The
worst of the worst for-profit college programs risk losing their federal student aid lifeline if they don't make improvements. According to the Department of Education, 193 programs at 93 schools fail all three "gainful employment" metrics the Obama administration has set up to ensure that federal student aid money doesn't go to completely useless or fraudulent career training.
To meet the gainful employment threshold, at least 35 percent of a program's former students must be repaying their loans, or else the program has to have estimated annual loan payments of no more than 30 percent of a former student's discretionary income or 12 percent of total earnings. This isn't a terribly high bar, yet 193 programs failed to meet it:
The programs include Everest College's paralegal training in Salt Lake City and more than 40 other programs operated by Corinthian Colleges, one of the nation's largest higher education companies; chef training at Le Cordon Bleu College of Culinary Arts in Austin, Texas; and the medical assistant program at Sanford-Brown College in McLean, Va.
"Career colleges have a responsibility to prepare people for jobs at a price they can afford," Education Secretary Arne Duncan said. "Schools that cannot meet these very reasonable standards are on notice: invest in your students' success, or taxpayers can no longer invest in you."
Though schools would have to fail these guidelines for three out of four years, lowering the bar still further, a threat like Duncan's is one for-profit colleges have to take very seriously. The industry, which represents a staggeringly disproportionate percentage of student loan dollars in default, subsists almost entirely on federal student aid. In fact, by law, just 10 percent of a for-profit college's revenue must come from nonfederal source, yet many colleges are looking for ways to skirt that requirement. Since GI Bill money counts toward the 10 percent nonfederal funding requirement, for-profit colleges aggressively recruit veterans, sometimes even targeting brain-damaged veterans. Such practices have led President Obama to announce a
crackdown on abusive recruiting practices.
The head of the Association for Private Sector Colleges and Universities, an industry group which recently had George W. Bush and Michelle Rhee speak at its annual convention, describes his industry as "one of the most highly regulated groups in the country" due to onerous requirements such as having 35 percent of graduates able to repay their loans and not aggressively recruiting brain-damaged veterans by misrepresenting their chances at a job and the student loan burdens they'll face.