WASHINGTON ― A gainful employment regulation announced by the Department of Education last week as part of the Higher Education Act of 1965 will have specific ramifications for some for-profit colleges. The regulation is an attempt to ensure that educational programs will lead to gainful employment in recognized occupations.
A panel of experts convened on Wednesday at the Center for American Progress to discuss the impact the regulations would have on for-profit colleges.
Roughly 1,400 programs, 99 percent of which are housed at for-profit colleges, serving 840,000 students are projected to fail when the regulations go into effect on July 1. Programs whose graduates have annual loan repayments that equate to 12 percent of their total earnings and greater than 30 percent of their discretionary earnings will fail under the regulations.
“We see that some of these programs are leaving students with debts that they cannot afford to repay, and, in fact, about a quarter of graduates of gainful employment programs earn less than a full-time minimum wage worker,” said James Kvaal, deputy director of the White House Domestic Policy Council, in the panel’s keynote address.
Kvaal added that for-profits, which enroll about 11 percent of students, produce more than 40 percent of student loan defaults.
Under the new regulation, students will not be allowed to use federal financial aid to pay for failing programs. This is bad news for those for-profits that derive a substantial portion of their operating revenue from federal financial aid.
Corinthian College’s swift fall from grace is indicative of the dependency of some for-profits on federal dollars. When the federal government disrupted the flow of federal funds to the for-profit Corinthian College for a period of 21 days this summer, Corinthian went into a financial tailspin leading to the closure of 12 of their campuses and the eventual sale of 85 more.
