After a year of spirited debate on accountability of for-profit colleges, new federal regulations designed to curb abuses in the sector are getting a lukewarm response from many educators.
The rules on “gainful employment” would determine the criteria through which for-profit colleges, many of them focused on trade and technical programs, can continue to have access to Pell Grants and other financial aid programs. The regulations unveiled by the Obama administration followed more than 90,000 comments on proposed rules that had the strong support of reformers but faced vehement opposition from the for-profit sector.
“While the final rule is a step in the right direction, it is substantially weaker than the draft rule and it will take longer to protect students and taxpayers from the worst of the worst programs,” said Pauline Abernathy, vice president of The Institute for College Access and Success.
Under the regulation, for-profit colleges must meet several criteria so their students can remain eligible for financial aid programs. At least 35 percent of a college’s former students must be paying down their student loans, while students must show proof that their training has translated into moderate to high-paying jobs. As a result, former students’ average loan payments must be less than 30 percent of their discretionary income and less than 12 percent of the average salary in their field of study.
Colleges would have to miss targets for three years to lose eligibility to participate in financial aid programs, and the earliest an institution would face penalties is 2015.
Since the U.S. Education Department began considering tougher rules, Abernathy said 11 state attorneys general have launched a joint investigation of the industry amid evidence of “rampant fraud and abuse,” she said.
Abernathy said that taxpayers are providing $9 billion in Pell Grants and $30 billion in federal loans for for-profit colleges in 2011 and that the sector has high loan default rates. “The evidence is clear that many of these programs are fleecing both taxpayers and students,” she said.
