For-Profit Crackdown Brings Criticism to ED Headquarters

Opponents of the U.S. Education Department’s (ED) proposed "gainful employment" rules said the regulations unfairly target for-profit colleges, and at least one career college advocate said at a Nov. 5 public hearing that the department should scrap its plan entirely.

ED officials listened to testimony for and against the proposed rule last week at the department’s headquarters in Washington, D.C., where most speakers suggested tweaking certain statutes — with at least one political ally of the Obama administration suggesting that the regulations would put higher education out of reach for many low-income and minority students.

About 10 percent of U.S. college students attend for-profit institutions, some of the largest online education programs in the country.

If enacted, ED’s “gainful employment” regulations would cut off federal aid to colleges – the lifeblood of many for-profit schools like the University of Phoenix and Kaplan University – if 65 percent of students default or are unable to pay back their loans after graduation.

The rules were crafted after ED officials heard from many for-profit college students who said they were misled about their job prospects after graduation.

There also have been consistent charges that for-profit schools provide incentives for recruiters who convince prospective students to take out hefty loans, even if the student’s financial records show they won’t be able to pay the loans back.

Harris Miller, president of the Association of Private Colleges and Universities (APCU), said at the Nov. 5 public hearing that several provisions are unrealistic and should be changed before the rules go into effect in 2012.

Miller said the ED rules should allow 15 or 20 years for for-profit students to pay back their loans, rather than 10 years.

“But we would prefer the department not do this at all,” he said.

Lanny Davis, former White House counsel for the Clinton administration, admonished ED for the “gainful employment” rules, reminding ED officials repeatedly that he was ideologically aligned with the White House, but couldn’t support the current proposal.

If a Republican administration had proposed rules that targeted colleges where many minorities receive an education, Democrats would “be on our feet asking why we are going after minority students,” he said.


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