Proposal Sets Stage For Gainful Fight

Career College Central summary:

  • The Obama administration’s unveiling of a proposed set of rules aimed at clamping down on career education programs, mostly at career colleges is just the latest flashpoint in a years-long battle with the controversial sector of higher education.  The proposed rules also tee up what is expected to be another round of voracious debate and intense lobbying to influence the final regulations that the administration plans to issue by November, so that they will take effect next July.
  • The 841-page proposal is the Department of Education’s first official attempt at rewriting “gainful employment” regulations that were largely gutted in 2012 by a federal judge, who ruled that some aspects of the rules were illegal because they were arbitrary and capricious. As soon as the new proposal is published in the Federal Register — which could happen in the next several days — it will kick off a 60-day public comment period that will be followed by another White House review of the impact of the regulations. And in a sign of how contentious and charged the coming months may be, the only thing that all sides agreed on last week was just how much they didn’t like the administration’s proposal.
  • Consumer advocates and critics of career colleges blasted the proposal as not going far enough to snuff out what they see as predatory practices in the industry. For-profit college supporters also sharply criticized the rules, but said it was too harsh and would harm the millions of students who rely on their institutions. Under the proposal, the Education Department would kick vocational programs out of the federal student aid program if they don’t satisfy two different standards relating to student loan debt.
  • In order to pass the first metric, a program must produce graduates whose estimated loan payments each year do not consume more than 20 percent of their discretionary income (or 8 percent of their total income). The second standard looks at the share of a program's former students who default on their loans; programs must keep their default rates below 30 percent in order to pass. The goal of the rules, the administration says, is to make sure that the programs are properly preparing students to get jobs where they are earning enough money to pay back their loans.
  • Programs would have to fail one of the standards for at least a couple of years before being cut off from federal student aid. But in a one-year snapshot the department provided Thursday, nearly one in five vocational programs would either fail the metrics outright or be in the warning zone, bumping up against the thresholds.
  • Of the 8,000 programs that would be subject to the rule, department officials said, 16 percent would have failed and another 8 would be in the warning zone. Among only programs at for-profit institutions, 20 percent would fail and 10 percent would be in the warning zone.
  • Student and consumer advocates said while they are happy the administration is doubling down on regulations of the for-profit education industry, last week’s proposal falls flat. The proposal does not include a range of features they had sought, such as restrictions on the amount of federal aid flowing to poor-performing programs and a mechanism to return money to students who take out loans to attend programs that end up failing.  

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