Students at for-profit colleges still can use an education tax credit under President Barack Obama’s tax deal, even as the schools face increased scrutiny from Congress and the Obama administration.
Education Secretary Arne Duncan said that there was no plan to exclude for-profit colleges from the list of eligible schools, despite concerns over aggressive recruitment tactics and a high rate of student-loan defaults.
"The vast majority of the for-profits are part of the solution," Duncan said. "They’re really helping disadvantaged individuals take that next step up the economic ladder."
"Where we have some bad actors, we’re dealing with that," he added. "The industry itself is desperately needed to get the country where we need to go educationally."
The American Opportunity Tax Credit, originally passed as part of the 2009 stimulus bill, allows families with tuition expenses to receive a credit of up to $2,500 per student. The credit was set to expire this year, but will be extended through 2012 after the tax deal passed Congress.
The Senate approved the plan, 81-19, on Wednesday, and the House passed the compromise on Thursday night.
In 2009, 8.3 million people received the credit, worth an average of $1,700 per person. Duncan said the credit was necessary to ease the financial burden on middle-class families paying for college.
"At a time when going to college has never been more important, it’s also never been more expensive," he said.
The for-profit higher education industry has faced criticism in the last year, particularly after a government report found that some colleges encouraged fraud and were misleading when recruiting applicants.
In response, the Department of Education proposed stricter regulations of the sector, including a provision that would disqualify for federal student aid schools that pay recruiters based on the number of applicants they enroll. Schools that do not qualify for government student aid are not eligible for the tax credit.
Anthony Carnevale, an expert on education and labor at Georgetown University, said that if those regulations are put into place as planned in July, there should be no concern about applying the tax credit to for-profit schools.
"If they clean the [for-profit sector] up, there’s no problem," Carnevale said. "You won’t then be paying for programs that don’t work."
Ty Gomez, a Dallas-based lawyer, represents students who claim their schools promised them high-paying jobs after graduation.
"The greater concern is: Are schools participating in federal financial aid programs or tax credit programs. Are they meeting certain educational standards?" Gomez said.