New Obama Regulations Takes Second Shot at For-Profit Schools

Administration’s new rules could jeopardize 840,000 students’ education, put 1,400 programs at risk.

Media outlets spent years bashing for-profit colleges and universities, calling for regulation, claiming they provided “woefully inadequate education,” all while ignoring these institutions’ efforts to educate underprivileged students.

On Oct. 30, 2014, the Department of Education announced new regulations on for-profit colleges that would strip them of financial aid unless these institutions proved graduates achieved “gainful employment.”

The revised gainful employment rules were still very similar to those struck down in court in 2012. The Department of Education’s new rules would mandate that for-profit institutions meet certain debt-to-earnings ratios, by tracking what their graduates earn. Traditional colleges and universities were exempted from the new guidelines.

“Programs whose graduates have debt-to-income ratios of 8 to 12 percent or debt-to-discretionary-income ratios of 20 to 30 percent” would no longer be covered by federal financial aid, The Chronicle of Higher of Education reported.

Three top newspapers, The New York Times, Los Angeles Times and USA Today supported similar regulations by a margin of 15-1 between June 1, 2011, and  July 31, 2014. Reports faithfully promoted traditional institutions while criticizing for-profit schools, and alleged that for-profits rely on “exploitive and fraudulent practices.”

Because of these new regulations, the Chronicle of Higher Education said Department of Education estimates show that 840,000 students may no longer receive financial aid from the government under the new rules. Approximately 1,400 programs were estimated to become ineligible for aid.

Underprivileged students could be hurt most by the regulations. For-profit institutions have a history of reaching students that traditional two-year and four-year colleges have ignored. “Students at for-profit schools are more likely to live at or below the federal poverty level and receive food stamp benefits than students in other sectors of higher education,” Associated Press reported.

President Barack Obama has said that the new rules will increase accountability. But not everyone agrees.

The regulations are "nothing more than a bad-faith attempt to cut off access to education for millions of students who have been historically underserved by higher education,"Steve Gunderson, President and CEO of the Association of Private Sector Colleges and Universities, said.

Gunderson also said the administration’s final rules are still “fundamentally flawed,” despite the Obama administration’s changes.

For-profit schools have argued that the administration’s efforts represent an “intrusion into the private sector,” according to Politico. The new regulations “unfairly target” for-profit institutions, Gunderson claimed.

In 2012, for-profit schools beat the Obama administration’s attempt to impose similar rules in a court battle and indicated they were prepared to fight this new round of regulations. Gunderson said for-profit schools plan to “vigorously contest” the new regulations.

A judge threw out the previous regulations ruling that they “arbitrarily targeted” for-profit schools.