The Biden administration's Department of Education unveiled new regulations Tuesday that will primarily affect for-profit colleges and schools on shaky financial ground.
The new rule, billed as a consumer protection effort for students, will go into effect in July 2024 and expands federal oversight and regulation of colleges and universities that may close due to financial difficulties.
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"In recent years, so many students have been abandoned by shady colleges that suddenly closed their doors," Secretary of Education Miguel Cardona said on a conference call with reporters Tuesday. "When a college shuts down, students often find themselves unable to complete the educational journeys, and then at the end of the day, the taxpayers end up lying on the hook for those debt discharges. ... These final rules will raise the bar for accountability and protect students and taxpayers."
The new regulations implement several requirements on institutions that will force schools to disclose "triggering events" that may indicate the college is struggling financially. These "events" include a failing financial responsibility composite score, a high cohort default rate, or federal or state lawsuits against the school.
The regulation also prohibits schools from withholding transcripts from students and allows the department to implement certain conditions on schools that are on shaky financial ground, including restricting the college's ability to expand locations and programs.
Undersecretary of Education James Kvaal noted on the call with reporters that the regulations are the department's second set of regulations that target "predatory and low-quality institutions of post-secondary education," specifically mentioning for-profit institutions in that category. The department had previously unveiled a "gainful employment" rule that requires for-profit schools to prove their programs set graduates up for financial success.
"These rules give the department greater tools to protect taxpayers from losses created by school misconduct and closures," Kvaal said. "They allow the department to more quickly and effectively place conditions on worrisome schools, and they ensure that when students take out loans for programs that lead to licensure, they'll be able to achieve their educational dreams."
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Cardona and Kvaal billed the new regulations as part of the Biden administration's broader effort to target problems in the student loan program. To date, the department has discharged $127 billion in federally held student loans for 3.6 million borrowers. The department has used existing programs such as the income-driven repayment program, the public service loan forgiveness program, and the Borrower's Defense of Repayment program to discharge the loans.
“With these final rules, the Biden-Harris Administration is fixing a broken system, which failed to protect students and families, and addresses abuses in higher education that have cost taxpayers billions of dollars in recent years," Cardona said in a statement. "We are raising the bar for accountability and making sure that when students invest in higher education, they get a solid return on that investment and a greater shot at the American dream."