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Administration Targets Poor-Performing For-Profit Colleges

The Obama administration announced new rules to crack down on low-performing for-profit career colleges with high rates of student loan defaults and a dismal track record of gainful employment. Under the regulationss, career programs have to meet certain requirements or they will lose federal funding for student aid.

"Higher education should open up doors of opportunity, but students in these low-performing programs often end up worse off than before they enrolled: saddled by debt and with few—if any—options for a career," said U.S. Education Secretary Arne Duncan.

Under the rules released Friday, career colleges must show that employment programs meet state and federal licensing requirements. Moreover, the graduates' estimated annual loan payment must not exceed 20 percent of their discretionary earnings or 8 percent of their total earnings, and loan default rates for former students cannot exceed 30 percent. The regulations also require fuller disclosure of gainful employment figures after graduation as well as the program's costs and debt figures.

Over 1 in 5 students at for-profit colleges defaulted on their student loan in the first 3 years, according to Dept. of Ed figures, compared to 13 percent at public colleges.

According to a Congressional Hispanic Caucus Institute white paper on for-profit colleges, Latinos and other minorities accounted for 40 percent of enrollment at for-profit colleges. The study found only a quarter of Latinos at for-profit career colleges completed their degrees, compared to 60 percent at private, non-profit institutions and 46 percent at public colleges or universities.