some Democrats. By 2012, the courts got involved, when a federal judge blocked a key provision, sending the department back to the drawing board.

After some tinkering with the original language, the Education Department issued new rules in October 2014. Under the new rules, a program would be labeled failing if typical graduates have loan payments that surpass 30 percent of discretionary earnings or 12 percent of annual earnings. Programs that fail in two out of any three consecutive years -- or land in the danger zone for four consecutive years -- will be ineligible for aid.

About 1,400 programs would not pass the accountability standards, according to the Education Department. The rule covers thousands of programs at for-profit, public and private nonprofit colleges. Industry groups have filed lawsuits to block the rules from taking effect, but a federal judge tossed out one of the two cases last month, leaving the remaining one in jeopardy.

For years, consumer groups have warned that vulnerable low-income students were leaving for-profit schools with five-figure debt and little to show for it. A 2014 lawsuit filed by the Consumer Financial Protection Bureau against for-profit giant Corinthian Colleges showed the school set tuition and fees as high as $75,000.

Allegations that Corinthian steered students into predatory loans and lied about the success of its programs ultimately led to a series of government lawsuits, loss of its access to federal funding and bankruptcy. Now the federal government may have to forgive hundreds of millions of dollars in student loans amassed by former Corinthian students.

Duncan has bemoaned all of the steps Congress has taken to prevent the department from bringing basic accountability to the for-profit industry, including fighting the new rules.

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