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The New For-Profit Regulations: Why They're Good for Students

Feb 1, 2011 Jennifer Williamson, Distance Columnist | 0 Comments

According to a recent study by the Education Trust, only 22% of students at four-year, for-profit colleges graduated within 6 years—compared with 55% of public school students and 55% of students at private colleges. In addition, 93% of students graduate with debt—as opposed to 49% of public and 69% of private university students. 97% of students at for-profit two-year universities graduate with debt, according to

In addition, only 36% of graduates of for-profit schools repaid their loans—with some colleges listing repayment rates as low as 10%. The data shows a pattern of for-profit graduates leaving school with large amounts of debt and few employment options—even fewer than graduates of other types of institutions—leaving them unable to pay their student loan debt.

The US Department of Education has proposed a list of new rules to govern for-profit colleges. If these are accepted, they will go into effect in 2012. Here’s how some of the new rules could be good news for students.

Schools can’t pay recruiters based on how many students they enroll

In the past, some for-profit online colleges used hard-sell tactics to get as many students enrolled as possible, regardless of suitability for the school’s programs, academic ability, or ability to pay. If recruiters are no longer motivated by money, they may be able to be more honest about whether individual students are truly a good fit for the school. In addition, students won’t be encouraged to sign up for loan programs they don’t need just to boost the recruiter’s sales numbers.

Potential students must be told about graduation and job placement rates

For-profit schools will no longer be allowed to promote their results without the numbers to back up their claims. As some colleges have been accused of deceptive advertising practices—implying that their degrees are in high demand and they have very high placement rates—hopefully students will sign up for these programs with a more realistic view of their prospects.

Arrow Drawn Up

With the new changes, hopefully students at for-profit schools will have less debt going forward—and receive a better education.


Schools must validate applicants’ high school credentials

There’s a reason most public and private nonprofit universities  screen admissions. Obviously there aren’t spots for everyone. But they also want to be sure the applicants they choose can handle the rigor of their programs—and are a good fit for the school. Most for-profit colleges have much more lax admissions standards than nonprofit online schools—so some students who aren’t academically ready for college or who don’t fit the programs are granted admission. Hopefully, this will raise graduation rates—and keep unprepared students from dropping out with a mountain of debt.

Schools will be held to gainful employment standards

This is probably one of the most controversial rules in the list. Under this rule, schools would have to share graduation and job placement rates with students as well as providing the Department of Education with data on student debt levels, employment and income after graduation. If students’ debt-to-income ratios and loan repayment rates don’t meet the Department’s standards, the schools will no longer be eligible to disburse federal aid. If schools have bad student loan debt ratios after graduation, their new students can’t receive federal aid—meaning the schools now have to make their tuition affordable to students with private aid or personal means alone. These schools would either have to improve their programs and reputation to make their degrees more in demand, lower their tuition dramatically, or go out of business.

It’s been suggested that if institutions have bad data, they could simply create large numbers of new programs—or reorganize existing programs—so the Department couldn’t measure the new program record for several years. To prevent this, the Department will be able to ask schools to formally apply to create new programs, with approval granted based on the new programs’ consistency with the school’s regular pattern of growth, operations and courses.

State review

The Higher Education Act requires the state to authorize its schools to participate in federal student aid programs—but this has been poorly enforced in the past. The regulations would clarify what the states have to do to make sure its resident schools provide an adequate education—especially for-profit schools. For students, this could mean schools are better regulated and the fact that they provide federal aid means they offer a certain minimum standard of education.

New standards for which courses are eligible for federal aid—and how much

The Department of Education measures eligibility for student aid by credit hour—but doesn’t define what, exactly, a credit hour is. This means that schools can award more credits—and qualify for more federal aid for each student—than their programs necessarily justify. This puts more money in schools’ pockets, while encouraging students to take out more in loans than they need. Hopefully, establishing a standard definition for the credit hour and assisting accrediting organizations in assessing institutional credit hour assignation practices will put an end to this practice.

Recent studies and investigations have found that some for-profit schools overcharge their students, encourage them to take out more in federal aid than they need, and tinker with their credit hours and other facets of their classes and operations to qualify for more federal aid than their programs justify. In addition, for-profit schools sometimes make big promises about the job prospects of their graduates that aren’t borne out in reality.

With the new regulations, for-profit schools will be required to track their students’ debt levels and employment status for several years after graduation. Those with the worst rates won’t qualify for federal aid. In addition, the new rules will close loopholes that currently allow schools to qualify for more federal aid than justified—reducing their income, but also reducing their students’ debt. With these changes, hopefully students at for-profit schools will have less debt going forward—and receive a better education.


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