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A Times Editorial

New rules let for-profit schools off the hook

The Obama administration caved in to pressure from the for-profit college industry by watering down regulations designed to protect low-income students from exploitation. While some regulation is better than none, the Department of Education missed an opportunity to demand that students and taxpayers get their money's worth from career schools that peddle expensive vocational and certificate programs as a means to good jobs that too often never materialize.

Stocks for for-profit career colleges soared earlier this month on the release of the new "gainful employment" rules, indicating the weakness of the final regulations. The industry invested millions of dollars in a lobbying campaign against the draft rules, which cracked down on the way these schools lure low-income students through the door and then burden them with a mountain of often unpayable debt.

Only 12 percent of students are educated by for-profits, yet they account for about a quarter of all student aid and 46 percent of student loan dollars in default. And with every default taxpayers lose out, since so much of the debt is federally guaranteed.

The for-profit college industry is awash in bad actors who use misleading and aggressive recruiting practices, hiring hundreds of recruiters to get students to enroll, while putting little into job placement services. Florida just joined a lawsuit against Education Management Corp., the nation's second largest for-profit college, for its alleged violation of a ban on paying recruiters a commission to bring in students.

One of the most serious problems with for-profit colleges is that the cost of tuition is too often disproportionate to a graduate's job prospects. Fields such as culinary services are too low-paying for many graduates to have a reasonable chance of handling their debt burden.

The final rules address that problem by making programs ineligible for federal aid if fewer than 35 percent of its graduates are repaying their loan principal after three years, and whose graduates carry debt-to-earnings ratios above 30 percent of discretionary income and 12 percent of total income. But this disqualification for aid only applies if a program fails these tests three times in a four-year period. The draft rules had been along these lines but more strict, and they didn't give offending colleges years and years to comply or so much flexibility in crunching the numbers.

Even this passing glance is too much for some in Congress. In February, the Republican-controlled House voted to bar the department from expending federal funds to enforce the rule, a measure that died in the Democratic-controlled Senate. In light of the bruising politics and industry pressure, the final rules may have gone as far as pragmatically possible. But for students and taxpayers, they didn't go far enough.

New rules let for-profit schools off the hook 06/08/11 [Last modified: Wednesday, June 8, 2011 4:24pm]
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