Comments to Dept. of Education: For-Profit Colleges

The Issue: The Secretary of Education proposed new rules to amend the Student Assistance General Provisions to assess whether postsecondary educational programs are eligible for federal student loans authorized under Title IV of the Higher Education Act of 1965. The rules also introduced means to assess whether a particular program leads to gainful employment in recognized occupations.

Why It Matters: The number of students enrolled in for-profit colleges has increased significantly in recent years. The majority of students at those colleges finance their education with federal student loans. Many of the colleges charge high tuition rates and engage in shady marketing practices while often offering programs of dubious educational value and failing to help students improve their post-graduation employability. As a consequence, students graduate, if at all, with high amounts of debt and often default on their student loans. Besides costing the taxpayer, such defaults have serious consequences for the student’s credit rating and access to future educational loans.

Public Good’s Contribution: Public Good filed a public comment, asking the Secretary of Education to include in its evaluation of “gainful employment” the educational value of programs that qualify for federal  loans. The comment also suggested that the rules provide clearer and more specific warning and disclosure requirements to protect prospective students from the colleges’ predatory practices. Finally, Public Good advocated that the Department close loopholes in requiring programs to obtain employer affirmation as proof that a particular program will lead to gainful employment upon graduation.

Outcome: The final rule issued by the Department, under intense pressure from the industry and its congressional allies, provides for more lenient consequences for failure to meet the Department’s standards but still requires schools to adhere to many of the principles outlined in our comment. As Secretary of Education Arne Duncan observed, “We’re asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective. This is a perfectly reasonable bar and one that every for-profit program should be able to reach. We’re also giving poor performing for-profit programs every chance to improve. But if you get three strikes in four years, you’re out.”

[Docket ID ED-2010-OPE-0012]

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