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I'm not sure if this was posted here or not but this story is just a few days old. This new rule goes into effect July 1st according to the article. It's a very interesting read.
"WASHINGTON (AP) — For-profit colleges with graduates unable to pay back their student loans could soon face scrutiny by the federal government.
Schools with career-oriented programs that fail to comply with the new rule announced Thursday by the Obama administration stand to lose access to federal student-aid programs.
To meet these "gainful employment" standards, a program will have to show that the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of total earnings.
The Education Department estimates that about 1,400 programs serving 840,000 students won't pass. Ninety-nine percent of these programs are offered by for-profit schools, although affected career training programs can come from certificate programs elsewhere in higher education."
For Profit schools shouldn't have been allowed to receive Federal loans in the first place. Most of them are nothing more than extremely expensive scams.
Some people have a problem with this because non-profit colleges aren't being held to the same standards. They do have students who default on loans and earn unmarketable degrees, too. However, I don't really have a problem with this. I'm all for the free market, but for-profit colleges are earning billions of dollars for their shareholders using government money. If they want to operate in the free market system and maximize profits, then they need to stop depending so much on government loans and grants. For-profit colleges have a tendency to spend more on marketing than education, so their tuition rates aren't justified. Not all of them are as bad as ITT Tech and Westwood College, but there are many that are.
A new (for profit) law school opened in my town about 10 years ago with plenty of pomp and publicity plus a big handout from city in the form of sweetheart deals on prime real estate. After ten years two of five owners sold out entirely and the three remaining disbursed $25 million among themselves last year. They promptly signed a contract to sell out to a group that runs about 4 for-profit law schools and all hell broke loose. Alumni were fuming at the loss of prestige, etc. Amidst all the brouhaha everyone actually started to look at their results. There job placement was pretty anemic and much of it was for positions that didn't require a law degree. And many of the ones with jobs were earning below industry average. It appears the whole place was running on the pretense that kids that couldn't get into the better law schools would like the location and also rather go to a newer school than an existing one with a poor reputation. And would pay through the nose for the privilege of attending.
The new company has explained that if it doesn't get approval for the purchase the school will likely go under and everyone is getting a good chuckle out of the melee. And wondering when a group of people ever made 30 something million off a 10 year old school previously. The amount of profit had never been disclosed and the fact that the tuition costs was inline with some very established, higher ranking schools has given everyone cause to scratch their heads.
FWIW, this rule does apply to programs in other sectors, its impact is just felt most heavily in the for-profit sector.
Also, schools already are subject to 'Gainful Employment' reporting requirements now - the final rule announced last week just goes back to having an actual measuring stick of success vs. failure.
There had been 3 measuring sticks in the original (2010) rule, but the court tossed all three over a concern that one of the three was 'arbitrary.' This move, after years of wrangling, brings one measure back into play.
Moderator - Diabetes and Kentucky (including Lexington & Louisville)
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