Cryan-Cunningham Act to Crack Down on Predatory Practices of For-Profit Schools

Introduces Legislation to Inform Students on Debt & Income as First Step towards ‘Gainful Employment’ Standard

Trenton – Senator Joe Cryan and Senator Sandra Cunningham are acting to crack down on the predatory practices of for-profit colleges and training schools by introducing legislation that would help protect students from being saddled with heavy debts and left with undervalued educational credentials. The bill is the first step to implementing at the State level the overturned Obama-era “gainful employment” protection.

The bill, S-2026, would require state agencies to take the steps needed to collect student loan debt and income information that could be used to establish a state-wide “gainful employment” or debt-to-earnings measure, which protects students by holding schools accountable for ensuring students are not overburdened with debt compared to future earnings potential.

In the interim, the bill would direct OSHE, Consumer Affairs and the Department of Labor to develop a performance metric based on the ratio of the earnings of students in career-oriented programs compared to tuition and fees.

“We need to take the steps necessary to hold these schools accountable so their students are not financially exploited and saddled with burdensome debt,” said Senator Cryan. “The Obama administration established rules that could get the worst of these programs off the federal dole, but the Education Department under Secretary Betsy DeVos has undermined those regulations, letting predatory schools flourish once again. We need to put these consumer and educational protections in place here in New Jersey.”

Additionally, their bill would require all institutions of higher education and private career schools to provide on their websites employment data of graduates.

“The Trump administration has made it clear we cannot rely on federal regulations to protect New Jerseyans,” said Senator Cunningham (D-Hudson), chair of the Senate Higher Education Committee. “In a world where most employers demand a college degree, people without them become increasingly vulnerable to predatory practices that prey on those desperate to find good-paying, middle-class work. This legislation will protect those from being thrust into debt and victimized by flashy marketing around a valueless degree.”

“With the federal government opening the door to predatory colleges financed by student loans, state leadership is critical to protecting students and families,” said Robert Shireman, director of higher education, The Century Foundation. “This bill is the right first step for New Jersey to be able to identify programs that do not deliver results, and to require schools to take corrective action or stop enrolling state residents.”

Although the gainful employment rule worked to improve quality, lower cost and save taxpayer money, on July 1, 2019 the Trump Administration rescinded the rule and immediately allowed schools to stop complying.

Only nine percent of career-training programs failed the gainful employment test, but 98 percent of those were at for-profit colleges, according to the Institute for College Access and Success. Nationwide, more than 350,000 students have completed programs at schools that failed to meet the guidelines established by the GE Rule. These students hold nearly $7.5 billion in student debt they are unlikely to be able to repay.

“We commend Senator Cryan’s proposed legislation, which would address one of the most troubling aspects of New Jersey’s $43 billion student debt crisis,” said Beverly Brown Ruggia, Financial Justice Organizer for New Jersey Citizen Action. “It’s time to put an end to for-profit post-secondary schools enrolling students in expensive programs that don’t lead to the jobs and salaries they promised, leaving students and families with insurmountable debt. We anticipate the final version of the bill will require strong standards for both performance and licensing eligibility, which will help put an end to unfair, deceptive and abusive practices in the industry.”

While the GE rule was in effect at the federal level from 2014-2019, the rule resulted in improvement at colleges, such as the offering of free trial periods, more scholarships, lower tuitions, greater focus on employer needs, and other efforts to improve the value they offer students.