Dear Commons Community,

For-profit colleges with graduates unable to pay back their student loans could soon face scrutiny by the federal government.

Schools with career-oriented programs that fail to comply with the new rule announced yesterday by the U.S. Department of Education stand to lose access to federal student-aid programs.  To meet these “gainful employment” standards, a program will have to show that the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of total earnings.

The Education Department estimates that about 1,400 programs serving 840,000 students won’t pass. Ninety-nine percent of these programs are offered by for-profit schools, although affected career training programs can come from certificate programs elsewhere in higher education. As reported by the Associated Press:

“Education Secretary Arne Duncan says the department wants to make sure that programs that prey on students don’t continue abusive practices.

However, Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities, calls the effort “nothing more than a bad-faith attempt to cut off access to education for millions of students who have been historically underserved by higher education.”

On Capitol Hill, Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, that has aggressively investigated the industry, commends the new rule. He also said that the rule does little to stop colleges that offer poor quality programs where most of the students drop out.

Tony