Regulating For-Profit Colleges: A Much-Needed Reform

Recently the Department of Education unveiled new regulations for colleges. These regulations are aimed at for-profit colleges such as Kaplan University and the University of Phoenix, although they apply to all forms of higher education in general.

The rules stop federal funding for programs whose graduating students consistently default on their student debt. Specifically, this happens only if “fewer than 35 percent of its graduates are repaying principal on their student loans three years out, and, for the typical graduate, loan payments exceed 30 percent of discretionary income as well as 12 percent of total earnings.”

Those are some pretty lenient conditions. If 65% of students default upon their debt, and said debt is more than 30% of their free income – well, that’s a lot of debt for what appears to be a very, very poor program. Certainly a program in which 65% of its graduates are failing ought to be called a failure. It probably doesn’t deserve federal funding.

The outraged reaction of for-profit colleges to these regulations also tells a pretty revealing story. For-profit colleges spent a load of money hiring lobbyists to fight the regulations and were able to successfully soften them up (for instance programs only start losing money by 2015). They also got much support amongst the Republican Party, and the Republican-controlled House of Representatives actually passed an amendment to stop the regulations.

It is quite baffling, and very sad, that Republicans did this. Indeed, Republican opposition to these type of common-sense reforms in education seems to be part of a puzzling pattern. Republicans also opposed reforms to student loans, a bill which increased aid to college students and put pressure on private, subprime-type, student loan companies. Under Republican control, the House of Representatives has targeted the Pell Grant as one of its top targets for spending cuts. The Pell Grant gives (far too little) money to low-income college students. Surely something else – perhaps the $450 million F-35 back-up jet engine which Defense Secretary Robert Gates calls an “unnecessary and extravagant expense” -better deserves these spending cuts.

All in all, curtailing the activities of for-profit colleges is a very good endeavor. For-profit colleges are akin to a form of legalized scamming. They take in often poor, often desperate Americans, promise them jobs and hope, but end up just giving them tens of thousands of dollars in tuition debt (which the federal government then picks up).

There is a much better option for poor Americans looking for a college education: community colleges, which are far less expensive but actually are legitimate institutions. Unfortunately, community colleges are quite bureaucratic, and their fees are rising. More funding could fix this problem. Yet here again one finds Republicans advocating cuts to community college funding; their opposition to President Barack Obama’s student loan reform reduced community college funding from the original $10 billion to a mere $2 billion. Why do they do this?

Nevertheless, this reform does represent a step in progress. It definitely will curb some of the excesses that cause so much student loan debt. It won’t solve everything, but it’s much better than nothing.

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One Response to Regulating For-Profit Colleges: A Much-Needed Reform

  1. Advocate says:

    STAY CLEAR OF CEC- Career Education Corporation (CECO)
    (CEC School List Below)
    It appears Career Education Corporation has been operating degree-mills and federal funding could stop.

    CEC is being investigated by the U.S. Government Accountability Office (GAO) for deceptive or otherwise questionable statements, which included information about the college’s accreditation, graduation rates and its student’s prospective employment and salary qualifications, duration and cost of the program, or financial aid. Representatives at certain schools also employed hard-sell sales and marketing techniques to encourage students to enroll. The investigations could lead to civil or criminal sanctions, including fines, loss of state licenses and the ability to participate in federal financial aid programs.

    CEC – Career Education Corporation (CECO) a for-profit conglomerate is highly untrustworthy. Researching this company and its schools briefly reveals countless highly damaging reports including CBS investigations, scam school list, a degree-mill list and regulatory investigations. Furthermore and more importantly, thousands of past and current students in addition to faculty alike have filed lawsuits against CEC and its school’s for deceitful practices in addition to many other untrustworthy practices. Judgments against CEC and its schools are successful. This is evidence something is in-fact wrong at CEC. Federal regulators recently tightened job placement and federal loan payback guidelines on CEC and its highly unlikely Career Education Corp. can satisfy the new guidelines. Career Education Corporation final days are numbered.

    Job recruiter:
    “Most for-profit degrees are worthless. Our company will not interview students from these “colleges” due to the low quality. All they care about is getting loan money.”

    CEC School List:
    AIU – American InterContinental University
    CTU – Colorado Technical University
    IADT – International Academy of Design
    Le Cordon Bleu Culinary School
    Briarcliff College

    The Department of Education is tired of federally subsidized student loans going to shady for-profit colleges that have poor track records of getting the students who do graduates good work — often leaving them stuck with mountains of debt and poor employment prospects.

    CEC will have a difficult time with imminent federal spending cuts and Pell Grant limitations.

    Those who purchased shares of Career Education Corp. (Public, NASDAQ:CECO), have certain options and should contact the Shareholders Foundation at or call +1(858) 779 – 1554.

    Shareholders Foundation, Inc.
    Trevor Allen
    3111 Camino Del Rio North – Suite 423
    92108 San Diego
    Phone: +1-(858)-779-1554
    Fax: +1-(858)-605-5739

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