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To protect students at career colleges from becoming burdened by student loan debt they cannot repay !
These regulations will hold career training programs accountable for putting their students on the path to success, and they complement action across the Administration to protect consumers and prevent and investigate fraud, waste and abuse, particularly at for-profit colleges.
"Career colleges must be a stepping stone to the middle class. But too many hard-working students find themselves buried in debt with little to show for it. That is simply unacceptable," U.S. Secretary of Education Arne Duncan said. "These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes. We will continue to take action as needed."
To qualify for federal student aid, the law requires that most for-profit programs and certificate programs at private non-profit and public institutions prepare students for "gainful employment in a recognized occupation." Under the regulations finalized today, a program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings. Programs that exceed these levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.
The final gainful employment regulations follow an extensive rulemaking process involving public hearings, negotiations and about 95,000 public comments. The regulations, which will go into effect on July 1, 2015, reflect the feedback the Department received, and aim to protect Americans from poor career training programs by targeting those programs that leave students buried in debt with few opportunities to repay it. Highlights of the rule include:
Today, the Department is also taking new steps to formalize partnerships with several federal agencies to enhance cooperation and ensure proper oversight of for-profit institutions of higher education through an interagency task force.
Background on the Administration's efforts to protect students from poor-performing career colleges Too often, students at career colleges—including thousands of veterans—are charged excessive costs, but don't get the education they paid for. Instead, students in such programs are provided with poor quality training, often for low-wage jobs or in occupations where there are simply no job opportunities. They find themselves with large amounts of debt and, too often, end up in default. In many cases, students are drawn into these programs with confusing or misleading information.
The situation for students at for-profit institutions is particularly troubling. On average, attending a two-year for-profit institution costs a student four times as much as attending a community college. More than 80 percent of students at for-profits borrow, while less than half of students at public institutions do. Ultimately, students at for-profit colleges represent only about 11 percent of the total higher education population but 44 percent of all federal student loan defaults.
In response to these concerns, in 2009, the Department began extensive conversations with the higher education community about the role of career colleges, particularly on how they could be held accountable for the outcomes of their students. Following a 2012 court decision, which affirmed the U.S. Department of Education's authority to regulate in this area in order to protect students and taxpayers, the Department undertook new efforts to make sure career training programs provide affordable pathways to good jobs.
The Department believes many institutions have already started to take steps to improve. Some of the largest institutions have instituted trial periods for programs before students have to commit, so students can decide if that program is right for them. There are reports that institutions have decreased program lengths. Some are reducing costs. And a few institutions have closed some locations and programs they judge to be performing poorly.
But the Department also believes there is still potential for improvement in many of these programs—public, private non-profit and for-profit—so it is taking action to spur more change.
The gainful employment regulations are a central part of the Administration's work to ensure that student debt is affordable and that for-profit colleges serve students well. These regulations complement other efforts taken by the Administration to protect students by addressing problems at poor performing institutions, particularly in the for-profit sector. These efforts include:
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