For-Profit Schools Face Increasing Oversight

Late last month the U.S. District Court for the District of Columbia ruled on new regulations that will hopefully reduce the number of for-profit schools and certification programs that use fraudulent data to prey on veterans and low-income students.

The ruling by U.S. District Judge John Bates states that if the Department of Education asks for proof that graduate can reasonably and reliably pay back their student loan, the college must provide it. Schools and programs that don't provide proof of "gainful employment" risk losing access to all federal funds - federal student loans, federal grants, and even military education benefits. The rules go into effect July 1, and require that the estimated loan repayment amount not exceed 20% of a typical graduate's discretionary income, or 8% of their total income.

The Association of Private Sector Colleges and Universities, which represents 1,400 private schools, sued when the Education Department announced this new rule last fall.

Although the for-profit college industry is understandably concerned about laws which arbitrarily target their industry, in the end this law should allow those private schools which do provide quality education and job opportunities the ability to point to their graduates' success as a testament to their quality.

Overall, for-profit colleges as a whole often get a bad reputation, due to the large amount of student debt, high default rates, and even very prominent bankruptcies due to falsified job placement data. This increased regulation, although potentially burdensome, should help restore trust in those private colleges that deliver what they advertise.