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Rules for Gainful Employment: What They Mean for For-Profit Colleges

Jul 8, 2011 Jennifer Williamson, Distance Columnist | 0 Comments

The Education Trust, a nonpartisan nonprofit, discovered that only 22% of students of four-year for-profit schools graduated within six years—compared with 55% of students at public schools and 65% at private nonprofit colleges. In addition, students at for-profit schools left with significantly more debt—even when compared with pricey private colleges.

But for-profit students are also more than twice as likely to default on their student loans. Clearly, students at for-profit colleges are being encouraged to take out more debt than they can handle—and the job opportunities aren’t waiting to help them pay back those loans when they graduate.

Congress has been scrutinizing for-profit colleges in the past few months. And they think the problem is more than just a bad economy. Essentially, it’s believed that for-profits overcharge for tuition without offering a high-quality or in-demand education, and as a result many graduates flounder after they leave school. According to some, for-profit colleges deliberately market to low-income students who will qualify for high levels of financial aid. For-profit schools educate only 12% of college students, but they receive almost 25% of all federal student aid.

Group of Students

Hopefully, the rules will result in stronger programs that achieve better results for graduates—and deliver on their promises.


A recently-introduced “gainful employment” regulation is designed to curb the situation—but it’s controversial. For-profit colleges say it will block some students from receiving aid for their education. Those against for-profit colleges say it doesn’t do enough to regulate the industry. 

Essentially, gainful employment regulations assess vocational programs according to level of graduate debt burdens and student loan repayment rates. Those whose students have the highest levels of debt and the lowest levels of loan repayment will not be able to receive federal student aid. Here are a few ways this might affect the schools—and the students.

The impact of this law is yet to be felt—although many are making predictions. Here are a few ways the regulations might affect for-profit schools.

Fewer programs available for low-income students

For-profit colleges claim that their numbers look the way they do because they serve a riskier group of students—and they claim the new law will make college less accessible for low-income students who flock to their programs.

Many programs will have to be overhauled

The government estimated that only about 40% of the 55,000 for-profit colleges affected by the rules would meet the standards. According to these projections, only about 5% would lose eligibility for aid entirely—but about 55% would have to make significant changes to their programs and enrollment policies. These projections were made before the rules were changed to lessen the impact—so it’s possible that fewer colleges would have to make these changes under the law as it is now.

Stronger measuring tools for academic programs across the board

This regulation represents a watershed moment for education. It essentially ties the financial success of some schools’ graduates to the income they receive through federal aid. This allows the government to assess academic programs’ value in terms of the employability and income their diplomas give to students. This could have an impact—not just on the for-profit industry, but on public and nonprofit private colleges throughout the education system.

It’s difficult to say, ultimately, how the gainful employment rules will affect for-profit colleges and their students. In the past, for-profit colleges have been accused of over-promising and under-delivering to their students. Hopefully, the rules will result in stronger programs that achieve better results for graduates—and deliver on their promises.


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