The gainful employment regulation recently announced by the U.S. Department of Education is painfully weak, especially when compared with the colossal and well-documented abuses committed by for-profit career colleges.
Under the new regulation, a career education program will need to fail all three of the following very forgiving standards for three out of four years before it can be declared ineligible for federal subsidies.
Read more about for-profit regulations in higher education…
The new rules stipulate that a minimum of 35 percent of former students must make progress paying back their loans. A student is deemed to make progress if the principal on his loan balance decreases by at least $1 during the year; annual loan payments must be less than 30 percent of the discretionary income of a typical graduate; and annual loan payments must be less than 12 percent of a typical graduate’s total earnings
As punishment, programs that fail to meet all three standards are required to inform current and prospective students about the degree to which they failed, and must describe their plans for improvement.
However, enrollment in the program can keep growing and federal aid is not interrupted.
Academic programs that fail to meet all three standards during two out of three years are required to be a little more forthcoming about the problem. Among other things, such programs must display prominent debt warnings on their website and in promotional materials.
But enrollment growth is not restricted and federal aid is not interrupted. Also, under this scenario, if the college voluntarily decides to discontinue the program within 90 days, the program will only be declared ineligible for federal student aid for two years. In the meantime, that same institution will be free to launch a new, similar program which will, of course, qualify for federal subsidy.