The abusive practices in the career college industry have not gone unnoticed by the Obama administration.
Consequently, the administration has sought to take comprehensive action to tackle the problems that have plagued the industry over the years.
The clock is ticking for bad actors in the career college industry to do right by students,” said U.S. Secretary of Education Arne Duncan.
“We know many have taken steps to improve or to close programs that underperform, but we believe there is more work to be done across the board so students get what they pay for: solid preparation for a good job,” he added.
The Administration’s current effort is to strengthen oversight and avert the flow of federal student aid to career training programs that leave students buried in debt with few opportunities to repay it.
Now, to qualify for federal student aid, the law requires that most for-profit programs and certificate programs at private non-profit and public institutions prepare students for “gainful employment in a recognized occupation.”
These institutions must provide key information on program costs, whether students graduate, how much they earn, and how much debt they may accumulate.
According to the Department of Education, these required standard disclosures empower students to compare across Career College programs when searching for and selecting a program. The regulations also help the Department in its efforts to protect students from deceptive practices on the part of some for-profit colleges.
The department also said in its press release that under the new regulations, a program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income – what is left after basic necessities like food and housing have been paid for – or 8 percent of his or her total earnings.
Programs that exceed these levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.
The Department also noted that there are about 1,400 employment programs serving 840,000 students – of which 99 percent are at for-profit institutions – would not pass the accountability standards.
It said all programs will have the opportunity to make immediate changes that could help them avoid sanctions.
However, it stated if programs do not make these changes, they will ultimately become ineligible for federal student aid – which often makes up nearly 90 percent of the revenue at for-profit institutions.
In keeping in line with the Department’s accountability and shared responsibility thrust, states will now play a more active role in the oversight of the operations of these institutions and the Department will publish its annual College Affordability and Transparency lists, which highlight institutions with the highest costs, the lowest costs, and those where costs are increasing rapidly.
Carole Davy, Readers Bureau, Fellow
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