An Obama-era rule meant to protect college students is on the chopping block

FILE PHOTO - U.S. Secretary of Education Betsy DeVos speaks at the Conservative Political Action Conference (CPAC) in National Harbor, Maryland, U.S. on February 23, 2017. REUTERS/Joshua Roberts/File Photo

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“These situations turn a benefit for struggling students into a de facto taxpayer-funded bailout,” according to an analysis.

The US Department of Education appears ready to alter the gainful-employment rule established during the Obama administration, The Chronicle of Higher Education reported on Thursday.

The rule, which aims to hold for-profit and other career-oriented colleges accountable, has been a focal point for the Trump administration, which indicated last month that it was “studying carefully and looking” at the rule.

The Chronicle learned that at the end of May, James Manning, the undersecretary of education, sent a letter to Senate Democrats regarding the regulation.

“We have some level of concern regarding the gainful employment regulations promulgated by the previous administration and are reviewing them carefully,” the letter said, in the clearest indication yet from the administration that changes may follow.

Gainful employment describes a school as failing if its students pay more than 30% of their discretionary income in student-loan payments. It was created to address for-profit colleges that charged high tuition payments but left graduates with poor career opportunities or low-paying jobs.

In 2015, Business Insider spoke with an Everest College graduate who amassed $37,000 in student loans for an associate degree in network administration. Once out of school, he was unable to find a job in the field. Everest, a subsidiary of the larger Corinthian College chain, eventually shut down amid claims that it defrauded students. The federal government has been on the hook to forgive tens of millions of dollars of student debt.

A new analysis from the Center for American Progress, a liberal think tank, concluded that a rollback of the gainful-employment rule would place even more burden on the federal government, and therefore taxpayers, relating to income-driven repayment plans.

These plans, touted as a solution for managing debt for those without a high-paying job, allow people to pay 10% to 15% of their discretionary income and have their debt forgiven after 20 to 25 years (depending on the plan).

The analysis said that if the government were to do away with the gainful-employment rule, more people would use income-driven repayment plans, ultimately shouldering the federal government with the burden of forgiving more debt. The analysis projects this figure to be $1.5 billion.

“These situations turn a benefit for struggling students into a de facto taxpayer-funded bailout for institutions that overcharge students,” the analysis said.