Updated federal regulations target for-profit colleges

New regulations close some loopholes allowing poor practices.

The U.S. Department of Education (ED) on Oct. 28 will release finalized regulations targeting for-profit colleges that give the government a stronger hand overseeing the fast-growing sector–including new rules reining in how recruiters are paid and a controversial attempt to define credit hours.

Still to come early next year is the most fought-over proposal: A rule that would cut off federal aid to college vocational programs with high student-debt levels and poor loan repayment rates.

ED put off finalizing those “gainful employment” regulations until early next year, although the updated package of rules includes one scaled-down gainful employment provision that has eased industry worries.

A full review will not be possible until the final regulations are published online Oct. 28 and in print Oct. 29 in the Federal Register. But ED officials are portraying themselves as good listeners, saying they made 82 changes in response to comments and criticisms of 13 new “program integrity” rules that will go into effect in July 2011.

“These new rules will help ensure that students are getting from schools what they pay for: Solid preparation for a good job,” Secretary of Education Arne Duncan said in a statement.

On recruiter pay, admissions officers at for-profit colleges have been barred since 1982 from receiving incentive pay based on securing enrollments. But since then, a dozen loopholes have been put in place allowing the practice, with limits.

The regulations to be released Oct. 28 will eliminate such “safe harbors.”

“It closes the loopholes that led to boiler room-style sales tactics at some colleges, with recruiters doing and saying whatever it took,” said Pauline Abernathy, vice president of the Institute for College Access & Success, an advocacy group for tighter regulations.

Other new regulations strengthen ED’s authority to take action against schools engaging in deceptive advertising, marketing, and sales practice. Those are common complaints against for-profit colleges, which are facing intense scrutiny this year for their huge reliance on federal aid and high student-loan default rates, among other things.

Industry officials are eager to see specifics on ED’s attempts to define a credit hour, the metric used to determine a student’s eligibility to receive federal aid. ED said a standard definition is necessary because some schools are gaming the system, inflating student credits to get more federal money.

The regulations define a credit hour and establish procedures for accrediting agencies to determine whether an institution’s assignment of credit is acceptable, the department said.

Although ED said it is not intruding into academics, others say they are not so sure.

“It’s quite likely they’ve federalized the definition of credit hour,” said Terry Hartle, senior vice president of government and public affairs for the American Council on Education, an umbrella group that represents higher education. “Our position is that no successful and diverse industry is improved by federalizing important aspects of it.”

ED significantly scaled back one part of the gainful employment rule, doing away with a proposal that would have required schools wanting to start aid-eligible occupational programs to provide five years of enrollment projections and get documentation from employers showing the curriculum aligns with job needs.

Under the final regulations, schools instead will be required to notify ED 90 days in advance of starting a new program. If the department has concerns, schools will be asked to apply for new program approval, a scenario ED officials said would be rare.

ED said it was important to get that on the books by next summer, because the full gainful employment regulations are not scheduled to go into effect until summer 2012.

Otherwise, institutions could quickly start new programs or restructure existing ones, eliminating a data trail and skirting the new rules, ED said.

Harris Miller, CEO of the for-profit college industry’s main lobbyist, Association of Private Sector Colleges and Universities, called the change “a much more reasonable and pragmatic approach.”

Lanny Davis, a lobbyist for a group for several large privately held for-profit colleges, called it a step in the right direction.

Earlier on Oct. 27, Davis held a conference call criticized the original proposal, saying it would block career college students from learning about new technologies and getting training for green jobs.

Sign up for our newsletter

Newsletter: Innovations in K12 Education
By submitting your information, you agree to our Terms & Conditions and Privacy Policy.

Laura Ascione
Latest posts by Laura Ascione (see all)

Sign up for our newsletter

Newsletter: Innovations in K12 Education
By submitting your information, you agree to our Terms & Conditions and Privacy Policy.