New standards for for-profit colleges

A graduation cap surrounded by dollars represents the costs of education.

Tess Vigeland: Stocks of for-profit colleges jumped today, the same day the Obama Administration announced new rules aimed squarely at the kinds of expensive career-training programs that those schools offer. The stock bounce was all about sighs of relief. In the end, the long-awaited regulations were softer on the industry than many expected.

From the Marketplace Education Desk at WYPR in Baltimore, Amy Scott reports.


Amy Scott: For-profit colleges get as much as 90 percent of their revenue from federal student aid. In other words, the taxpayer.

Their students default on their loans at more than twice the rate of students at public colleges. Under the new rules, some for-profit programs may lose access to federal aid if not enough of their students can repay their loans. The goal is to make sure career colleges prepare students for jobs that pay enough to justify the debt they take on.

Harris Miller represents for-profit schools at the Association of Private Sector Colleges and Universities. He says the new rules amount to price-fixing.

Harris Miller: What the department has said repeatedly is, your students are borrowing too much. And the way to prevent that from happening, is you the school have to lower your prices.

After intense lobbying by groups like Miller's, the Education Department relaxed its initial version of the rules. Programs will have time to clean up their acts before they're disqualified.

Chris Lindstrom: Bottom line, it is disappointing.

Chris Lindstrom directs the Higher Education Program at U.S. Public Interest Research Group. She says the rules don't go far enough to clean up programs that load students with debt and then turn them out into the job market with shaky credentials.

Lindstrom: It won't be implemented until three years from now, and then when it is, it narrowly defines who the bad actors are, and it gently nudges them towards better behavior.

The rules apply to non-degree programs at public and nonprofit colleges too. But according to the Education Department, for-profit schools enroll 12 percent of college students and account for nearly half of loan defaults.

I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

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