Federal regulations are working to reign-in for-profit colleges and make the industry more accountable for subpar education, but colleges are able to take advantage of loopholes while legislators scramble for reform, The Consumerist reported on Friday.
For-profit colleges, including those that operate in a chain, often cost much more than public institutions and can leave students in loads of debt with faint employment hopes. Some schools recruit students who are not ready for higher education and leave college with no new job skills.
One regulation attempt has been the 90/10 rule, which outlaws for-profit schools from receiving more than 90 percent of their revenue from federal student aid. The remaining 10 percent of the company's income must be found through other means. The rule aims to prevent for-profit institutions from making big profits off of tax dollars and keeping them from baiting low-income students, who usually make up a large portion of enrollment.
The Department of Education found that 29 schools were in violation of the rule in the 2011-2012 federal aid award year. Some advocates say there are issues with the 90/10 rule, issues that pose a big problem for prospective students.
"It only applies to Title IV money - so, Pell grants and federal student loans mostly - meaning that other kinds of federal dollars can be counted in the remaining 10 percent the school takes in," Suzanne Martindale, senior counsel for Consumers Union, told The Consumerist.
Other new rules proposed by the Obama administration this spring would require career training programs to meet two standards to remain eligible for financial aid. The projected loan payment of a typical graduate must not exceed 20 percent of discretionary earning, or 8 percent of total earnings. And the default rate of former students should not exceed 30 percent, according to The New York Times.
The industry has been fighting against proposed rules and is lobbying Congress to stop them on the basis that they limit educational opportunities for poor students. But graduates of two-year for-profit career training programs average a loan debt of $23,590, while most community college graduates don't owe anything.
