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New Rules for For-Profit Schools

[Time]

Secretary of Education Arne Duncan (AP Photo)
Secretary of Education Arne Duncan (AP Photo)

Loan payments for some 8,000 programs, designed to propel students straight into careers but often landing them in worse debt than high school dropouts, will be capped at a percentage of their total income.

The Obama Administration is taking aim at institutions designed to propel students into careers, but that too often land them deep in debt instead. On Friday, the Department of Education released new regulations that will cap loan payments for graduates of so-called “gainful employment programs,” offered both at for-profit schools and community colleges, to 20% of discretionary income and 8% of total income. The institutions must stick to the caps and keep loan default rates under 30% in order to continue receiving federal financial aid.

Though some of these job-training institutions properly prepare students for the work force, the majority of for-profit schools designed to propel students straight into careers do not. The Department of Education estimates that about 72% of graduates of for-profit programs designed to propel students straight into careers earn less than high school dropouts. And while students at for-profit colleges represent just 13% of the higher education population, they comprise a disproportionate 31% of student loan recipients and half of all defaults. Students at for profits are often veterans and adults.

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