Betsy DeVos Repeals Gainful Employment Rule, Eliminating All Accountability for For-Profit College Job Outcomes Despite $1.3 Billion Projected Cost to Taxpayers

Secretary of Education Betsy DeVos formally repealed the Obama Administration’s Gainful Employment Rule on July 1, 2019, eliminating the only federal accountability mechanism that measured whether career training programs at for-profit colleges and non-degree programs at all institutions actually prepared students for jobs with earnings sufficient to repay their student loans. The repeal came despite warnings from the Department of Education’s own Inspector General that eliminating the regulation would leave a “vacuum in accountability” with no safeguards to protect students from predatory programs that leave graduates with unmanageable debt, despite Congressional Budget Office estimates that the repeal would cost taxpayers $1.3 billion over ten years in increased student loan defaults, and despite clear evidence that over 800 programs—98 percent of them at for-profit colleges—were failing the gainful employment tests and leaving students worse off financially than if they had never enrolled. The regulatory rollback exemplified the Trump Administration’s systematic regulatory capture of the Education Department, where former for-profit college industry executives were hired to senior positions overseeing the very industry they had worked for, conflicts of interest were ignored, and student protection regulations were systematically dismantled to benefit the for-profit education sector at massive cost to students and taxpayers.

The gainful employment rule that DeVos repealed had been finalized in 2014 after years of development, legal challenges, and regulatory proceedings during the Obama Administration. The regulation required career training programs to demonstrate that typical graduates could repay their student loans without the debt consuming more than 20 percent of discretionary income or 8 percent of total earnings. Programs that failed these debt-to-earnings tests for two out of three consecutive years would lose federal financial aid eligibility, creating accountability for programs that charged students for credentials that did not lead to employment with earnings sufficient to justify the debt incurred. The rule was based on the statutory requirement that for-profit colleges receiving federal aid must prepare students for “gainful employment in a recognized occupation”—a requirement that had existed since 1965 but had never been enforced through outcome-based metrics until the Obama Administration developed the regulation.

Data from the first years of gainful employment implementation demonstrated the urgent need for the accountability the rule provided. When the Department of Education released 2015 data applying the debt-to-earnings tests to existing programs, the results showed that 803 programs at 351 institutions failed the metrics, affecting approximately 99,000 students and $1.1 billion in annual federal aid. Critically, 98 percent of the failing programs were at for-profit institutions, demonstrating that the systematic problem of high-cost programs that did not lead to sufficient employment was concentrated in the for-profit sector. Many failing programs charged $30,000-$50,000 for credentials in fields where graduates typically earned $20,000-$30,000 annually, creating mathematically impossible debt burdens where loan payments would consume 30-50 percent of graduates’ income, guaranteeing high default rates and long-term financial hardship.

The gainful employment rule had already begun to affect for-profit college behavior even before programs actually lost aid eligibility. Some for-profit colleges closed or reformed failing programs to avoid the reputational damage of being designated as failing the tests. Other schools reduced tuition for at-risk programs, demonstrating that they could operate at lower prices when faced with regulatory pressure but had chosen to charge inflated tuition when able to do so without accountability. Some for-profit colleges stopped offering certain programs that could not be reformed to meet the debt-to-earnings standards, effectively admitting that those programs could not be operated in a way that served student interests while generating profit for the institution. These market responses to the gainful employment rule demonstrated that accountability regulations could effectively protect students and improve program quality when actually enforced.

Betsy DeVos’s decision to repeal the gainful employment rule was driven not by evidence that the regulation was ineffective or that for-profit college quality had improved, but by ideological opposition to regulation and by political pressure from the for-profit education industry that had strongly supported Trump’s presidential campaign and DeVos’s nomination as Secretary. DeVos had financial ties to the for-profit education industry through her family’s investments, creating conflicts of interest that raised questions about whether her regulatory decisions served student interests or industry interests. Under DeVos’s leadership, the Education Department hired multiple former for-profit college executives to senior positions overseeing the industry, creating a revolving door that placed industry insiders in charge of regulating their former employers and business associates.

Most notably, DeVos hired Robert Eitel, a former lawyer for Bridgepoint Education (a for-profit college company), as a senior counselor with significant influence over regulatory policy. Julian Schmoke Jr., a former dean at DeVry University (another for-profit chain), was appointed to lead the unit responsible for investigating fraud at educational institutions—effectively putting a former for-profit executive in charge of policing for-profit fraud. These appointments created obvious conflicts of interest where officials with career and financial ties to the for-profit industry were making regulatory decisions that directly affected their former employers’ profitability and their own future career prospects in the industry. The revolving door ensured that regulatory decisions were made by people whose loyalties and interests aligned with the for-profit industry rather than with students or taxpayers.

The Department of Education’s rationale for repealing the gainful employment rule was that the regulation was “unnecessarily burdensome” and that existing accountability measures were adequate without outcome-based metrics. However, this rationale ignored the reality that before the gainful employment rule, for-profit colleges had operated for decades with minimal accountability, enrolling hundreds of thousands of students in programs that did not lead to gainful employment while extracting billions in federal student aid. The existing accountability measures DeVos cited—cohort default rates and other metrics—had proven completely inadequate to prevent systematic fraud at Corinthian Colleges, ITT Technical Institute, and numerous other for-profit chains that had collapsed leaving students with worthless credentials and unpayable debt. The claim that the gainful employment rule was unnecessary amounted to arguing that no accountability for job outcomes was needed even though massive fraud specifically related to false claims about job outcomes had just caused multiple major for-profit college collapses.

The Department also ignored extensive commentary and criticism received during the repeal’s public comment period. The Administrative Procedure Act requires agencies to respond to significant public comments when developing or repealing regulations, but the Department of Education essentially dismissed all criticism of the repeal without substantive engagement, providing only cursory responses that did not address the detailed evidence and arguments that commenters had submitted. This failure to properly consider public input made the repeal vulnerable to legal challenges under administrative law, but DeVos proceeded with the repeal anyway, demonstrating that the decision was predetermined regardless of evidence or public comment.

Most damagingly, the Department completely ignored warnings from its own Inspector General about the consequences of repeal. The Education Department’s Office of Inspector General had specifically warned that repealing the gainful employment rule without replacing it with alternative accountability measures would create a regulatory vacuum that would leave students vulnerable to predatory programs. The Inspector General noted that the gainful employment metrics provided important information about program quality that was not available through other accountability measures, and that eliminating this information without developing alternatives would reduce the Department’s ability to identify and address programs that harmed students. DeVos’s decision to proceed with repeal despite these warnings from an independent watchdog within her own department demonstrated that protecting students was not a consideration in the regulatory decision.

The Congressional Budget Office’s estimate that the gainful employment repeal would cost taxpayers $1.3 billion over ten years represented only the direct fiscal impact from increased student loan defaults when students enrolled in programs that would have been ineligible under the rule. This estimate did not include the broader costs to students who would take on debt for credentials that did not improve their earnings, the opportunity costs of time spent in failing programs rather than in productive education or employment, or the macroeconomic costs of reduced workforce productivity when workers were inadequately trained. The full social cost of the gainful employment repeal likely exceeded $5-10 billion when these broader impacts were considered, but the Trump Administration prioritized for-profit college industry interests over the multi-billion-dollar cost to students and taxpayers.

Twenty-one state attorneys general filed a lawsuit challenging the gainful employment repeal, arguing that the Department of Education had violated the Administrative Procedure Act by failing to provide adequate justification for the repeal, by ignoring contrary evidence and expert warnings, and by failing to properly consider alternatives to complete repeal such as modifying the metrics while maintaining accountability. The lawsuit also argued that the repeal was arbitrary and capricious—a legal standard that prohibits agency actions that are not reasoned or that contradict the agency’s own prior findings without explanation. The states pointed out that the Department had extensively justified the need for gainful employment accountability when developing the 2014 rule, finding that the accountability was essential to protect students and taxpayers, but had now repealed the rule without explaining what had changed to make the accountability unnecessary, suggesting the repeal was driven by political ideology rather than reasoned policy analysis.

The American Federation of Teachers (AFT) also sued DeVos over the gainful employment repeal along with related rollbacks of borrower defense protections, arguing that DeVos had “capriciously” dismantled student protections to benefit the for-profit college industry. AFT President Randi Weingarten stated that “Betsy DeVos has made it clear that she will do anything to protect the interests of predatory for-profit colleges, even if it means abandoning students and taxpayers.” The lawsuit highlighted that DeVos’s regulatory agenda consistently favored for-profit industry interests over student protection, creating a pattern that suggested regulatory capture rather than good-faith policy disagreements about the best way to protect students.

The gainful employment repeal was part of a broader DeVos regulatory agenda that systematically dismantled Obama-era student protections. In addition to repealing gainful employment, DeVos delayed and then rewrote borrower defense to repayment regulations to make it dramatically harder for defrauded students to obtain loan forgiveness; she eliminated automatic closed school discharge for students whose colleges closed while they were enrolled, requiring them to apply for relief instead; she rescinded guidance that prohibited forced arbitration clauses and class action waivers in enrollment agreements, allowing schools to force students to resolve disputes through arbitration rather than in courts; and she weakened accountability metrics for online education and distance learning programs. This comprehensive deregulation created an environment where for-profit colleges could operate with minimal accountability, could defraud students with limited risk of consequences, and could prevent students from obtaining loan relief even when fraud was proven.

The revolving door between the for-profit education industry and the Trump Education Department extended beyond Eitel and Schmoke to numerous other appointees with industry ties. These officials consistently made decisions that benefited their former employers and potential future employers at the expense of students. The regulatory capture was so complete that consumer advocates described the Education Department under DeVos as essentially an industry lobbying organization that happened to have government authority. Decisions that would normally be made to protect students were instead made to protect industry profits, with the official justifications for regulatory changes reading almost identically to for-profit industry lobbying materials and legal briefs.

For students who enrolled in for-profit programs after the gainful employment repeal, the consequences were devastating. Without the accountability the rule provided, for-profit colleges resumed enrolling students in programs that charged $30,000-$50,000 for credentials that did not lead to employment with earnings sufficient to repay the debt. Students who attended these programs during the Trump Administration found themselves in the same debt trap that had harmed hundreds of thousands of students at Corinthian, ITT, and other failed for-profit chains—carrying tens of thousands of dollars in student debt for credentials that employers did not value, unable to find jobs that would allow loan repayment, facing default and all its consequences, and discovering too late that they had been systematically defrauded. The gainful employment repeal directly enabled this renewed wave of for-profit fraud by eliminating the accountability that would have made these predatory programs ineligible for federal aid.

The repeal also sent a message to the for-profit education industry that fraud would not face serious consequences during the Trump Administration. The industry had just witnessed the collapse of Corinthian and ITT after massive fraud was exposed, had just seen EDMC pay nearly $200 million to settle fraud charges, and might have been expected to reform practices to avoid similar fates. However, the message from DeVos’s regulatory rollbacks was that the Trump Administration would protect the industry from accountability rather than holding it accountable for fraud, encouraging a resumption of predatory practices rather than genuine reform. Industry enrollment data showed that for-profit colleges began expanding again during the Trump Administration after years of enrollment declines following the Corinthian and ITT collapses, suggesting that the regulatory relief DeVos provided had indeed encouraged renewed predatory expansion.

The gainful employment repeal also illustrated the fragility of regulatory protections that depend on executive branch enforcement rather than statutory requirements. The Obama Administration had spent years developing the gainful employment rule through extensive research, negotiated rulemaking, public comment, and legal defense against industry challenges, finally implementing the regulation in 2015 after nearly six years of work. Yet a single political transition was sufficient to eliminate all that work, with DeVos able to repeal the rule in 2019 through the same rulemaking process that had created it. This regulatory instability meant that students, taxpayers, and even for-profit colleges operating in good faith could not rely on consistent standards, since regulations could be created or eliminated based on which political party controlled the presidency and Education Department.

The policy arguments DeVos offered for the repeal were contradicted by the evidence. DeVos claimed that gainful employment unfairly targeted for-profit colleges, but the data showed that 98 percent of failing programs were at for-profit schools precisely because for-profit colleges systematically charged much higher tuition than community colleges for similar programs while delivering worse employment outcomes, creating the high debt burdens that caused programs to fail the metrics. DeVos claimed that existing accountability measures were adequate, but those measures had completely failed to prevent the Corinthian and ITT frauds that had just cost taxpayers billions and devastated tens of thousands of students. DeVos claimed the rule was burdensome, but schools operating quality programs that actually led to gainful employment had no difficulty meeting the metrics—the only schools burdened by the rule were those operating programs that did not serve student interests and should not have been eligible for federal aid in the first place.

The gainful employment repeal represented a clear case where industry interests captured regulatory decision-making at the expense of the public interest. The for-profit education industry had spent tens of millions on lobbying specifically to achieve repeal of the gainful employment rule and other accountability regulations, had made substantial campaign contributions to Trump and to members of Congress who supported deregulation, and had supported DeVos’s nomination despite her obvious conflicts of interest. This investment in political influence paid off handsomely when DeVos delivered the regulatory rollback the industry sought, allowing for-profit colleges to continue extracting billions in federal student aid while operating programs that harmed students—a clear return on the industry’s political investment obtained through regulatory capture rather than through improving program quality or student outcomes.

For the hundreds of programs that had been failing the gainful employment tests and that would have lost federal aid eligibility if the rule had remained in effect, the repeal provided a massive windfall. These programs could continue enrolling students using federal aid despite demonstrable evidence that graduates could not repay their loans, could continue charging tuition that exceeded what graduate earnings could support, and could continue operating business models that enriched owners and executives while harming students. The $1.1 billion in annual federal aid flowing to failing programs that the gainful employment rule would have cut off instead continued to flow, representing a direct transfer from taxpayers to for-profit college owners facilitated by DeVos’s repeal.

The Biden Administration would later restore accountability for career training programs by developing new gainful employment regulations in 2023, but the four-year gap during the Trump Administration allowed for-profit colleges to enroll tens of thousands of students in predatory programs that should have been ineligible for federal aid. Those students would carry debt from the Trump-era enrollment for decades, facing the same financial hardship and limited employment prospects that the gainful employment rule had been designed to prevent. The Trump Administration’s regulatory capture of the Education Department thus created a cohort of student debt victims whose harm was entirely preventable and was directly caused by political decisions to prioritize industry profits over student protection in exchange for campaign contributions and political support.

The gainful employment repeal stands as one of the clearest examples of regulatory capture in the Trump Administration, where government officials with direct ties to a regulated industry dismantled consumer protections specifically to benefit that industry despite massive costs to the public, despite warnings from independent watchdogs, despite evidence that the protections were essential, and despite legal requirements to properly justify regulatory changes. The repeal demonstrated that when industry insiders control regulatory agencies, regulations serve industry interests rather than public interests, and the costs of that capture are borne by the most vulnerable—in this case, the low-income students, veterans, and people of color whom for-profit colleges specifically target with predatory recruitment.