New federal rules are aimed at cracking down on misleading recruiting practices by for-profit education providers, who also are among the nation’s largest providers of online instruction.

Enrollment in online college classes grew by more than 1 million students over the past year as more people returned to school in the midst of the economic downturn—but this phenomenal growth might be short-lived, a new study suggests. That’s partly because of new federal rules aimed at cracking down on misleading recruiting practices by for-profit education providers, who also are among the nation’s largest providers of online instruction.

Following up on a promise made earlier in the year, the Education Department (ED) in October enacted new regulations that bar for-profit colleges from tying recruiters’ pay to the number of students they enroll, among other measures. The new rules came in response to investigations detailing “fraudulent” practices among recruiters for some for-profit colleges. Criticism of these institutions also mounted as figures showed that at least one for-profit school, the University of Phoenix, received $1 billion in federal Pell Grants during the 2009-10 academic year.

ED also proposed new regulations that would cut off federal aid to for-profit colleges if too many of their students default on loans or don’t earn enough after graduation to repay them. These so-called “gainful employment” rules met a flood of resistance from the for-profit industry, prompting ED to hold off on enacting them until further review.

Still, shares of for-profit schools have tumbled in the past year—and amid all the federal scrutiny of the for-profit industry, California’s community colleges have dropped a controversial plan that would have allowed their students to take some courses at the online Kaplan University and make it easier to transfer to that school for a bachelor’s degree.

For-profit education companies argue the new rules will disproportionately hurt low-income and minority students and undermine the Obama administration’s college completion goals. In one example of how the new federal scrutiny might affect online instruction, the University of Phoenix says it will offer new students a free, three-week trial program to see if they are ready for its curricula and for online instruction in an effort to weed out those at risk of leaving school before earning a degree. But the tighter admissions standards come at a cost; the school said it expects the number of new students enrolling in its programs to drop 40 percent in the next quarter.

Making things even more uncertain for the future of online learning, House Republicans who have railed against the new regulations aimed at for-profit colleges will serve influential roles on key committees in 2011—a shift that could change the Obama administration’s approach to the issue.

Republican lawmakers have sent open letters to Education Secretary Arne Duncan asking the administration to scrap the “gainful employment” rules, and Rep. John Boehner, R-Ohio, the new House speaker when the next session of Congress convenes, has pushed for Congress to eliminate a rule that prohibits for-profit colleges from taking in more than 90 percent of tuition from federal financial aid programs.

Related links:

Spike in online enrollment not surprising to many

ED looks to crack down on misleading college recruiting

For-profit colleges find new market niche

Proposed federal rules crack down on for-profit schools

For-profit colleges face more scrutiny in new report

California schools cancel deal with online Kaplan University

For-profit schools hit back as ED finalizes regulations

Panel: Troubles abound in online learning regulation

Updated federal regulations target for-profit colleges

Online-instruction leader to make key changes

For-profit crackdown brings criticism to ED headquarters

For-profit college shares dropping as ED rules approach

Rapid growth in online instruction could wane, study says

Report finds low graduation rates at for-profit colleges

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