For-Profit Colleges Face Tougher Regulations

Those for-profit colleges that take in millions of federal tax dollars but turn out graduates with mountains of debt and worthless degrees will have to do better for their students.

Long awaited regulations released this week by the Department of Education make it clear that those “career colleges” risk losing their Title IV funding if they don’t actually provide a path to gainful employment. The rule, which modestly ramps up over the next four years, requires colleges to maintain specific repayment rates and debt-to-income ratios among their graduates.

It’s all about using taxpayer money wisely – and providing real opportunities for students, especially poor ones, said National Education Association President Dennis Van Roekel. “We must promote the use of federal student aid for programs that give students hope a brighter future,” he said, adding that college students should gain “real prospects without excessive debt.”

For years, government investigators have been sniffing a long and wide trail of misdeeds in the for-profit industry, which relies on federal aid to operate. (About 25 percent of the schools get 80 percent of their funding from taxpayers.) According to government reports, some campuses have aggressively deceived students and federal authorities about the value of their academic programs and the true costs of enrollment. Frequently, their victims are low-income students, women, students of color, and veterans.

The facts are that students at for-profit institutions represent just 12 percent of all higher-education students – but 26 percent of all student loans and 46 percent of all student loan dollars in default.  Their students carry a median debt of $14,000, while most of their counterparts at public community colleges don’t borrow a single penny.

“We call this the community’s college for a reason,” said Jim Rice, an English professor at Quinsigamond Community College in Massachusetts, and president of the National Council of Higher Education. “The most important thing to everybody at this college is that students succeed. That starts from intake at the driveway and goes right through to graduation. In some of our programs, like nursing, we have a 98 percent job-placement rate.”

The new rules have been controversial – to some advocates, they don’t go far enough.  By the Education Department’s own estimates, just 2 percent of programs are projected to lose federal aid. But, at the same time, the for-profit industry, which has hired a fleet of expensive lobbyists to argue its case before Congress, claims the new regulations would strip students of “choices.”

That sounds ridiculous to Rice, who notes that the several for-profit colleges have “indicated through their own behavior that there is a need for external regulation… And it’s not unfair to ask institutions that receive taxpayer money to be responsible with it.”

The new regulations, which go into effect on July 1, 2012 and were based on three rounds of public hearings, more than 100 private meetings, and more than 90,000 written comments, represent a step forward but their measures are hardly draconian.

The way it would work is, if less than 35 percent of graduates are paying off their loans and graduates have a debt-to-income ratio greater than 12 percent of their total income and 30 percent of their discretionary income, the school would be ineligible for Title IV money – in 2015.

“We’re asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective,” said Secretary of Education Arne Duncan. “This is a perfectly reasonable bar and one that every for-profit program should be able to reach.”

“We do not have to sacrifice quality for convenience and accessibility,” said Van Roekel.