Fears Over New Federal Rules at For-Profit Colleges ‘Overblown’

Proposed federal regulations on job-training programs offered by for-profit colleges and universities would have relatively little impact, according to a study released today by a nonpartisan research group.

Advocates for the sector have argued that as many as 300,000 students could lose access to an education if the rules, which could deny financial aid to programs with high loan default rates, are enacted, but the study’s author said that is unlikely.

"I think their concerns are overblown," said Ben Miller, a policy analyst with Education Sector, who compiled the report. "It looks like the number of programs that would be affected are very small."

The proposed rule would deny federal money for programs where fewer than 35 percent of former students are paying back their loans and whose graduates have loan payments exceeding 30 percent of their discretionary income and 12 percent of their total income.

It would apply to job-training programs at some community colleges, as well as to those at for-profit schools — many of them publicly traded, including ITT Technical Institute, Everest Institute, Westwood College and the University of Phoenix.

Miller determined that about 4 percent of programs would be ineligible for students to receive federal financial aid and student loans – a blow that could kill the programs, since federal money accounts for up to 90 percent of revenues in some programs.

Decision this fall
Programs most likely to be affected include those for medical assistants and chefs, fields in which starting pay is generally low, and for certain high-tech fields, including graphic arts, animation technology and e-commerce. Those jobs pay better but are hard to find, and the training programs are expensive, he said.

The rule, known as the "gainful employment" rule, is one of more than a dozen proposed by the Department of Education, but is the only one to have drawn much attention. Others deal with recruiting and other practices.

A final decision is expected later this fall.

Miller said he found that virtually all of the programs at risk of losing federal funding are run by for-profit schools. He declined to identify specific programs at risk, instead releasing a list of ineligible programs identified only by subject matter.

For-profit schools attract many low-income and minority students, partly because of aggressive recruiting but also because they often offer convenient hours and easy access, and they have launched a furious lobbying effort against the proposal, saying it would hurt students who need education the most.

But Miller said he expects programs that survive the scrutiny to simply expand in order to provide opportunities for any students who are affected.


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