The University of Phoenix program review “is the initial evidence of an increased enforcement regime” at ED, said Signal Hill analyst Trace Urdan in a research note.
Critics claim the schools are not helping students find better jobs and say enrollment counselors sign up many who are unprepared for higher education.
When students drop out, they are still stuck paying back their student loans — unless they default, and then the bill goes to the taxpayers. Defaults on student loans, most of which are supplied by the government, have been rising throughout the recession.
ED’s “gainful employment” rule could limit schools’ access to federal financial aid if graduates’ debt levels are too high or too few students repay loans.
It was supposed to be announced by Nov. 1, but intense lobbying from the for-profit sector helped delay finalization until 2011. ED officials held public hearings on the rule proposal Nov. 4-5 at the department’s headquarters in Washington, D.C.
School chains, including Apollo, have been warning investors that they expect student enrollments to drop as they accommodate new rules.
Becoming ineligible for federal student aid would mean an annual loss totaling in the hundreds of millions for many of the largest for-profit colleges.
The University of Phoenix, with more than 200 locations and 476,000 students nationwide, took in slightly more than $1 billion in Pell Grants during the 2009-10 school year, according to ED statistics. Kaplan University, a school with 66,000 students, received $211 million in Pell Grants, and DeVry received $207 million. Ashford University took in $162 million in Pell Grants last academic year.
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