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July 25, 2012 / Admin

For-Profit Schools Face Increased Federal Oversight

The U.S. Department of Education announced on Sept. 24 that it would move forward with tighter regulations on the for-profit education sector, which are designed to protect students from misleading recruitment practices and from running up huge debts, among other issues. The proposal the Department of Education released last month would require for-profit schools to ensure that their graduates earn at least enough to start repaying federally backed student loans. If not, the schools would risk losing access to those loans.  Students at for-profits have a higher likelihood of retaining debt than not-for-profit schools. In fact, students at for-profits are twice as likely to default as students at nonprofits. Proponents of the new rule say they are not interested in driving for-profits out of business, just in stopping students from borrowing more than they can afford to repay. The Department of Education says these regulations will heighten its ability to penalize institutions that have significantly misrepresented their programs to prospective students.  Additionally, the proposed regulations will crack down on loopholes which allowed for-profit schools to avoid legislation forbidding recruiters from being compensated based on the number of students that they are able to recruit. Such limits would help to curb some high-pressure sales tactics that for-profit colleges enlist via recruiters.

The for-profit education business has responded with an aggressive campaign to rally public opinion to its side. For-profits have been urging students to write letters to the government during the comment period on the rule. The Department of Education received about 90,000 comments critiquing the proposed regulations in the 90 days following their announcement. Following this response, the Department has agreed to meet with representatives of for-profit schools and education advocacy groups on Nov. 4 and 5 at department headquarters in Washington.

Final regulations are scheduled for publication on or around November 1, 2010, and will go into effect on July 1, 2011. The impact of the rule on students and for-profit schools won’t be clear until the new rule is issued in November.

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