The Obama administration released a broad set of rules to strengthen federal student aid programs at for-profit, nonprofit and public institutions by protecting students from aggressive or misleading recruiting practices, providing consumers with better information about the effectiveness of career college and training programs, and ensuring that only eligible students or programs receive aid.
Students at for-profit institutions represent 11 percent of all higher education students, 26 percent of all student loans and 43 percent of all loan defaulters. The median federal student loan debt carried by students earning associate degrees at for-profit institutions was $14,000, while the majority of students at community colleges do not borrow. More than a quarter of for-profit institutions receive 80 percent of their revenues from taxpayer financed federal student aid.
This rapid growth of enrollment, debt load, and default rates at for-profit institutions in recent years prompted the Obama administration to embark on an 18-month negotiation with the higher education community over new regulations, which was required by Congress. During the negotiation, the Department worked with stakeholders to develop a set of proposals around 14 specific issues (outlined below) that strengthen the integrity of the federal student aid program and ensure that taxpayer funds are used appropriately. The regulations, published today in two parts, follow that year-long process and will go into effect on July 1, 2011. They address 13 of the 14 issues in their entirety, and partially address the 14th issue, which involves the definition of "gainful employment."
The Department received over 1,200 comments on the proposed regulations published today. The comments were carefully considered and led to 82 thoughtful revisions in the proposal including: giving institutions additional time to put in place systems required by the regulations; clarifying institutions' flexibility in the way they define a credit hour; and clarifying exemptions for religious institutions.
After receiving over 90,000 comments during the public comment period on the Department's gainful employment proposals dealing with a program's eligibility to receive federal student aid, the Department announced plans in September to change the publication date of these final regulations from November 1 to early 2011. This will still allow the Department to publish final regulations in time for them to go into effect on or around July 1, 2012, as originally planned. The Department is taking additional time to hold several meetings with interested parties (see list) over the coming weeks, as well as public hearings on November 4th and November 5th. These meetings will give people the opportunity to clarify the comments they've submitted and respond to questions from Department officials.
"We continue to be thoughtful as we move forward with finalizing new gainful employment eligibility rules," said Secretary Duncan said. "We're taking additional time to analyze all the feedback we've received to help us strike the right balance between holding these programs accountable to protect students and taxpayers from abuse and making sure we keep whole those programs that are doing a good job," Duncan continued.
For more information on specific rules, or to view the entire press release, visit http://www.ed.gov/news/press-releases/department-education-establishes-new-student-aid-rules-protect-borrowers-and-tax.
