Hundreds of programs at for-profit colleges are at risk of losing federal funding unless their graduates start earning better wages, federal officials say.
On Monday, the Education Department issued its first round of data measuring whether graduates of 8,700 career programs earn enough money to repay their student loans. It stems from the Obama administration’s new “gainful employment” rule, which aims to weed out programs that leave students with heavy debt and light income.
Under the rules, programs are considered failing if their graduates on average pay at least 12 percent of their yearly earnings on student loans, or 30 percent of their discretionary income. Programs can lose access to federal funding if they fail twice within three years, or if they fall into a lower “warning zone” for four consecutive years.
In the first round of ratings, based on students who graduated between 2010 and 2012, more than 800 programs failed and 1,200 others were in the warning zone. Although for-profit colleges represented only 66 percent of all programs that were evaluated, they accounted for more than 98 percent of those that failed.
Department officials said their data is further proof that community colleges, which generally fared well in the ratings, offer a better value than for-profit colleges.
“We are giving career colleges an opportunity and in some cases a warning to improve the quality of their programs,” Education Secretary John B. King Jr. said in a conference call with reporters. “Far too many hardworking students are graduating with certificates or degrees that have little or no value in the job market.”
The findings drew outrage from many in the for-profit college industry, which has ardently opposed the new rules since they were proposed in 2014. Steve Gunderson, president of Career Education Colleges and Universities, an industry lobbying group, said the findings should have been withheld while schools appeal the data.
