Obama administration to clamp down on for-profit colleges

Department of Education says too many students leave institutions with inadequate training and too much debt

Orquidea Mejia, a student who transferred from for-profit Devry Inc. to LaGuardia Community College in New York City.
Chris Goodney/Bloomberg/Getty Images

The Obama administration on Friday signaled a crackdown on for-profit colleges, vowing to protect students at risk of amassing huge debts they can't pay off.

Proposed regulations would penalize schools that produce graduates without the training needed to find a job with a salary allowing them to pay off their debt. They would also call for a tightening of rules governing certification requirements, college accountability and public disclosure.

According to a review of schools by the Education Department, 72 percent of for-profit colleges produce graduates who earn less than a high school dropout.

For-profit colleges are managed by private companies and are run, at least in part, to generate money for investors or owners. Typically marketed to low-income students who qualify for federal loans and grants, the sector has rapidly expanded over the past decade.

There are a wide range of for-profit institutions — from trade schools and institutes to larger, mainly online colleges.

All schools, for-profit or not, that don't comply with the new standards would lose access to federal student aid programs. But the Department of Education singled out problems at for-profit colleges in Friday’s announcement.

“Career-training programs offer millions of Americans an opportunity they desperately need to further their education and reach the middle class,” Education Secretary Arne Duncan told reporters Thursday.

“Today, too many of these programs fail to provide students with the training that they need at taxpayers’ expense and the cost to these students’ futures.”

By law, career-training programs can receive taxpayer-funded federal student aid only if they “prepare students for gainful employment in a recognized occupation.” Duncan said for-profit colleges receive up to 90 percent of their revenue from federal financial aid programs — and without that aid, some may be forced to close.

The for-profit-college industry has indicated that it will vigorously oppose new regulations, which would take effect in 2016. Previous attempts to impose stricter rules wound up being thrown out. In 2012, the for-profit colleges convinced a judge that regulations similar to those being put forward Friday were too arbitrary.

Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities, said in a statement that the proposed regulations would “deny millions of students the opportunity for higher earnings.”

“This is about asking whether graduates of your programs do well enough in the workforce to justify the amount of debt needed to get a degree,” Mark Huelsman, a senior policy analyst at the public-policy think tank Demos, told Al Jazeera. “The benchmarks are low. They are not saying you must get graduates a job, just that no more than 30 percent of loans can be defaulted — that’s a success.”

Huelsman said the rules are a commonsense way to make sure "predatory" institutions aren't receiving federal funding without benefiting students.

Education Department reports show that for-profit student programs account for about 13 percent of all college students but 46 percent of all loan defaults. At for-profit colleges, 22 percent of student borrowers defaulted on their loans within three years, compared with 13 percent at public colleges.

The public has 60 days to comment on the proposed regulations.

Al Jazeera and wire services. Renee Lewis contributed to this report.

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