New rule seeks to weed out college programs that leave grads with low income, high debt

WASHINGTON, D.C. (AP) - Under a proposal released Wednesday by the Biden Administration, federal funding would be cut to college programs that underpay graduates or bury them in debt. However, the rules would only apply to for profit colleges and a small fraction of traditional university programs.

The Education Department calls it a major step towards accountability for colleges across the country. The measure is designed to eliminate low-performing programs, and assure students that the tuition cost will pay off over time.

The rules are designed to help students get the most out of their postsecondary investment, and achieve more of the American Dream. Education Secretary Miguel Cardona made this statement in a press release.

The scope of the program is said to be too narrow for most students.

It is known as gainful employment and revives a policy from the Obama administration that was dismantled before it could take full effect by the Trump Administration. The law was passed during a federal crackdown against for-profit colleges, which led to the closures of Corinthian Colleges as well as ITT Technical Institute.

The new proposal, like the Obama rule would apply to all for-profit college programs, but only certificate programs offered by traditional universities. Opponents claim it is a double standard that could lead to the demise of hundreds of programs in for-profit colleges, while other programs would be left untouched even if students are buried under debt.

The rule unfairly targets proprietary institutions and fails in its attempt to address the unique challenges faced by students and communities who benefit from career-oriented programs, said Jason Altmire. He is president and CEO of Career Education Colleges and Universities.

Two tests would be used to evaluate the effectiveness of college programs.

First, we would look at whether graduates of a particular program have a high student loan debt relative to their income. The first test would check whether the graduates of a program have a lot of student debt compared to their income.

Second, if at least half the graduates of a particular program earn more than adults with only a high-school diploma in their state.

Students who fail to pass at least one of the tests will be warned that their federal funding is at risk. Federal aid would be withdrawn from those who fail the same test two times in a three-year span. This is a death penalty for many programs, particularly at for-profit schools that depend heavily on students using federal financial aid to cover tuition.

According to the Education Department, this rule will help approximately 700,000 students enroll in one of 1,800 colleges that are low-performing.

Many for-profit colleges programs are expected to be affected by the rule. It would mainly apply to certificate programs at nonprofit colleges that are usually geared towards career training. This would not include bachelor's or graduate degrees.

The policy is aimed at the most risky programs, say supporters. For-profit college students tend to borrow more money and default at higher rates. It is a blow to the industry of for-profit colleges, who had previously said they would support it if the measure was applied equally to all schools.

The federal government will need to collect and evaluate public comments before the final rule is published. Republicans in Congress will be outraged by the rule, which they have described as an unfair attack on the entire for profit college industry.

The proposal comes as confidence in higher education is waning. Experts attribute the decline in college attendance to rising tuition fees, a strong labor market, and the failures of pandemic education.

In an effort to restore public confidence, the Education Department is exploring ways to hold colleges accountable to the results of their graduates.

Separately, the agency is working on a listing that will identify low-value courses across all colleges. The list would be made public as a student resource, without any financial penalties.

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