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THE TOPIC:Will e-books kill the paper book? Tell us what you think. Proposed federal rules target for-profit colleges
Buzz up! Related Quotes Symbol Price Change CECO 25.41 +0.87 COCO 10.20 -0.05 DV 59.29 +7.78 EDMC 16.31 +1.14 ESI 85.44 +0.26 By ERIC GORSKI, AP Education Writer Eric Gorski, Ap Education Writer – Fri Jul 23, 4:52 pm ET
The Education Department proposed much-anticipated regulations Friday that would cut off federal aid to for-profit college programs if too many of their students default on loans or don’t earn enough after graduation to repay them.
“Some proprietary schools have profited and prospered but their students haven’t, and this is a disservice to students and to taxpayers,” Education Secretary Arne Duncan said in a briefing with reporters. “And it undermines the valuable work, the extraordinarily important work, being done by the for-profit industry as a whole.”
To qualify for federal student aid programs, career college programs must prepare students for “gainful employment.”
The Obama administration, amid intense lobbying from both for-profit college officials and consumer and student advocates, is proposing a complicated formula that would weigh both the debt-to-income ratio of recent graduates and whether all enrolled students repay their loans on time, regardless of whether they finish their studies.
Early reaction was mixed, with a Republican senator and a for-profit college lobbying group panning it and advocates for tougher regulation questioning whether it does enough to protect students and taxpayers.
On Wall Street, shares of several for-profit education companies jumped Friday at the news. DeVry Inc., which is among the companies analysts predicted would be least affected by the proposal, climbed 15 percent and was one of the biggest gainers in the Standard & Poor’s 500 index.
But shares were mixed among companies such as ITT Educational Services Inc., Corinthian Colleges Inc., Education Management Corp. and Career Education Corp. Those companies operate career colleges focusing more on two-year programs or lower-income students and may need to make big changes if the proposal is adopted, analysts said.
Mark Kantrowitz, publisher of the FinAid.org Web site, said the government’s proposal “appears to represent a reasonable compromise that separates the wheat from the chaff without discarding too much wheat.”
For-profit colleges have faced increased scrutiny in recent months for some questionable recruiting tactics, high loan default rates, and low graduation and job placement rates. The government is taking notice because for-profit colleges are bringing in record amounts of federal aid money — $26.5 billion last year, up from $4.6 billion in 2000.
Under the Obama administration proposal, vocational programs would fall into one of three categories:
_Programs fully eligible for aid will either have at least 45 percent of their former students paying down the principal on their federal loans — or their graduates will have a debt-to-earnings ratio of less than 20 percent of discretionary income or 8 percent of total income.
_Ineligible programs will have less than 35 percent of their former students paying down the principal on their federal loans — and their graduates will have a debt-to-earnings ratio above 30 percent of discretionary income and 12 percent of total income.
_Those programs that don’t fit either definition would be restricted — meaning they would be subject to limits on enrollment growth and schools would be required, among other things, to warn of their high debt levels.
Duncan said the department estimates that if schools make no changes, 5 percent of for-profit college programs would be ineligible for aid in 2012 — affecting 8 percent of all students in the fast-growing sector.
If the rules went into effect now, 55 percent of for-profit schools would be required to disclose unflattering loan data in their promotional materials, making for a strong consumer protection tool, the agency said.
To give schools time to improve and to target “the bottom of the barrel,” Duncan said the administration would cap the number of programs it would strip of aid eligibility at 5 percent in fall 2012, when that penalty would first be assessed.
The Career College Association, the for-profit college sector’s main lobbying group, said establishing a ratio between student debt and anticipated graduate earnings is unwise, unnecessary and unproven.
“Amounts borrowed today do not indicate what you will be able to repay in five years, ten years or over a working lifetime,” the association’s president, Harris Miller, said in a statement.
Others who were hoping for tougher rules were disappointed, as well.
Pauline Abernathy, vice president of the Institute for College Access & Success, said while the proposal is significant and has teeth, programs could continue to profit from federal aid when more than half their students can’t afford to pay down the principal on their loans.
“It is not as strong as it should be to protect students and taxpayers from getting ripped off by career education programs that over-promise and under-deliver,” she said.
Republican Sen. Lamar Alexander of Tennessee criticized the proposal, saying the government could in effect “institute price controls on certificate and degree programs at thousands of institutions of higher education.” Sen. Tom Harkin of Iowa, a Democrat who is holding oversight hearings on for-profit colleges, said at first glance, “the regulation appears to set a low bar.”
The proposed rules will be published Monday in the Federal Register and a 45-day public comment period will follow. The final rules are scheduled to be announced in November and would take effect next year, although enforcement action that would strip schools of aid eligibility would not begin until the 2012-2013 school year.
___
Associated Press Business Writer Tali Arbel contributed to this report.
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1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment Chandler 11 hours ago Report Abuse Wait… Let me get this straight… Because some students made poor decisions in financial preparation for school, the government has to control it?
3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment James 14 hours ago Report Abuse For-Profit Educational Institutions have been gaming the system for decades all the way back to the beginning of the very first “GI Bill”. So called entrepreneurs have always feasted at the trough where-in Federal monies are involved.Having been an employee of government with duties comparable to an adjudicator, I know first hand that most for-profit institutions use underhand techniques to recruit and maintain so-called low income students in their programs. Many of those student wind up deeply in debt with no usable skills for the period of time spent in less than honorable excuses for rigorous classroom programs.
3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment Yogi 17 hours ago Report Abuse How about jobs go back to the old days of letting their entry level employee work their way up. Graduates are known for changing jobs every 3 years. Yet, a employee who grows with a company stays longer. Bring back on the job training. Just because you put yourself in 40k+ debt does not earn you the right to manage someone who has been with a company for 10+ years right off the back.
What do you know that they do not know? How to use power point? What a joke a week or two doing the tutorials all over the net takes no time at all to learn.How to budget? Does not take a genius for this either. Sorry most college grads do not bring anything to the table that experience could not solve in today job market. Computer skills are taught at such a young age anymore really… Any child could do inventory at id say 13 on up.
5 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment Scortch Dearth Fri Jul 23, 2010 06:14 am PDT Report Abuse Rufus…are you saying in your post that government NOT subsidizing for-profit colleges is a punishment to those colleges, and another step toward socialism?…
…huh?…
Government handing money to the private sector is what other neo-cons CALL socialism (well, if it suits them at the moment)…methinks you are wildly confused.
As far as I’m concerned, college should be funded by federal money & set up as a non-profit commons, the same way grades k through 12 are by the states. Now THAT will get me called a socialist, because the wealthy want to bring back the days when only THEIR children had access to the advantage of higher education, and the rest of us were kept safely uneducated, so as not to provide any competition to their own offspring…most of whom were already incompetent & unable to survive without family wealth, anyway.
5 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment Pooh Fri Jul 23, 2010 02:14 am PDT Report Abuse Circe, you are exactly on point. I had a friend that attended one of those universities for an IT Degree. They told him that other universities were useless because it focus too much on History, English and all these other “useless” subjects that were not necessarily related to his future field of work. They told him his class will be intensely in IT knowledge for 36 months. He went to the college and guess what…in month 30, the university shut down and closed it’s doors. All the students lost the funds and time they put into that “would be” degree. The worse thing was that none of the credits from the school were transferable to any other university. The student got stuck with the loans and other losses. What was the school’s price tag for this IT degree? $42,000.
1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 6 users disliked this comment Dude Fri Jul 23, 2010 01:45 am PDT Report Abuse This would turn education into a credit issue rather than an academic issue. The affected intitutions will be forced to reject students from low income families or those with bad credit. With the future of the economy being uncontrollable as well as the students, they are likely to accept only those or those whose parents already have the means to pay back a loan. I’m sure they would want to do that anyway and what better excuse than to make it a law.
It would push the poor to the non-profit and community colleges the same way Doc-in-the-Boxes push people without insurance to the emergency room. The people who can pay are put in one group while those who can’t are put in another. Across the industry/market, risk and it’s costs will become the burdon of those who can’t say no. While the for-profit companies no longer have to legally share that risk.
6 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment james Fri Jul 23, 2010 01:34 am PDT Report Abuse It amazes me that anyone can look at this and see “Marxism”, or government control.
The government decides whether or not to invest taxpayer money based on… purely market forces. If a school puts out a quality product (education that provides the student with the skills needed to thrive in the employment marketplace), then the students will be employable and there will be few defaults. If a school puts out a crappy product (education that doesn’t provide needed skills) then the employment marketplace will reflect this, and graduates of that school will be more likely to default on their loans. The government is observing this free market at work and following its dictates, not dictating to the market. They cut off the schools that are failing to deliver what the students are paying for.
As a bonus, by cutting off schools with high default rates, they SAVE TAXPAYER MONEY. I, for one, approve of that.
Yes, I used to work in vocational education.
10 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment Circe Fri Jul 23, 2010 01:10 am PDT Report Abuse I’m seeing some pretty broad comments on here so I don’t know if you folks are familiar with these types of trade schools or their unscrupulous practices. They prey upon the uneducated and the poor, they make false promises to them and encourage them to take out hefty loans because, of course, they’ll be employed as a dental assistant or a correctional officer by the time they’re done and they’ll be able to pay off whatever they borrow.
The young, gullible person believes them, ruins their credit and ends up saddled with hefty loans which the government WILL pursue- trust me. They’ll have garnished wages and liens on their property for years to come and the school turns a profit. What does the student get? An education that is pretty much useless and they’ll never use. Trust me, I’ve met PLENTY of these graduates and they know only the barest minimum of what they need to know.
But those schools DISCOURAGE students from attending more affordable schools- telling them that those schools are too slow and that they’ll be learning useless information.
Its a terrible racket.
If you’re going to blame these young, vulnerable (and hopeful) students, you might as well blame the lonely old people who fall prey to deceitful tactics from unscrupulous telemarketers and end up in debt too- because they’re lonely and they don’t understand what’s going on.
Where is the compassion?
2 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this comment Peter Fri Jul 23, 2010 01:09 am PDT Report Abuse @rufus….Well put….”People deserve their government” – Taylor Caldwell
4 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 10 users disliked this comment Rufus Fri Jul 23, 2010 01:00 am PDT Report Abuse One more marxist step, one more step towards total socialism. Oh wait, we already are socialists, just ask the New York Times.
How we can sit around and let “our” government punish the private sector and those evil “for profit” companies and institutions is beyond me.
Right now, today, we deserve everything that this marxist administration is doing to us.
They are destroying our country as we know it and we sit here as if everything is just fine. The only thing we worry about is unemployment, the very unemployment that Obama is creating and wants to have continue so we have to go the govt for help, so they can control us just a little bit more. Comments 1 – 10 of 61First PrevNextLast Post a Comment Sign in to post a comment, or Sign up for a free account. Most Viewed – U.S. Charges dropped for NY man who tackled prankster AP US bank failures reach 108 for 2010 AFP Univ. of Va. puts out Faulkner audio archives AP Relief rig returns to BP leak site as storm weakens AFP Storm Bonnie poses little threat to Gulf of Mexico Reuters All Most Viewed » Daily Features
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