Dive Brief:
- The U.S. Department of Education has released its “gainful employment” rules, which will require career training colleges to show that their graduates aren’t overly burdened with student loan debt.
- While aimed primarily at for-profit colleges, the rules also apply to non-degree programs at nonprofit colleges.
- The rules aren’t as stringent as what the department proposed in March, the Washington Post reports.
Dive Insight:
Consumer advocates say the new rules are too lax; for-profit college industry representatives say they’re unfair. Per the rules, a typical graduate of the programs in question can’t have student loan payments that are more than 20% of discretionary income or 8% of total earnings. If a program has graduates with loan payments of 20% to 30% of discretionary income, or 8% to 12% of total income, it’s in a warning zone — and if it’s the zone for four consecutive years, it loses federal aid. If the program’s graduates have loan payments of more than 30% of discretionary income or 12% of total income, it’s deemed failing and loses federal funding if it stays in the failing category for two out of three years.
What isn’t counted are the students who don’t graduate, or a student loan default rate, which would have made the rules tougher to comply with. Based on current numbers, 1,400 programs would fall into the failing category, according to the Department of Education. The new rules take effect in July 2015.