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For-Profit College Regulations are Moving Forward: What This Could Mean for You

Jun 16, 2011 Jennifer Williamson, Distance Columnist | 0 Comments

For-profit colleges are a $23 billion industry. And they’ve faced a lot of criticism in the past few months. Recently, the Department of Education introduced new data demonstrating that, although for-profit college graduates represent only 15% of students nationwide, they account for almost half of all student loan default cases.

Some lawmakers have accused for-profit colleges of deliberately enrolling students who qualify for maximum levels of financial aid; charging through-the-roof tuition; delivering sub-standard education; and overstating the potential success of their graduates. As a result, students enrolled in for-profit colleges often graduate with high levels of debt—and without the strong job prospects promised.

Presently, for-profit colleges get about 80% of their revenue from federal financial aid.  Some lawmakers want to make the for-profit college industry accountable with regulations that limit the amount of financial aid students can apply for—and tie the success of the college to the success of its graduates. Soon, the new regulations will hit the market. It’s likely to affect for-profit college share prices—which have already dropped about 30% due to the scrutiny. But it’ll affect the lives of students enrolled—or considering enrolling—in for-profit colleges as well. Here’s how.

Your degree will be more likely to result in a job

Gold Piggy Bank

It’s difficult to say how the gainful employment rules and other regulations will affect for-profit colleges in practice—but the effects have already been felt in some areas.




New “gainful employment” rules halt access to federal financial aid for colleges that don’t meet established standards regarding employment rates and debt-to-income ratio of graduates How this will play out in practice isn’t yet clear. But it could mean a higher quality of education for students, as well as aggressive job-placement and assistance after graduation.

For-profit colleges will be more selective

In the past, for-profit colleges had an incentive to accept almost any student—and get their tuition money. Now, with access to financial aid tied to student success in the workplace, for-profit colleges will have to become more selective. It’s possible they’ll become more like nonprofit colleges in their application and evaluation process.

Students will get more help

Currently, a larger percentage of for-profit college students drop out of school. The reasons for this are complicated, but could be related to the high percentage of students in for-profit schools who are the first in their family to attend college, returned to school as adults after many years out of the classroom, or came from low-income neighborhoods without strong secondary schools. It’s possible that with the new regulations, for-profit schools will take a more active role in assuring their students graduate—with tutoring and academic assistance programs.

Admissions staff won’t pressure you

The media, Congressional reports, and legal action have uncovered a trend among for-profit admissions personnel to take out large loans to earn degrees. Some of those degrees are useless in the job market—such as online law degrees that don’t qualify for the Bar and nursing degrees with no hands-on component. The Department of Education already strengthened regulations in 2010 preventing admissions staff from earning commissions based on the number of students they recruit. In addition, the DOE will require schools to disclose to applicants realistic figures about job placement and graduation rates.

It’s difficult to say how the gainful employment rules and other regulations will affect for-profit colleges in practice—but the effects have already been felt in some areas. For example, the University of Phoenix recently started offering a free three-week orientation program aimed at helping students decide if they can manage the workload. Hopefully, the new regulations will make college more effective for all—and lead to lucrative, fulfilling careers for a higher percentage of graduates.


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