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The "gainful employment" rule unfairly targets
for-profit institutions and would disproportionately affect poor
students, said the report prepared by the Association of Private
Sector Colleges and Universities, a trade group representing the
colleges.
The U.S. Education Department rule would require for-profit
institutions to publicly disclose information including cost of
attendance, student loan default rates, and student completion
rates.
For their students to continue receiving federal financial aid,
the institutions must show that the estimated annual loan
payment of their typical graduates does not exceed 20 percent of
their discretionary income or 8 percent of their total earnings,
and that the default rate for former students does not exceed 30
percent. Tuesday was the last day for public comment on the
rule. The APSCU report, prepared by Northwestern University
economist Jonathan Guryan and Matthew Thompson of the consulting
firm Charles River Associates, said nearly 7.5 million students
over a decade could be denied higher education if the rule goes
into effect. For-profit colleges have already spent millions of
dollars fighting the proposed rule since its earliest version
was released in 2010. The debt-to-income ratio used in the rule
to determine continued eligibility for federal funding, APSCU
said, could unfairly cause certain schools or programs to fail
because it does not take into consideration that poor students
typically have to borrow more for college than their wealthier
counterparts. For-profit institutions tend to serve larger
numbers of minorities, low-income students and non-traditional
students such as single parents and veterans than traditional
colleges.
State and federal regulators have accused the institutions for
deceptive practices, including providing misleading information
and poor-quality education at excessive costs. They have also
criticized the institutions for having low completion rates and
graduates with high student loan default rates. According to the
U.S. Department of Education, students at for-profit colleges
represent 13 percent of the U.S. higher education population but
account for about 31 percent of all student loans and nearly
half of all loan defaults. APSCU said the regulation runs
contrary to President Barack Obama's goal of increasing the
number of college graduates. About 21.8 percent of programs in
for-profit colleges could fail the rule's test, causing 44.2
percent of students in those institutions to lose access to
postsecondary education, the report said. "It's going to be
discriminative," Guryan, one of the reports co-authors, told
Reuters.
(Reporting by Elvina Nawaguna; Editing by Jim Loney)
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