Duncan said the department estimates that if schools make no changes, 5 percent of for-profit college programs would be ineligible for aid in 2012 — affecting 8 percent of all students in the fast-growing sector.
If the rules went into effect now, 55 percent of for-profit schools would be required to disclose unflattering loan data in their promotional materials, making for a strong consumer protection tool, the agency said.
To give schools time to improve and to target “the bottom of the barrel,” Duncan said the administration would cap the number of programs it would strip of aid eligibility at 5 percent in fall 2012, when that penalty would first be assessed.
The Career College Association, the for-profit college sector’s main lobbying group, said establishing a ratio between student debt and anticipated graduate earnings is unwise, unnecessary, and unproven.
“Amounts borrowed today do not indicate what you will be able to repay in five years, ten years, or over a working lifetime,” the association’s president, Harris Miller, said in a statement.
Others who were hoping for tougher rules were disappointed as well.
Pauline Abernathy, vice president of the Institute for College Access & Success, said while the proposal is significant and has teeth, programs could continue to profit from federal aid when more than half their students can’t afford to pay down the principal on their loans.
“It is not as strong as it should be to protect students and taxpayers from getting ripped off by career education programs that over-promise and under-deliver,” she said.
Republican Sen. Lamar Alexander of Tennessee criticized the proposal, saying the government could in effect “institute price controls on certificate and degree programs at thousands of institutions of higher education.”
Sen. Tom Harkin of Iowa, a Democrat who is holding oversight hearings on for-profit colleges, said at first glance, “the regulation appears to set a low bar.”
The proposed rules will be published July 26 in the Federal Register, and a 45-day public comment period will follow.
The final rules are scheduled to be announced in November and would take effect next year, although enforcement action that would strip schools of aid eligibility would not begin until the 2012-13 school year.
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