While many for-profit colleges promise increased earnings after graduation, evidence shows that students at the institutions default on federal loans at a significantly higher rate than their counterparts at public universities. Student advocates expected that the gainful employment rule would force the worst offenders in the career college industry to reduce their costs and increase their quality of education, or risk the loss of federal student aid dollars.
The final rule is a good first step, as CP’s Executive Director David Halperin said in a statement last month. But it’s not strong enough. “ A program can systematically fail to provide value to students and still be eligible for federal financial aid. Sixty-five percent of students from a program can fail to pay back their loans, and loan repayment from a school’s graduates can consume 30 percent of their disposable income, and the program will nevertheless remain eligible [PDF] for federal grants and loans,” said Halperin.