Four Ways For-Profit Colleges Could Benefit From Trump

For-profit college officials and their investors have reason to celebrate Donald Trump’s return to the White House, but the policies they favor may come with more strings attached than during his first term in office. 

There will be similarities. Trump won’t be interested in limiting the growth of the for-profit college industry, as recent Democratic administrations were, and experts expect far fewer students who claim for-profit colleges defrauded them to have their loans forgiven. But there are likely to be differences, too. The traditionally conservative anti-regulation forces in Trump’s first administration will now have to contend with Trump’s pledge to hold colleges and universities that get federal money accountable. And while there could be a proliferation of for-profit, career-oriented programs, which Trump has signaled he favors, there may be more pressure on them to deliver on promises to help students get jobs. 

Here are some areas that for-profits—and their critics—will be watching.  

Gainful employment 

One of Trump’s most consequential moves during his first term was rescinding the Barack Obama-era gainful employment rule. That rule set a debt-to-earnings ratio that essentially required career-oriented programs to ensure their graduates could earn enough to repay their loans. If they didn’t, the school could lose its federal funding. A stunning 99 percent of the institutions that failed to meet that standard were for-profits. 

Joe Biden’s administration strengthened the rule, but approval dragged on through the rule-making process, with legal challenges and bureaucratic hurdles. Colleges are supposed to submit their final data in January 2025. In practice, gainful employment rules haven’t been enforced for eight years, and under Trump, there is little chance Biden’s rules will be enacted. 

But instead of ripping up the rules as Trump’s appointees did last time, his second-term team may want to keep some performance standards in place. Congress could well back that. Some leaders in the for-profit industry support such a measure. 

“We think a bad outcome would be to simply withdraw all of the Biden-era regulations relating to for-profit schools,” said Jason Altmire, CEO and president of Career Education Colleges and Universities, the leading industry group representing for-profit career colleges and a former Democratic member of Congress from Pennsylvania. “We don’t want the end result to be that we keep playing the same game of ping-pong back and forth, where each subsequent administration imposes new regulations, and then the new administration comes in and withdraws them.” 

If the pro-regulation forces win, the next battle will be over what gets measured to determine colleges’ eligibility for federal aid—perhaps graduation rates, debt levels, income and/or job placement. Some public community colleges tend to have low graduation rates, for example, but they are inexpensive, so their student debt levels are low, especially compared to for-profit programs. 

“We see a disproportionate amount of student debt held by students who are coming out of the for-profit sector,” said Amber Villalobos, a higher education fellow at the progressive think tank The Century Foundation. “Specifically, students of color and students from low-income backgrounds; we know that these students tend to be overrepresented in for-profit colleges, which is where we’re more likely to see students pulled into high-cost but lower-value programs.” 

An analysis of the most recent federal data by The HEA Group, a research organization, looked at 3,887 higher education institutions and found that students at 305 of them were, on average, making less than 150 percent of the poverty-line income ($21,870 a year) 10 years after they enrolled. And 86 percent of those whose students were not hitting the benchmark were for-profit certificate programs. 

Industry representatives have objected to those measurements; however, they argue that in some occupations in which for-profits play a prominent role, such as cosmetology, employees rely heavily on tips, which may not get reported as income. [See “America’s Best and Worst Colleges for Vocational Certificates” in the Washington Monthly’s 2022 College Guide.] 

Borrower Defense 

Another Obama-era initiative that critics credit with curbing some of for-profit colleges’ worst practices is known as borrower defense. The rule allows for loan forgiveness for students who attended colleges that defrauded them; the majority of colleges found liable were for-profits. Under the first Trump administration, the borrower defense wasn’t abolished, but Secretary of Education Betsy DeVos repeatedly put roadblocks in front of students seeking debt relief. That left a massive backlog of cases for the Biden administration. Hundreds of thousands of borrowers entitled to relief are still waiting to have their cases put through the system, and student debt advocates expect the incoming administration to move slowly on those and future cases.  

“Borrower defense can’t really be made to go away, but it can be made inaccessible or extremely difficult,” said Eileen Connor, president and director of the Project on Predatory Student Lending. 

Accreditation 

During the campaign, Trump promised to reform college accrediting bodies—the nonprofit organizations nominally overseen by the federal government that guarantee the quality of higher education institutions and act as gatekeepers to federal student aid. He wants to make it easier for new accrediting bodies to be created. 

“Our secret weapon will be the college accreditation system,” Trump said in a campaign video. “The accreditors are supposed to ensure that schools are not ripping off students and taxpayers, but they have failed totally.” 

In addition to firing “the radical Left accreditors that have allowed our colleges to become dominated by Marxist Maniacs and lunatics,” he said he wanted to ensure that colleges are “offering options for accelerated and low-cost degrees [and] providing meaningful job placement and career services.”  

“Folks around the Trump campaign and Trump himself recognize the accreditors as a central problem,” said Preston Cooper, a senior fellow at the conservative American Enterprise Institute. “The current accreditation system is a cartel that protects institutions but excludes newer institutions that might be more innovative.” 

While the existing accreditation system has detractors on the left and the right, some critics worry that new accreditors wouldn’t scrutinize for-profit colleges; Trump’s first administration, for example, reinstated a disqualified accreditor. 

“The regulatory environment, the pressures for colleges to create new programs that will expand their enrollment, creates sort of like a perfect storm for more students to go to predatory for-profit colleges that won’t have the same level of oversight,” said Jeremy Bauer-Wolf, the investigations manager on the higher education program at the liberal think tank New America. 

Indeed, publicly held companies that own for-profit colleges saw a boost in stock prices after the election. 

“Institutional investors that might have been reluctant a few weeks ago to invest are starting to look at the sector a little bit more favorably,” said Jeffrey Silber, senior analyst in BMO Capital Markets Equity Research. “There’s always been some private equity firms in this space, but under the Obama administration, many of them pulled back. I saw a little bit of that under Biden as well. I could see some of those folks coming back to the table, too.” 

While for-profit four-year colleges only enroll about 5 percent of college students, their enrollment increased by 8 percent between 2021 and 2023, and preliminary enrollment showed another 5 percent gain this fall.  

Short-term Pell 

The real growth, however, in the coming years could be in shorter-term, job-oriented certificate programs. The Trump administration has signaled that it will prioritize higher education that is primarily job-focused, which could loosen up both state and federal streams of funding for the for-profit sector. 

Trump’s nominee for education secretary, Linda McMahon, is a proponent of what’s known as “short-term Pell.” Pell Grants, which most low-income families use to pay for college, can currently be used only for education programs that last 15 weeks or more (about one semester). 

McMahon supports a bill, which has some bipartisan support, allowing federal aid dollars to pay for short-term programs that train students for high-demand jobs. Critics worry the program could be used to support shorter programs run by for-profit companies that deliver poor results for students; a recent report showed no improvement in employment for students who used short-term Pell in a pilot program. But there is a push to attach some strings to the federal funding, including graduation and job placement requirements.  

For-profits’ stakes for all these policies are high. The industry has spent more than $6.6 million on lobbying this year, according to OpenSecrets.org. 

For the most part, experts expect the Trump administration to aim its fire at selective, nonprofit and public four-year colleges. He has threatened to withhold funding from universities he says are indoctrinating students into a “woke” ideology. Some in the for-profit sector say the same regulations used against them could be aimed at other higher education institutions. 

“We were the politically unpopular schools,” said Altmire of the for-profit group Career Education Colleges and Universities. “In a new administration, there are other schools that might find out that having the ability to weaponize regulations against politically unpopular schools is not something that they would be happy with.” 

This story about for-profit colleges was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger Higher Education newsletter. 

Meredith Kolodner is a staff writer at The Hechinger Report. Kolodner@HechingerReport.org 

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