The Fall of the Department of Education and the Rise of For-Profit Colleges

Last week, Donald Trump directed Elon Musk to begin dismantling the Department of Education. Though not the only federal entity to face attacks from the new administration, it is the first cabinet-level agency—so far—that Trump has indicated he won’t be satisfied to merely kneecap. He and Musk want to completely obliterate it. Of course, dismantling the Department of Education will be devastating for millions of students and families who rely on it for equal access to education and for the funding that the agency sends to state and local school systems each year. Perhaps less obvious, because the department has become so effective, is the core role it plays in financing and regulating education opportunities after high school. Without the Department of Education—or the Consumer Financial Protection Bureau (CFPB), another one of Musk and Trump’s recent targets—we will undoubtedly see the return of the abusive and extractive for-profit colleges that these agencies have spent years reining in. 

The Trump administration’s interest in dismantling the Department of Education is one more part of its drive back toward an era of unbridled financial conning. It is about reopening the $1.6 trillion student debt market to profiteers, not optimizing our education system. That much is apparent when looking at Trump’s attacks on the Department of Education, which regulates institutions that receive student loan dollars, in the context of other actions to dissolve existing consumer protections, including by shutting down the CFPB. By doing so, this administration is reversing many of the crucial reforms that reined in the sectors that bled students and taxpayers dry for decades—what some might call an inefficiency. 

As a matter of both budget and policy, targeting the Department of Education doesn’t make any sense—until you examine its role regulating the for-profit companies involved in higher education. The Department of Education is the smallest cabinet-level agency: In 2024, the agency had fewer than 5,000 employees and a budget of only about $240 billion (only about 2 percent of the federal budget), the vast majority of which goes to student financial aid. The Department of Education establishes and oversees financial aid policy, including federal loan programs that millions of students rely on to finance their post–high school educations.

Not long ago, for-profit education companies—like the now-defunct ITT Technical Institute, Corinthian Colleges, and Trump University—operated unchecked, coercing and defrauding millions of students with ubiquitous, misleading marketing and fraudulent promises of high returns on investment. They did so while siphoning billions in federal dollars, in many cases specifically targeting populations that were entitled to student aid, including US veterans eligible for funding via the Post-9/11 GI Bill. Trump and Musk don’t have a vision for the future of post–high school education in this country. Instead, they see an opportunity to raid another pot of tax money for their own purposes. A world in which there are no federal institutions dedicated to the welfare of students or their families would return us to the time when these companies ran rampant—and so did the fraud.

How the Department of Education Became an Enemy of Financiers

That wasn’t always the case. Until 2010, the federal student loan program was a clunky system of privately issued loans that the federal government regulated. Under this system, private lenders had to raise their own capital to issue loans, but the federal government provided subsidies that guaranteed a certain rate of return and backstopped loans when students defaulted on them. During the Great Recession, these lenders, which had a harder time raising their own capital, appealed to Congress, claiming that they’d be unable to issue more loans without additional government help. Without federal intervention, they argued, they’d be forced to renege on students hoping to finance their educations and on the colleges reliant on such student financing. Swayed by these arguments, Congress authorized the Department of Education to purchase the private loans the government had already guaranteed. Though this move expanded the Department of Education’s role in student borrowing, it did little to reduce the power of private lenders and servicers or to ease students’ debt burdens. 

Today, the Department of Education—along with other federal regulators including the CFPB and the Securities and Exchange Commission (SEC)—plays a pivotal role in preventing (and seeking remedy for) the fraudulent behaviors of for-profit colleges, universities, and education companies. This vital role preventing grift and abuse is a through line in agencies that Musk is targeting alongside the Department of Education, including the CFPB and the SEC. These agencies have been so effective that it’s easy to forget the arc of for-profit colleges and their demise in the face of more ardent student protections levied by regulators over the past several years.

For-profit colleges were a siphon for federal student aid and a boon to their owners and investors—until the Department of Education and the CFPB cracked down in the 2010s. Though for-profit colleges and trade schools have been around for decades, accreditation requirements and restrictions on financing through federal funds (such as in the original 1944 GI Bill) kept the industry from gaining too much power. The 1990s saw the emergence of publicly traded and private equity–owned for-profit college giants with multiple locations and thousands of students. To maximize profits, these schools kept their labor costs low and their marketing budgets high: A 2012 Senate report found the typical for-profit school had a recruiter-to-career-services employee ratio of 10:1. The business model was to get students—and the dollars they borrowed—in the door; delivering on the promises of a secure career was immaterial. This extractive business model combined with the broader phenomenon of “credentialization,” whereby employers began demanding higher levels of educational attainment for a given job, to all but ensure that students and recent graduates accumulated larger and larger debt burdens for relatively little payoff in the labor market.

These institutions, through machinations like predatory advertising and misleading promises of high-paying degrees, preyed on veterans and low-income families who could or needed to borrow federal funds to be able to afford attendance. By 2010 the industry boasted nearly 1.8 million students. A Government Accountability Office investigation from the same time determined that as much as 89 percent of for-profit revenue came from federal student aid. And these loans were more likely to go into default than those held by students at traditional four-year colleges. 

Only after a series of high-profile debtor protests and investigations into this fraudulent behavior and subsequent lawsuits by the Department of Education, the CFPB, and other federal agencies did the industry’s power start to fade in the 2010s. Though for-profit colleges still exist today, federal regulators have cracked down on the most predatory companies and behaviors. Most notably, in August of 2016, the Department of Education banned ITT Tech from enrolling students who receive federal aid—it closed its doors permanently less than two weeks later. Corinthian Colleges also shuttered in 2016 after years of state and federal legal challenges. And Trump University, which promised to teach students Trump’s “secrets of success,” closed down in 2018 after it settled a lawsuit for duping students. Without the Department of Education or the CFPB, nothing is stopping these unscrupulous actors from being resuscitated. 

The system of financing post–high school education in the US remains far from perfect—partly because of the sustained power of private lenders and for-profit education companies and partly because of exorbitant cost increases. And despite higher debt loads, more education has not always led to higher earnings for workers over time. But whereas the last administration tried to provide real relief to students and families—especially those harmed by for-profit colleges—recent actions by the Trump administration would exacerbate long-standing inequities in higher education. The first Trump administration rejected the claims of hundreds of thousands of students who were enrolled at schools that defrauded them. The Department of Education under Biden, conversely, issued new rules to protect student borrowers from for-profit college fraud and offered debt relief to students whose for-profit schools had gone defunct. At the same time, the Department of Education and the CFPB cracked down on other unscrupulous practices by student loan servicers such as Navient and MOHELA for mishandling borrower accounts.

It’s unlikely that a unilateral move by Musk to dismantle the Department of Education—or the CFPB—would hold up in court (both agencies were established through acts of Congress). That’s not the point. Trump and Musk’s recent actions are an attempt to reverse any and all material relief students and their families have received over the past several years—and to reignite for-profit industries that will take advantage of them with impunity. (In fact, the stocks of some for-profit colleges have already started overperforming.) Without federal institutions that can monitor, regulate, and intervene in private industry, those industries can and will take advantage of individuals and families—and those affected will have nowhere to go to seek relief.