The Obama administration took new steps on Friday and proposed “gainful employment” regulations to hold for-profit colleges and other career training programs accountable for producing graduates who can earn enough money to pay back student loans.
The regulations are intended to protect students from amassing large amounts of student loan debt that they will not be able to pay off after graduation.
“Career-training programs offer millions of Americans an opportunity they desperately need to further their education and reach the middle class,” Education Secretary Arne Duncan told reporters in a conference Thursday, a day before the official announcement of the “gainful employment” program.
“Today, too many of these programs fail to provide students with the training that they need at taxpayers’ expense and the cost to these students’ futures,” added Duncan.
“Most will pass. Many programs, particularly those at for-profits, will not,” explained Duncan.
Roughly 8,000 academic programs would be required to comply with the standards, federal officials said at the conference Thursday.
There are two metrics education programs must pass in order to be considered compliant with the “gainful employment” program. Education programs would fail the debt-to-earnings standard if graduates who qualified for federal aid spend more than 12 percent of their annual earnings on student debt, or more than 30 percent of their discretionary earnings for any two out of three years.
The other metric is that programs must have a student loan cohort default rate of 30 percent or less for three consecutive years.
The program would penalize for-profit institutions of higher education that do not comply with the regulations by denying them access to federal student aid programs.
The new rules of the “gainful employment” program are subject to change following a 60-day public commentary period.
After the public comment period, the U.S. Education Department has approximately two months to further amend the rules, reported Inside Higher Ed.
The department would then send any revisions to the White House Office of Management and Budget for review. For the regulations to take effect by July of next year, the feds must publish their final version by Oct. 30.
If passed, institutions would be subject to regulations under gainful employment in 2016, Duncan said.
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