Over the past six years, the U.S. Department of Education has established tougher regulations targeting for-profit, or career colleges — institutions that operate as a business, often have shareholders, and derive most of their revenue from taxpayer-funded student financial aid. Among other actions, the Department has issued “gainful employment” regulations (also applied to community colleges and public universities), intended to help ensure that students at career colleges don’t end up with debt they cannot repay. The rule requires colleges to track their graduates’ performance in the workforce and eventually will cut off Federal funding for career training programs that fall short.
Department officials say that for-profit colleges enroll just 11 percent of students nationally but account for 44 percent of Federal student loans defaults. A Brookings Institution report found that the amount of debt held by for-profit college attendees grew from $39 billion in 2000 to $229 billion in 2014.
“While some for-profit colleges play a critical role in helping students succeed in their educational and training pursuits, too often, bad actors in the sector have preyed on some of our Nation’s most vulnerable students and taken advantage of hard-working Americans who simply want a better future for themselves and their families,” said Education Secretary Arne Duncan.
Other Federal agencies — including the Consumer Financial Protection Bureau, the Federal Trade Commission, and the Securities and Exchange Commission — have cracked down on the industry as well, and some States have initiated investigations and lawsuits. As a result, some for-profit colleges have begun closing or downsizing. While they blame government overreach for their financial decline, regulators call it a sign that the industry is taking its outcomes more seriously.
Meanwhile, two bills are pending in Congress that would address these issues.
The Students Before Profits Act, introduced by Senators Dick Durbin (IL-D), Chris Murphy (CT-D), Elizabeth Warren (MA-D), and Sherrod Brown (OH-D), “ensures that students have access to important and accurate information, strengthens oversight and regulation, and holds for-profit schools and their executives accountable for violations and poor performance,” according to a press release issued by the bill’s sponsors.
The Protecting Our Students and Taxpayers (POST) Act, introduced by Senators Durbin, Warren, Jack Reed (RID), and Richard Blumenthal (CT-D), aims to put an end to for-profit colleges’ allegedly predatory marketing campaigns and aggressive recruitment of military members and their families. Specifically, the bill would reinstate a rule requiring for-profit colleges to derive at least 15 percent of their revenue from non-Federal sources. (The cap was lowered to 10 percent in 1996.)
In the past five years, about 40 percent of GI Bill tuition benefits have gone to for-profit schools, and veterans groups are supporting the POST Act, as is the Obama Administration. “This ramps up the accountability for schools that are marketing to veterans and other students who come with Federal dollars and makes sure that we are providing a high-quality education for the veterans who have served us so well,” said a White House spokesperson.
For more background, see the November 2009 issue of Congressional Digest on “Federal Student Loans.”
