Are For-Profit Schools Just a Scapegoat?

in Education by Candice Shakur — June 8, 2011 at 12:05 pm | 2 comments

New Regulations on For-Profit Schools – A Setup for Failure?

 

As I’m sure you’ve heard by now, the US Department of Education finally released its regulations on for-profit schools and other career-training programs. It’s worth a look if you haven’t read it yet.

 

Federal Requirements for Schools

In the mean time, the gist is that starting in 2015, all for-profit schools will have to meet certain guidelines or they’ll risk losing access to federal funding.  These guidelines include:

 

• At least 35% of the school’s former students must be repaying their loans.  To be counted in that 35%, a student’s loan balance must decrease by at least $1.00 per year.
• Students’ annual loan payment can’t be more than 30% of their average discretionary income.
• Students’ loan payments for the whole year can’t be more than 12% of the typical graduates’ annual income.

Consequences for Failure

If a school fails to meet the guidelines, then there are consequences .  If a school fails to meet 2 of the requirements within 3 years, then it has to tell its students that “their debts may be unaffordable, the program may lose eligibility, and transfer options exist.”

 

One thing to know about education policy is that nothing is new.  Well, a few things are new.  Most of the reform ideas that politicians tout are ideas that were tried a few decades or even centuries ago.  And, well, I can’t really fault anyone for that; there are only so many ways that people are willing to let their schools run. But as a result, America insists on recycling old reforms instead of actually investing in anything new.

 

What’s Old is New Again

Federal requirements look a lot like No Child Left Behind

I bring all this up because the Federal Government’s response to for-profit schools is a lot like their response to failing public schools.  Remember No Child Left Behind (NCLB)? Part of its strategy was to inform parents when their children’s schools were failing.  And beyond just saying “Hey, this school isn’t serving your kids well,” they were to be given the opportunity to withdraw their kids from the failing school and enroll them in a passing one.

 

We don’t have to get into all the details right now (like what happens when you live in a neighborhood like mine?  One where literally all of the public schools are failing.), but NCLB is important to consider because, as you might remember, the biggest complaint was that it was an unfunded mandate.  This meant that while the schools were being asked to perform miracles, they weren’t given any extra resources to perform them.  It’s hard to turn water into wine, when you don’t have any water!

 

Looks like a setup!

Similarly, the for-profit colleges are going to be in a bind.  How can they be held accountable for their students’ ability to pay back loans when the unemployment rate is so high ?  How can they ensure that their students will have loan payments equal to or less than 12% of their annual income, when the cost of living has increased while wages have stayed the same or even decreased?

 

Students from public or private colleges are in the same predicament, but their schools are not being held to the same strict standards.  As was noted in the October 2010 publication, Student Debt and the Class of 2009:

 

In the current economic climate, recent college graduates who borrowed for their education face unique challenges in paying back their student loans. The unemployment rate for young college graduates rose from 5.8 percent in 2008 to 8.7 percent in 2009, the highest annual rate on record.

 

So it seems that all recent graduates are likely to struggle financially, at least for a little while.  So does that mean that some schools should be held accountable for the state of the economy?  I don’t know about you, but it seems like a setup to me.  Given our economic situation, is there any way these schools will be able to meet these requirements?

Can you think of an answer to this dilemma? It looks like the government could use a few thoughtful suggestions. Feel free to share your ideas in the comments below!

 

Tags: federal for-profit schools loans students