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The U.S. Education Department on Thursday released final regulations requiring college programs to better prepare students for "gainful employment" or risk losing access to federal student aid.
The regulations, which apply to most degree and non-degree programs at for-profit institutions and non-degree programs at other institutions, are primarily aimed at for-profit college programs that saddle students with high debt and fail to prepare them for an occupation.
The new rules will ramp up over the next four years, giving colleges time to reform while protecting students from exploitative programs, according to the department.
“We're giving career colleges every opportunity to reform themselves, but we're not letting them off the hook because too many vulnerable students are being hurt,” Education Secretary Arne Duncan said in a statement.
To qualify for federal aid, the law requires that most for-profit programs and certificate programs at nonprofit and public institutions—including community colleges—prepare students for gainful employment in a recognized occupation.
Under the new regulations, a program would be considered to lead to gainful employment if it meets at least one of the following three metrics:
• at least 35 percent of former students are repaying their loans• the estimated annual loan payment of a typical graduate does not exceed 30 percent of his or her discretionary income• the estimated annual loan payment of a typical graduate does not exceed 12 percent of his or her total earnings
While the regulations apply to occupational training programs at all types of institutions, for-profit programs are most likely to leave their students with unaffordable debts and poor employment prospects, according to the Education Department. Students at for-profit institutions represent 12 percent of all higher education students, 26 percent of all student loans and 46 percent of all student loan dollars in default.
The median federal student loan debt carried by students earning associate degrees at for-profit institutions was $14,000, according to the department. More than a quarter of for-profit institutions receive 80 percent of their revenues from federal student aid.
Most students at community colleges do not borrow to pay for college, and few community colleges are likely to be sanctioned, according to the American Association of Community Colleges (AACC). AACC will soon provide an analysis of the regulations, which take effect July 1.
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