The Obama administration is making another run at limiting how badly for-profit colleges can scam and rip off their students. Since 90 percent of revenue at some for-profit colleges comes from federal student aid, threats to cut the schools off from eligibility for that aid are serious, and the for-profit higher education industry has pushed back aggressively, getting a previous Obama administration plan thrown out by a judge.
Stronger requirements for for-profit colleges to qualify for federal aid are clearly needed:
Education Department reports show for-profit programs account for about 13 percent of all college students but 46 percent of all loan defaults.
At the same time, 22 percent of for-profit student borrowers defaulted on their loans within three years. At public colleges, that number is 13 percent of borrowers.
Remember those figures when you hear for-profit college flacks squealing about how great these schools are for their students.
The current plan:
... would require that the estimated loan payments of typical graduates not exceed 20 percent of discretionary income or 8 percent of total annual income.
Programs in which loan payments exceed 30 percent of discretionary income or 12 percent of total annual income would be deemed failing. Those in which loan payments amount to 20 to 30 percent of discretionary income, or 8 to 12 percent of total annual income, would be placed in a warning zone. Either way, colleges would be required to improve performance rapidly, or the programs would be ineligible for federal aid.
Also, the proposal would require colleges to ensure that the loan default rate for former students does not exceed 30 percent. Like the earlier regulation, the proposal threatens to shut low-performing colleges out of federal student aid programs.
These are sensible and badly needed plans to rein in a predatory industry. Let's hope they're upheld in court when the for-profit colleges inevitably challenge them.
