Obama Administration's New Regulations on For-Profit Colleges Draw Backlash

U.S. Education Secretary Arne Duncan visits with students during a visit to Dayton's Bluff Achievement Plus Elementary School Tuesday, May 31, 2011 in Minneapolis. (AP)

The Obama administration's crackdown on for-profit colleges is drawing backlash from conservatives and liberals alike.

On Thursday, the Education Department released the final regulations aimed at what are known as career or vocational schools, which train medical technicians, chefs, welders, electricians and the like. The regulations will cut federal aid to programs that don't lead to "gainful employment."

"These new regulations will help ensure that students at these schools are getting what they pay for: solid preparation for a good job," Education Secretary Arne Duncan said. "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."

Under the regulations introduced Thursday, a program would meet standards if at least 35 percent of former students are repaying their loans and the estimated annual loan payment of graduates doesn't exceed 30 percent of their discretionary income or 12 percent of their total earnings.

The first year programs would be deemed ineligible is 2015.

Progressive groups say the new regulations aren’t strong enough, while others say they go too far.

"Given the overwhelming evidence that the worst for-profit colleges are abusing students and taxpayers, the rule isn't strong enough, but it's still an important reform that could, over time, help millions of students," said David Halperin, director of Campus Progress, the youth arm of the Center for American Progress.

"We believe that, collectively, the rules issued by the administration, ongoing investigations by state attorney general, and increasing scrutiny by Congress and the media will ultimately compel for-profit schools to clean up their act or else shut their doors."

The National Black Chamber of Commerce called for Congress to derail the implementation of the gainful employment rule because it says it unfairly targets only for-profit schools, doesn't address the excessive cost of higher education and it may be illegal.

"It is the result of a biased rule-making process that essentially targeted only one sector of post-secondary institutions," Harry Alford, president chief executive of the chamber, said in a statement. "Moreover, it is beyond the department's legal authority to regulate in such a broad, new policy-making fashion."

For-profit students represent 12 percent of all higher education students, 26 percent of all student loans and 46 percent of all student loan dollars in default, according to the Education Department. More than a quarter of for-profit schools receive 80 percent of their revenues from federal student aid.

"While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not," Duncan said. "This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole."

A half dozen Democratic lawmakers blasted the rule — Reps. Alcee Hastings of Florida, Carolyn McCarthy of New York, Donald Payne of New Jersey, Edolphus Towns of New York, Tim Holden of Pennsylvania and Ted Deutch of Florida.

"It is deeply troubling that an administration supposedly committed to increasing college completion in the United States would propose a regulation that restricts minority access to higher education and limits job opportunities for those who need them most," Hastings said.

The Heartland Institute also ripped the rules.

"Attacking the industry most responsible for popularizing higher education among the disadvantaged seems to be at odds with the Obama administration's goal of getting more kids into college," said Marc Oestreich, a legislative education specialist at the institute.

Sen. Dick Durbin, the No. 2 Democrat in Senate, also didn't give the rule a ringing endorsement.

"This rule may stop the worst violators among the predatory for-profit schools but it will not protect thousands of young students who are being burdened with debt by many worthless diploma mills," he said in a written statement. "If we are serious about protecting taxpayers and students, we should view this rule as the starting point."

Randi Weingarten, president of the American Federation of Teachers gave the rule a lukewarm reception.

"While this rule is a step in the right direction – accomplished amid intensive lobbying against it – there is more work to be done," she said.