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March 14, 2014

As policy makers work to reign in student debt, there’s been a lot of attention on for-profit colleges like the University of Phoenix and Kaplan University.

Thirty-two states, including Massachusetts, have endorsed new regulations that would require all of these schools to provide more accurate information. Now, the Obama administration is taking steps to further regulate for-profits.

The new regulations would require for-profit colleges to do a better job of preparing students for employment, or risk losing federal student aid dollars.

During a trip to Boston this week, US Education Secretary Arne Duncan said higher education should fulfill its social contract, and offer economic mobility to all citizens.

“What we want to do is make sure that when people graduate from school that they’re not overly burdened," Duncan said during a visit to a Boston area school. "What we want to do is make sure that people can follow their hearts –people can follow their dreams. And the overall debt is a real concern and we have to work together to bring it down."

According to The Department of Education, most students at for-profit left with federal student loan debt, while the majority of students at community colleges did not borrow. And of the for-profit programs the Department analyzed, 72 percent produced graduates who on average earned less than high school dropouts. 

So here’s how it would work.

Starting in 2016, colleges and universities would be singled out if more than a third of their graduates are unable to pay back their students loans.

“This rule is designed to identify those programs that are doing a good job and target those that are failing both students and taxpayers," Duncan said during a press conference Friday.

Schools would also need to disclose information about costs, debt and performance. The idea is that if that information is more transport, students can make better financial decisions.

If programs fail to meet these new regulations, the federal government would cut off financial support to the university.

Suzanne Mettler is a government professor at Cornell University and the author of Degrees of Inequality: How the Politics of Higher Education Sabotaged the American Dream.

According to Mettler, for-profit colleges, and the federal funds that support them, are some of the biggest culprits in education that actually reinforces income inequality in America.

“I think the low-hanging fruit here, the problem that needs to be solved and solved quickly, is the problem of for-profit colleges receiving so much government money with so little accountability,” Mettler said.

Mettler points out that for-profit institutions target a particular class of students.

“These schools cater particularly to people who would be probably the first in their family going on to advanced education, they tend to be low-income people,” Mettler said.

Supporters of career colleges, on the other hand, argue that for-profit schools can still play a positive role in higher education. They say these new regulations would actually harm low-income students by making it more difficult to get aid.

An earlier draft of the regulation failed in the courts, and higher education experts predict the latest version will face a lawsuit.

for-profit, increasing access and success, new business models

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