For-profit schools may face new rules

Amy Scott Jun 16, 2010

For-profit schools may face new rules

Amy Scott Jun 16, 2010


Kai Ryssdal: Last year, we reported, along with ProPublica, on some of the high-pressure recruiting tactics that are being used at for-profit colleges, like at the biggest one, the University of Phoenix.

Brandon Burke: One thing we would be told to do is call up a student who was on the fence and say, “All right, I’ve only got one seat left. I need to know right now if you need me to save this for you.” Well, that wasn’t true.

It turns out the federal government been looking into recruiting and student debt loads at some of those for-profit schools as well. Today, they came out with a new set of rules.

From the Marketplace Education Desk, Amy Scott reports.

Amy Scott: Jessica Jasper had always wanted to be chef. So a few years ago, she enrolled in the Art Institute’s culinary school in Denver.

Jessica Jasper: For a one year’s program, which took me two years, it cost me about $40,000.

She dropped out when she realized she’d never be able to pay her loans making $8 or $9 an hour as a line cook.

Career colleges are booming, as more people go back to school for job training. But critics say many students graduate with more debt than at traditional colleges, and are more likely to default on their loans. Many for-profit schools get most of their revenue from federal student aid programs.

Pauline Abernathy: We’ve seen some really troubling signs that taxpayers are subsidizing programs that over-promise and under-deliver.

That’s Pauline Abernathy with the nonprofit Institute for College Access and Success. Under the proposed new rules, the Education Department would have more power to go after schools that misrepresent their programs. Abernathy says the new rules would also make it harder for schools to pay enrollment counselors and financial aid officers based on how many students they sign up.

Abernathy: When people are paid on commission, it leads to the kind of boiler-room situation where all that matters is getting students signed up.

The new rules would also prevent schools from paying bonuses when students graduate. Harris Miller is head of the Career College Association. He says those bonuses can pay off for students.

Harris Miller: We want everybody on the campus to continue to encourage that student, to say, “Don’t give up just because you hit a bump in the road.” And there’s no reason that the admissions office or the financial aid officer shouldn’t be part of that team, providing that kind of support.

For-profit colleges had been much more worried about another change that the Obama administration has delayed for now. It would have required schools to prove that their graduates can earn enough to pay their student loans. In the mean time, officials opted for more disclosure on student debt and job placement rates.

In New York, I’m Amy Scott for Marketplace.

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