Author: Dervarics, Charles
Date published: June 10, 2010
The U.S. Education Department is considering new regulations on forprofit higher education institutions that are earning praise from consumer groups but face criticism from the private sector.
After a series of negotiated rulemaking sessions during the past year, the department is planning rules that could restrict for-profits' access to federal financial aid programs. One key provision would ban aid to students at institutions whose former students have high debt-to-earnings ratios once they enter the work force.
Proponents say the reforms are long overdue, claiming that many students complete vocational, career and certificate programs but cannot find high-paying jobs and may default on debt. "This sector is targeting a financially needy population, with some schools that aggressively recruit students and load them up with debt," said Chris Lindstrom, higher education program director at consumer group US PIRG.
Citing federal data, Lindstrom said that, while for-profits enroll only 7 percent of college students, they account for 44 percent of borrowers who entered student loan repayment in 2007 and defaulted by 2009.
"Clearly something's going awry here," she told Diverse.
But for-profit representatives say the rules, if approved, would deprive many students of color from gaining access to career programs.
The Career College Association, which represents 1,450 private colleges, commissioned research on the impact of the change. It found the rule or rules would affect 33 percent of students in for-profit programs, including 68,000 African-American students and 79,000 Hispanic students annually.
Overall, about 360,000 students nationwide would lose access to financial aid annually under the rule, says Dr. Jonathan Guryan, a University of Chicago economics professor conducting the study for the association.
"The problem that the regulation aims to solve has not been clearly stated - neither its nature nor its extent," he said.
Career College Association President Harris Miller says the plan would take a "sledgehammer" approach to the for-profit sector. As a result, it could "displace hundreds of thousands of students," he said.
The regulations are expected to address a range of financial aid integrity issues, from eligibility for federal student aid to bans on payments to recruiters for their role in bringing in new students. The prime concern facing for-profit colleges centers on the definition of "gainful employment" under the Higher Education Act, the main federal law for the postsecondaiy sector. The act states that students at for-profit colleges and institutions can participate in financial aid, including grant and loan programs, if the institution's program prepares students for "gainful employment in a recognized occupation."
But the federal government has never provided a specific definition of what it means by gainful employment. In negotiated rulemaking following passage of the Higher Education Opportunity Act of 2008, student and consumer groups sought a more specific definition that would weed out low-quality programs.
This plan would define "gainful employment" in a way that considers students' likely earnings in the profession and the debt they incur to pursue the line of study. The plan would make career schools largely ineligible to participate in financial aid programs if graduates' student loan debt is more than 8 percent of their earnings.
If schools miss this debt-to-income threshold, they still could participate in financial aid if they have high rates of students who graduate, obtain jobs and pay back their loans.
On Capitol Hill, Education Secretary Arne Duncan said his goal is to weed out "bad apples" among for-profit and vocational schools. In a commentary on AOL News, Duncan outlined his concerns.
"Many former students of vocational schools have reported that they were enticed into programs that did not deliver," he said. "They reported that their programs fell far short of providing the education and training needed to be gainfully employed. These problems afflict only a small minority of vocational and career programs. But they will fester unless steps are taken to protect students and taxpayers."
According to Duncan, representatives of the for-profit sector "declined to negotiate on these proposals."
But the Career College Association says it offers alternatives to the departments' plans. It has suggested more public disclosure about the cost of career programs, the range of income levels likely from these positions and the repayments likely required from student loans. Schools also could collect wage and salary data for their graduates and their average levels of debt, with sanctions for colleges that fail to report such data.
Miller also says the department lacks the statutory authority to carry out the debt-toearnings proposal, which is "at best based on flawed and incomplete data and at worst counter to the notions of educational choice and access to postsecondary education."
Consumer groups say they expect formal regulations proposed by lune. The public then will have an opportunity to comment on the plan before final regulations are set, likely by November or December.