If you ever thought that for-profit colleges viewed their students as walking cash-cows instead of potential workers, then you could probably be right.
A recent study of 3,695 educational programs in 1,336 institutions was conducted by the United States Education Department (ED).1 The results shows that for-profit colleges ranked among the worst in preparing students for decent-paying jobs that allow graduates to pay back their student loans.
The study looked at three values: the repayment rate of graduates paying back their loans, the total debt-to-annual-earnings ratio and debt-to-discretionary-earnings ratio. Of the 3,695 educational programs scrutinized, 193 programs had failed all three measures – all of them in for-profit colleges.
What was worse is that a mere 5 percent of educational programs subjected to the ED’s regulations had debt measures in place to disqualify students from receiving federal aid.
This is the result of additional regulations on “gainful employment” that were designed specifically to address issues where for-profit colleges took in huge swathes of federal aid while having the highest student loan default rate among other higher education sectors.
All these numbers and results, however, are purely for informational purposes only. The government will begin enforcing the rules over the next several years, giving the underperformers a chance to redeem themselves over that span of time.
Even so, colleges will face increased pressure from these regulations come fall when the federal government really starts keeping track of program performance.
Programs would be in trouble if more than 65 percent of their graduates are delinquent in paying loans and if students graduate with debts higher than 30 percent of their discretionary income or more than 12 percent of their total annual earnings. If they don’t remedy these problems in three years starting fall, then they will find themselves disqualified from federal aid as early as 2015.