WASHINGTON — The Obama administration announced new regulations Thursday requiring for-profit colleges to demonstrate they’ve prepared students for “gainful employment in a recognized occupation,” putting the schools’ federal funding at risk if they cannot.
The regulations prompted Minnesota Republican John Kline, who chairs the House Education and the Workforce Committee and is a strong defender of for-profit schools, to warn against “regulation [that] could undermine an entire sector of colleges in the name of rooting out a few bad actors.”
According to the Department of Education, for-profit schools that receive federal aid must demonstrate that the meet at least one of the following guidelines: “At least 35 percent of former students are repaying their loans; the estimated annual loan payment of a typical graduate does not exceed 30 percent of his or her discretionary income; or the estimated annual loan payment of a typical graduate does not exceed 12 percent of his or her total earnings.”
If a school consistently fails to meet those goals, they are required to send out a series of letters to students explaining why they failed, warning them about post-school debt loads and explaining potential transfer options. If a school fails to meet the new standards three out of four years, it will lose its federal funding.
The new rules, called gainful employment regulations, take effect on July 1, 2012. The first year a school could lose its federal funding is 2015.
The politics of for-profit schools
The regulations were announced after a months-long back and forth between the White House and Congress, in which Democrats, lead by President Obama and Iowa Sen. Tom Harkin, called for more regulation of for-profit schools while Republicans warned it could hurt the schools’ effectiveness.
Harkin is the chair of the Senate’s education committee, which has conducted investigations into the for-profit college industry. The investigation found that for-profit schools took in nearly $24 billion in 2008-09, about 23 percent of all federal student aid dollars. But students at for-profit schools still account for almost half of student loan defaults.
Rep. John Kline
Harkin greeted the regulations, but indicated he hopes to see more coming in the future.
“The Department of Education’s gainful employment rule is a modest and important first step to protect students and taxpayers from subprime academic programs that have a demonstrated track record of failure,” he said in a statement.
Kline and Republicans on his committee, meanwhile, condemned the regulations, saying the Department of Education has “failed to adequately address the harmful impact the gainful employment regulation could have on students and the workforce.”
In March, Kline’s committee heard testimony on an early gainful employment proposal from the Department of Education. Jeanne Herrmann, the COO of the Minnesota-based Globe University, called the then-proposal, “anti-student,” “anti-employer” and “anti-taxpayer.”
On Thursday, a spokesman for Minneapolis-based Capella University said “the first and most important step in measuring the return on investment for students and taxpayers begins with measuring academic quality, not just debt.”
According to spokesman Michael Walsh, Capella had submitted several recommendations to the Department of Education regarding the gainful employment rule, and it appeared the final regulations wove in some of them.
Industry organizations and think tanks were quick to respond to the new regulations. The Association of Private Sector Colleges and Universities said it “remains very concerned” about the gainful employment standards, and is specifically worried, like Capella is, that they could end up punishing programs with strong academic results.
Campus Progress of the progressive Center for American Progress said the new standards are “important reforms,” but they don’t go far enough.
“We believe that, collectively, the rules issued by the Administration, ongoing investigations by state attorneys general, and increasing scrutiny by Congress and the media will ultimately compel for-profit schools to clean up their act or else shut their doors.”
Devin Henry is an intern in MinnPost’s Washington Bureau.
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I propose one very simple criterion for qualifying a for-profit school for federal student aid: Have you ever denied admission to an applicant because he or she was not qualified for the field of study?
Well if the for-profit colleges don’t want to play by the rules, they can refuse to accept federal aid. Easy enough.
Sure, for profits want to compete, they want to have an education “market”, but they don’t want their consumers to have rights, reliable information, or an consumer advocate. Sounds like banks, and we know how that ended up.
…According to the Department of Education, for-profit schools that receive federal aid must demonstrate that the meet at least one of the following guidelines: “At least 35 percent of former students are repaying their loans; the estimated annual loan payment of a typical graduate does not exceed 30 percent of his or her discretionary income; or the estimated annual loan payment of a typical graduate does not exceed 12 percent of his or her total earnings.”….
Those are hardly strict requirements. Money speaks through legislators, in this case the for-profit school’s profit motivating the mouthpieces like Klein.
The fact is that the US taxpayer is on the hook for more and more guaranteed student loans that cannot possibly be paid back. But hey, what is the taxpayer when you get donations from the for-profit school?
You can get a 2 year “degree” from a cooking school that will cost $40K/year. Let’s say a student ends up owing $70K, which would be a monthly loan payment of $1000 (each $7 k of loan results in a hundred dollars a month payment). How likely it is a beginner in the food industry will have a discretionary income of $40K per year?
The math doesn’t work out, the student defaults and the taxpayer pays. Meanwhile the for-profit school made its money when they took the proceeds from the guaranteed student loan. A private enterprise ripoff of the taxpayer.
“No money” = “not qualified”.
How many students are turned down for admission when they CAN pay–but don’t meet admission requirements? What *are* admission requirements? Do they have any *other than* the ability to pay?
From a potential employer’s point of view, way too many of these schools, IMHO, not only fail to prepare their students for the work they purport to prepare them for, but all too often misrepresent the prevailing wage a student can expect once they’ve graduated. You see ads saying “earn up to x dollars a year as an accountant,” for example, never mentioning that receiving that amount requires a heckuva lot more than a 2-year associate’s degree. All too many of these schools appear, to me, to work on some diabolical combination of bait-and-switch/ponzi scheme business model. No wonder Kline supports them.
I would like an explanation of how this regulation would be bad. If a student graduating from a for-profit school (or any school for that matter) defaults on his student loan, one must question whether or not we should be funnelling public money into them. If you have the luxury to go to school simply to go to school, find a way to do it on your own dime. But if you go to school to get job-related skills and knowledge and that school fails to provide them to you, then we shouldn’t be rewarding the school.
Amen to Neal and Lora (#4 & #6). The proposed requirements are not at all strict, and the amount of money taxpayers are being asked to make up due to loan defaults is substantial, all in the pursuit of what Lora correctly points out is less-than-truthful advertising about prospective income. I also like Gerald’s series of very relevant questions in #5.
While I’m inclined to agree with the Capella University spokesman that “…the first and most important step in measuring the return on investment for students and taxpayers begins with measuring academic quality, not just debt,” but I’ve seen no compelling evidence that academic quality is significantly superior at for-profit schools. If anything, the evidence leans a bit in the other direction.
When Campus Progress says “…the rules issued by the Administration, ongoing investigations by state attorneys general, and increasing scrutiny by Congress and the media will ultimately compel for-profit schools to clean up their act or else shut their doors,” I’m not at all disturbed by the prospect of some for-profit schools being forced to cease their operations.
Mr. Kline’s support for private diploma mills and collegiate-level rip-offs is, shall we say, unfortunate. Ideologically pure, perhaps, for someone on the right wing, but educationally unsound.
And what about public colleges…do those graduates find jobs 35 percent of the time. I know plenty of people with 4 year degrees from public colleges who either don’t have a job in their field or don’t make adequate money. My daughter just graduated with 4-year in broad English, (middle school, high school)…very few teaching jobs out there…are those public colleges going to be penalized as well?
BTW: My 25-year-old daugher did not have a child out of wedlock so she actually had to pay for her education (or my husband and I did). Would have been less expensive for us to tell her to get pregnant….but not ethical.
John Kline has always to my knowledge gotten his paycheck from the government.
He’ll always come down on the side of money, every single time.
Jeff Wilfahrt, Rosemount, MN
As a previous poster stated, “The fact is that the US taxpayer is on the hook for more and more guaranteed student loans that cannot possibly be paid back.”
Considering 25% of loans go the the private schools, but more than 50% of the defaults come from those loans begs for explanation. It does not take a genius to figure this out.
Apparently John Kline falls short on this measure.