New bid to shut down career-training programs
In a new bid to shut down career-training programs that leave students with low earnings and high debt, the Obama administration drew cries of foul Thursday, with for-profit schools saying the government overreached, and those schools' harshest critics saying it did not go far enough.
More than one-quarter of all the career programs that qualify for federal student grants, with some 840,000 students, would fail the new standard for "gainful employment" of graduates, if it were applied right away, federal officials said.
But it is uncertain what effect the rule, published Thursday, will actually have. No school would face penalties for at least three more years, well into a new administration that might take a different approach.
Under the new rule, a program would comply if its graduates' annual loan payments were, on average, less than 8 percent of their total income, or less than 20 percent of their discretionary income. If it were over those standards for four consecutive years, or over 12 percent and 30 percent for two years in a three-year period, the school would be barred from federal student aid programs — effectively a death sentence for the programs, because a majority of their revenue comes from federal student loans and Pell grants.