Some of the country’s largest online education programs will have to comply with federal regulations far less stringent than once thought after the U.S. Education Department (ED) unveiled its new rules for for-profit institutions that have come under fire for unscrupulous business practices.
The long-awaited rules aimed at for-profit schools such as the University of Phoenix and Kaplan University—first discussed in 2009—were released June 1. The regulations are meant to ensure that students aren’t graduating from for-profit colleges unqualified for the professional world and burdened with excessive student loan debt.
One-fourth of for-profit students default on their loans after three years, for-profit students account for almost half of all federal loan defaults, and graduation rates at those schools hover around 50 percent, according to national education statistics.
A college must fail all three of the government’s “performance requirements” in three out of four years before the institution can no longer receive federal loans, according to ED’s new regulations, which take effect in 2015.
For-profit institutions that have seen enrollments skyrocket in the past decade rely heavily on federally-backed student loans.
Public and nonprofit colleges are also subject to the federal “gainful employment” rules.
Advocates for far stricter rules laid out by ED officials last fall—and decried by for-profit lobbyists—said the Obama administration had missed its chance to crack down on an abusive industry that took in more than $20 billion in student loans in 2009.
“I feel like it’s an unconditional surrender to the [for-profit] industry,” said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers (AACRAO). “This administration is putting on a brave face, but the fact is that they caved in. … I see it as a complete defeat for reform. This was a rout, and the industry won clear across the board.”