Editorial: Federal rules make it harder for for-profit colleges to rip off students

Published: Saturday, Mar. 15, 2014 - 12:08 am

When it comes to choosing whether to attend a for-profit college, it’s buyer beware. In too many cases, students emerge from a career training program to find they have a big bill – but not enough skills to land a job.

Taxpayers shouldn’t have to assist in this fleecing of students by shady businesses that promise more than they can deliver, and that’s the point behind “gainful employment” rules developed by the Obama administration. Under the new rules released Friday, for-profit programs at colleges can’t have a loan default rate higher than 30 percent and grads can’t have loan repayments that exceed 20 percent of their discretionary income or 8 percent total income.

If the schools don’t meet those standards and aren’t able to improve within a few years, they will get cut from federal student aid programs. That’s a huge hit; students at for-profit schools such DeVry, Kaplan and Heald College account for about a quarter of the federal loans and grants.

The rules will require the colleges to be more transparent with cost, debt and student outcomes data so that prospective students can make better decisions about how to invest in their education.

An associate’s degree at a for-profit college can cost up to $40,000. Because nearly all students at these colleges take out loans to pay their tuition, cutting off federal student aid will make it tougher for for-profit colleges to offer nothing for something.

That’s what happened in California. In 2012, this was the first state in the nation to adopt rules requiring that for-profit colleges meet important standards to qualify for Cal Grants. Those standards require that more than 30 percent of students finish their certificates within three years, or a six-month certificate within nine months, and that no more than 15.5 percent of them are defaulting on loans.

It’s a pretty low bar, but still too high for the 137 for-profit schools, including the biggest institutions, that have been dumped out of Cal Grants since then.

Tying student success to financial aid is a good move, but it’s not enough to ensure students aren’t fooled by for-profit colleges. Last year, state Attorney General Kamala Harris used the state’s power to sue Corinthian Colleges Inc., which manages Heald Colleges, for deceptive marketing. Surely that’s not the only for-profit institution overselling itself in California.

The rules are now in a 60-day public review. For-profit colleges say they will fight back. Of course – they stand to lose more than $35 billion a year.

They will argue that student choice is at stake. That’s right: The choice not to be ripped off.

Read more articles by the Editorial Board



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