From Salon to Senate: Cosmetology’s Lobbying Power

The cosmetology lobby helped Empire Beauty build its early empire. In the decades since cosmetology schools became eligible for federal financial aid, they have continued to fight against measures that would provide any oversight and accountability, while working to line their pockets with more taxpayer dollars. In the 1990s, the American Association of Cosmetology Schools (AACS) pushed Congress to expand eligibility for Pell Grants, including increasing the amount of money in each award, so more cosmetology students could access them for even higher tuition.¹

A 1993 Education Department Office of Inspector General, or OIG, report found an alarming level of wasted taxpayer dollars on cosmetology programs. Despite the money being poured into these programs, the OIG found, students consistently struggled to succeed.² For instance, one beauty school the OIG highlighted received over $2.8 million in federal financial aid, over a period of 3.5 years, for about 650 students.³ Only 19 of those students went on to receive their state cosmetology licenses—at a cost to taxpayers of almost $148,000 per license. The OIG suggested that to prevent waste, fraud, and abuse of taxpayer dollars, there should be minimal performance standards for vocational trade schools, such as requirements for licensing exam passage and job placement.⁴

The report asserted that the increased availability of federal financial aid had led to a significant expansion of cosmetology schools, regardless of whether there was any market need for cosmetologists where the institutions were located. Often, the OIG noted, the supply of cosmetologists leaving the schools routinely exceeded demand. In 1990, for example, 96,000 cosmetologists were trained nationwide, adding to a labor market already supplied with 1.8 million licensed cosmetologists. Of the approximately 1.9 million cosmetologists in the labor market at that time including recent graduates, the Bureau of Labor Statistics found that only 597,000 were employed as cosmetologists because the market was completely oversaturated. Yet the OIG estimated the federal government continued to spend $725 million in federal financial aid funds annually to cosmetology students at for-profit schools.⁵

Though the schools were plagued with problems related to student outcomes, AACS kept pushing against oversight and for more money. The lobbying group urged the U.S. Department of Education, in the 1990s, to rescind “cohort default rates,” the only outcomes-based accountability measure established by the Higher Education Act that protects students and taxpayers.⁶ The Education Department measures the rates of student loan defaults for every college that participates in the federal student aid programs. Congress requires that schools with large numbers of former students consistently failing to repay their debt be deemed ineligible to participate in the federal student aid programs. In the 1990s, more than 1,000 for-profit colleges lost eligibility for federal aid due to their high cohort default rates.⁷

AACS, like the broader for-profit college lobby, argued that beauty schools weren’t at fault for high default rates. They couldn’t help it if their students, who came largely from low-income and marginalized backgrounds, weren’t able or willing to make federal loan payments. Seeking to pin responsibility on the borrowers, an AACS representative testified at a 1997 House of Representatives subcommittee hearing that “the sad part is that everyone who takes the time to fully understand the issues involved realizes that the primary factor in determining a student’s predisposition to default are the demographics of the students when they enroll in the school, not the educational quality of the school itself.”⁸

As a result of industry influence, the 1998 reauthorization of the Higher Education Act weakened the cohort default rate to the point that it was no longer an effective accountability tool.⁹ The result was predictable: On paper, default rates looked lower because of the short, two-year measurement window that associations like AACS lobbied for. As it turned out, institutions encouraged students to pursue forbearances and deferments when their loans entered the repayment period, but many students went on to default once they exhausted their deferments and forbearances.¹⁰

The cosmetology school industry continued to strike at consumer protections for years. The for-profit industry, including cosmetology schools, worked to weaken and even eliminate several other consumer protections during the late 1990s and early 2000s, leading to explosive growth in enrollments in for-profit and career-oriented programs.¹¹

After rapid growth of the for-profit sector, the Obama administration in 2009 attempted the first iteration of the gainful employment rule, which would help the Education Department clamp down on institutions with extremely poor outcomes. Gainful employment rules were finalized in 2014, at which point AACS sued to block them from taking effect, arguing that the rule was unfair to their schools, since “graduates disproportionately underreport their income due to high levels of cash-based and self-employment-based earnings, including tips.”¹² A federal judge found merit in the idea that schools should be able to appeal more easily. But by that point, the Trump administration had begun, and Education Secretary Betsy DeVos used AACS’s lawsuit as part of her pretext for rescinding the previous administration’s regulations in 2019.¹³

Before the rescission of the regulations when defending against the cosmetology association’s lawsuit, the Education Department, under the Trump administration, wrote in a court brief that the cosmetology association provided “no evidence of unreported income being an actual—much less widespread—practice among cosmetology program graduates.”¹⁴ Research led by the economist Stephanie Cellini confirms that tax evasion in the cosmetology sector due to unreported tips is minimal, accounting for only about 8 percent more in earnings, and is insufficient to explain the poor performance of many cosmetology programs in comparison to high school.¹⁵ Even a cosmetology industry-funded survey found that nearly 90 percent of salons report tips on W-2 forms, ensuring they would appear in federal tax data.¹⁶

In 2021, the Education Department, under the Biden administration, revisited gainful employment regulations, adding a minimum earnings requirement. Graduates from career-oriented programs would need to make, on average within their state, at least $1 more than if they had received only their high school diploma and no other education.

With such a large share of cosmetology programs expected to fail, AACS and cosmetology schools didn’t waste any time before filing lawsuits to stop the rule from being implemented. In court filings, they argued again that the industry’s reliance on cash payments and tips can result in underreported earnings to the IRS, disadvantaging cosmetology schools when it comes to passing the gainful employment rule’s earnings test.¹⁷ That litigation is still pending.

Separately, the cosmetology lobby already won a battle on a May 2023 effort by the Education Department to require programs to align their required education hours with state licensing standards in order to be eligible for federal aid.¹⁸ The Biden administration aimed to change Education Department regulations that permit these programs to exceed state requirements by up to 50 percent. For example, if a state has a 1,500-hour requirement for a cosmetology license, a school can set its program length up to 2,250 hours. In justifying the rule change, the Education Department highlighted the fact that institutions like cosmetology schools often offered programs that went well beyond state licensing requirements, which meant that students could burn unnecessarily through their limited eligibility for Pell Grants while accruing federal student loans.

Just like with gainful employment, the beauty industry, along with other for-profit schools, sued the Education Department.¹⁹ The judge granted a preliminary injunction, saying the department’s new provision “represents a sea change from 30 years of established practice,” which would result in irreparable harm to institutions.²⁰ The newly finalized rule is paused due to an injunction so institutions can continue offering programs that go well beyond state requirements.²¹