Analysis shows high student loan default rate at for-profit colleges

For-profit schools took in $23 billion in government aid during the 2008-09 school year.

A new U.S. Department of Education (ED) report details rising loan default rates among students at for-profit colleges as the for-profit industry – including some of the country’s largest online education programs – fends off government regulations that could limit their federal aid.

About 25 percent of students at for-profit institutions – such as the University of Phoenix and Kaplan University – defaulted on their school loans within three years of starting repayment, according to the federal analysis, released Feb. 4.

That default rate is up from a 21-percent rate at for-profit colleges in late 2009, according to ED. For-profit college students, who make up about 15 percent of all U.S. students, now account for 46 percent of all student loan defaults.…Read More

For-profit college group sues over regulations

A group representing for-profit colleges and trade schools filed a federal lawsuit Friday against the U.S. Department of Education seeking to block new regulations of the sector, the Associated Press reports. For-profit colleges, which rely heavily on students receiving federal aid, have been criticized for leaving too many students with large debt and questionable job prospects. The lawsuit from the Association of Private Sector Colleges and Universities, filed in the U.S. District Court for the District of Columbia, challenges new rules issued in October that are scheduled to go into effect July 31. At issue are regulations that prohibit paying recruiters based on how many students they enroll, seek to rein in deceptive advertising and require states to authorize colleges for students to be eligible to receive federal loans…

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The top 10 higher-ed tech stories of 2010: No. 3

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.…Read More

GOP takeover signals major changes for higher ed

New House Speaker John Boehner, R-Ohio, has supported for-profit colleges as officials lobby against ED's "gainful employment" rules.

Congressional Republicans who have long railed against increases in federal student aid and new regulations aimed at for-profit colleges will serve influential roles on key committees next year—a shift that could change the Obama administration’s approach to important higher-education issues.

Republicans will have a majority in the House of Representatives in 2011 for the first time since 2006, when Democrats secured a large majority in both Congressional chambers. Democrats will maintain a slim majority in the Senate next year.

Education Secretary Arne Duncan has pushed for greater federal regulation of for-profit colleges—which include some of the largest online education programs in the country—after government investigations revealed shady recruitment practices.…Read More

For-profit college shares dropping as ED rules approach

For-profit schools take in billions in federal financial aid every year.

A proposal for tougher standards in the for-profit college sector has sent shares of the predominantly-online institutions tumbling, and for-profit school officials are lobbying the U.S. Education Department (ED) to reconsider a new set of regulations that could kick into effect soon.

Several analysts have sounded warnings in recent weeks, concerned about for-profit colleges’ ability to sign up new students and access government-backed financial aid due to increased scrutiny.

Apollo Group Inc., which owns the University of Phoenix, the country’s largest for-profit higher education chain, said that ED is launching a review of how Phoenix administers federal financial aid.…Read More

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.…Read More

Online-instruction leader to make key changes

Critics charge that for-profit schools are accepting unqualified students.
Critics charge that for-profit schools are accepting unqualified students.

In a move that might trickle down to the rest of the for-profit education market, the University of Phoenix—the nation’s largest provider of online college classes—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.

The announcement comes as the federal government ramps up its regulation of for-profit colleges and universities, an industry that critics say preys on many students and leaves them with hefty debt loads and meager job prospects.

But Apollo Group Inc., the company that runs the University of Phoenix, says this change—and others the company will make as it seeks to comply with new federal guidelines—likely will result in fewer opportunities for lower-income students.…Read More

For-profit schools hit back as ED finalizes regulations

Duncan has received a series of letters from members of Congress opposing a for-profit crackdown.
Duncan has received a series of letters from members of Congress who oppose a for-profit crackdown.

The U.S. Education Department (ED) will take longer than expected to formulate new regulations for for-profit colleges, and private-sector school officials expect about 1,000 students to speak out against the government’s measures at a rally planned for Sept. 29 in Washington, D.C.

For-profit colleges have campaigned hard against the “gainful employment” rule, which would cut off federal aid to college vocational programs with high student debt levels and poor loan repayment rates. They’ve lobbied Congress, purchased newspaper ads, and helped students and others register complaints with ED.

The government was to publish its final rules by Nov. 1, but ED officials announced a new timeline on Sept. 24, saying sections of the plan would be ready by Nov. 1 and the remaining portions will be published in early 2011.…Read More

Proposed federal rules crack down on for-profit schools

For-profit colleges are bringing in record amounts of federal aid money, according to government officials.
For-profit colleges are bringing in record amounts of federal aid money, according to government officials.

The Education Department proposed much-anticipated regulations July 23 that would cut off federal aid to for-profit college programs—including many of the nation’s largest online schools— if too many of their students default on loans or don’t earn enough after graduation to repay them.

“Some proprietary schools have profited and prospered but their students haven’t, and this is a disservice to students and to taxpayers,” Education Secretary Arne Duncan said in a briefing with reporters. “And it undermines the valuable work, the extraordinarily important work, being done by the for-profit industry as a whole.”

To qualify for federal student aid programs, career college programs must prepare students for “gainful employment.”…Read More

ED looks to crack down on misleading college recruiting

Duncan said ED's proposed rules would increase colleges' accountability to students.
Duncan said ED's proposed rules would increase colleges' accountability to students.

Some of the nation’s largest online colleges could be barred from tying recruiters’ pay to the number of students they enroll if the Obama administration’s new list of rules for for-profit institutions becomes federal policy.

The administration’s set of 14 proposed guidelines for for-profit colleges—announced June 16—was created in response to widespread student complaints of deceitful recruiting practices at some of the most profitable institutions.

Many of the proposals aim to ensure that federal aid is distributed only to students who are qualified to take college classes.…Read More