The Department of Education published a draft rule that will provide better oversight of for-profit colleges, according to USA Today.
The new rule published Thursday is intended to protect the public treasury and students, many of whom are veterans who haven't received the training they need from the for-profit education industry, government officials said.
Education Secretary Arne Duncan said in a statement that even graduates of the programs are often left "worse off than before they enrolled: saddled with debt and with few – if any – options for a career."
If implemented, the new rule will require for-profit schools to demonstrate that the average graduates' debt load does not exceed 30 percent of their discretionary earnings, or 12 percent of their total income, according to Kelly Field at The Chronicle for Higher Education. They must also prove that the graduates' default rate does not exceed 30 percent.
When schools don't meet the debt-to-income tests during two years of a three-year period, or are near failing the tests for four consecutive years, the government will cut off Pell Grants and loans to students enrolled at those for-profit institutions.
A for-profit college trade group issued a statement saying it will oppose any attempt to implement oversight rules. The Association of Private Sector Colleges and Universities said that if enforced, the rule will "deny millions of students the opportunity for higher earnings."
According to the Hechinger Report, the APSCU has been effective at lobbying government and is "a main reason Congress and the White House have not been able to crack down on dubious practices."
Eduardo Porter of The New York Times anticipated the proposed rules in a February column, in which he wrote the villains in for-profit university business "lure poor, unprepared students with misleading ads that promise good jobs on graduation but discharge them with limited employment prospects and a crushing burden of debt."
The for-profit education industry has been under fire for several years. Kevin Carey of The Chronicle of Higher Education, reported in 2010 that many of the industry's students are "financially unsophisticated" and thus easier for companies to "ruthlessly exploit."
He wrote that government investigations have uncovered how the companies use the hands of students as a means to pass vast sums of money "from the public treasury to the for-profit bottom line" regardless of whether the students’ graduate, find jobs, or default on the loans. USA Today reports that while 31 percent of all student loans in the United States go to these companies, they account for just 13 percent of the nation’s students.1 comment on this story
However, these for-profit companies fill a needed gap in the higher-education market, Porter reported in the Times. He interviewed educators who said the schools often outpace their non-profit competitors in the relatively fast pace they develop curriculum, hire faculty, and usher students through a credentialing program, such as how to work in a clean room in a nanotech facility.
The public has 60 days to make comments on the draft rule, published in the Federal Register. At that point, the Department of Education will review the comments and either revise or promulgate the original version of rules, which are then open to litigation. Nearly 8,000 schools will be subject to the new rule if it takes effect.