For-profit colleges that don’t produce graduates capable of paying off their student loans could soon face the wrath of the federal government.
Schools with career-oriented programs that fail to comply with the new rule being announced Thursday by the Obama administration stand to lose access to federal student-aid programs.
To meet these “gainful employment” standards, a program will have to show that the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of total earnings.
The Education Department estimates that about 1,400 programs serving 840,000 students won’t pass. Ninety-nine percent of these programs are offered by for-profit schools, although affected career training programs can come from certificate programs elsewhere in higher education.
Education Secretary Arne Duncan says the department wants to make sure that programs that prey on students don’t continue abusive practices.