COSTAR: New Student Aid Regulations May Put 1,400 For-Profit Colleges at Risk of Failure

Career College Central Summary:

  • New U.S. Dept. of Education rules that take effect today are putting about 1,400 college programs at risk of losing eligibility for receiving federal student financial aid. The new rules could accelerate the ongoing closures of for-profit colleges across the country.
  • The for-profit education business has been under fire for several years as investigations covering a broad range of their business practices have been launched by government attorneys generals, educational accreditation institutions and securities regulators.
  • New “gainful employment regulations” taking effect today are intended to strengthen the Dept. of Education’s oversight of certain career training programs.
  • To qualify for federal student aid, the law requires that most for-profit programs and certificate programs at private non-profit and public institutions prepare students for "gainful employment in a recognized occupation."
  • Under the new regulations, a program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 20% of his or her discretionary income — the amount left after basic necessities like food and housing have been deducted — or 8% of his or her total earnings.
  • Programs that exceed these discretionary income levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.
  • The regulations are designed to distinguish between programs that provide affordable training that leads to well-paying jobs from programs that leave students with poor earnings prospects and high amounts of debt.
  • They also are intended to support greater accountability for colleges by requiring institutions to provide key information on program costs, whether students graduate, how much they earn, and how much debt they may accumulate.

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