U.S. Department of Education has announced regulations to ensure that career colleges improve their outcomes for student. To prevent students from the burden of high tuition for poorly conceived programs, certificate and Diploma awarding institutions must now show proof of preparing their students for “gainful employment” in a recognized occupation or risk losing access to federal student aid funds.
Under the new regulations, 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 regulations will go into effect on July 1, 2015.
The primary goal of the new regulations is to protect students at career colleges from becoming burdened by student loan debt they cannot repay, The new regulation 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.”
.Highlights of the rule include:
• Preventing students from being buried in debt: Based on available data, the Department estimates that about 1,400 programs serving 840,000 students—of whom 99 percent are at for-profit institutions—would not pass the accountability standards. All programs will have the opportunity to make immediate changes that could help them avoid sanctions, but if these programs do not improve, they will ultimately become ineligible for federal student aid—which often makes up nearly 90 percent of the revenue at for-profit institutions.
• More rigorous accountability than previous regulations: The new regulations are tougher than the Department’s 2011 rules because they set a higher passing requirement and lay out a shorter path to ineligibility for the poorest-performing programs. In 2012, the Department estimated that 193 programs would not have passed the previous regulations; with respect to these new regulations, based on available data, the Department estimates that about 1,400 programs would not pass the accountability metric.
• Providing transparency about student success: The rule also provides useful information for all students and consumers by requiring institutions to provide important information about their programs, like what their former students are earning, their success at graduating, and the amount of debt they accumulated.
• Improving student outcomes: The regulations build on momentum toward increased accountability in higher education by setting standards for career training programs, including programs offered by for-profit institutions, to ensure they are serving students well. While the Department has seen encouraging changes in the past five years, it believes all career training programs can and should meet higher expectations.
