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New rules on for-profit colleges overturned

Amy Scott Jul 2, 2012

David Brancaccio:A federal judge overturned new regulations on for-profit colleges and other vocational programs a day before they were to have gone into effect.

From the Marketplace Education Desk at WYPR, Amy Scott explains.

Amy Scott: Starting this week, career training programs were supposed to show that their former students earned enough to pay down their loans. Programs that failed three out of four years would have become ineligible for federal student aid. At some for-profit colleges, 90 percent of revenue comes from that aid. On Saturday, U.S. District Judge Rudolph Contreras vacated the rules, calling them arbitrary and capricious.

Last year, the Department of Education devised the rules in response to complaints that for-profit colleges weren’t doing enough to make sure students found “gainful employment” after graduation.

Kevin Kinser: There was some concern that institutions were providing education for students that wasn’t worth the price they were charging.

That’s Kevin Kinser. He teaches higher education policy at the State University of New York at Albany. The Association of Private Colleges and Universities challenged the rules in a lawsuit. In a letter to the Department of Education, APSCU president Steve Gunderson said, “It is my personal hope, and that of our members, that the era of litigation is over, and the era of public-private partnerships in putting people to work in high-quality, good-paying jobs is ahead.”

It’s unclear whether the Department of Education will appeal the judge’s decision. In a statement, DOE spokesman Peter Cunningham said, “We are reviewing our legal and policy options to move forward in a way that best protects students and taxpayers while advancing our national goal of helping more Americans get the skills they need to compete in the global economy.”

In a recent analysis of vocational programs, the Department of Education found that 5 percent of programs would have failed to meet the standards of the now-vacated rules. Many were at beauty schools. Anthony Fragomeni is with the American Association of Cosmetology Schools.

Anthony Fragomeni: In a difficult economic time, sometimes repayment of that student loan might slide down the priority list a little bit.

Fragomeni says beauty schools have been counseling their students on the dangers of debt and working with employers to line up jobs for graduates.

I’m Amy Scott for Marketplace.

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