New Career-Training Rule for Colleges Ignores Dropouts

Career College Central Summary:

  • The Education Department culminated a five-year struggle over regulating for-profit colleges last week when it published a final rule stating that career training programs will risk losing federal funding if their graduates have student debt payments that are greater than 8 percent of their annual earnings or 20 percent of their discretionary incomes.
  • The purpose of the rule, which has been in and out of court and tweaked on numerous occasions, is to ensure that career-training colleges like Kaplan or the University of Phoenix don't encourage their students to take on too much debt as they finish their degrees. The rule applies to all colleges that offer career training, including public universities and community colleges, but the administration says 99 percent of the schools that would be affected by the new standard are for-profit institutions. Lobbyists for the for-profit industry say the administration is singling out their schools based on politics.
  • For-profit colleges tend to cost more than community colleges, in some cases two to three times the tuition, but they also design their programs specifically for the people who have the most difficulty completing a degree at a traditional college. They cater to older students who are usually juggling family and multiple jobs. Those students might need a degree faster than a community college can offer it, and they also tend to rely on night classes. The Association of Private Sector Colleges and Universities, the lobbying wing of the for-profit college industry, calls their typical client "the new traditional student."
  • Advocates of cracking down on for-profit colleges say these schools lure in vulnerable students with promises of lucrative careers and convince them to take out bigger loans than they should, especially when their clientele is the most likely to drop out. "They realize the schools are a joke," says Rory O'Sullivan, deputy director of the millennial advocacy group Young Invincibles. "We shouldn't punish students for leaving failed programs."
  • O'Sullivan was a student representative on the Department of Education's rule-making panel and is upset that the final rule doesn't deal with dropouts. Those are the students most at risk of being overwhelmed by debt because their earnings can't keep pace with their repayments. Groups like Young Invincibles lobbied hard for another metric in the rule that would judge schools based on the earnings-to-student-debt ratio for all their students, including dropouts. Dropouts make up about half of the for-profit college population, according to Sen. Chris Murphy, D-Conn., who is advocating legislation that would find other ways to regulate for-profit institutions. (One way, he says, is to require them to find at least 15 percent of funding from non-federal sources, so they don't rely exclusively on Pell Grants and federal loans.)
  • The Education Department had earlier proposed that career-training programs would lose access to federal funds if the default rate of all former students–dropouts and graduates alike–rose above a certain level. But that provision was taken out of the final rule, largely because the for-profit college industry threatened legal action, and earlier court opinions suggested they had a case. After all, it's hard to hold a school responsible for someone who doesn't finish their studies.

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