RENEE MONTAGNE, host:
After months of delay, the Department of Education today puts out new rules that could shut down some for-profit colleges and universities. The Education Department says the regulations are meant to cut off federal aid to schools where many graduates are not earning enough to repay their loans. The administration did soften the rules in response to industry pressure. But as NPR's Larry Abramson reports, this has not ended the debate.
LARRY ABRAMSON: Before he announced the rules, Education Secretary Arne Duncan paid tribute to the important role played by for-profit schools, such as the University of Phoenix. He said they improve access to higher education, one of the administration's key goals. But then he said the industry relies heavily on government-backed student loans, and so the government has to police those funds by making sure that graduates are gainfully employed.
Secretary ARNE DUNCAN (Department of Education): We feel an obligation to impose some level of accountability. There are also bad actors who recruit aggressively and exploit students, signing them up for loans they can't pay back, and enrolling them in programs that will not lead to jobs.
ABRAMSON: So now, if a career education program cannot show that about a third of its students are able to start a career and repay their loans, the government could say, sorry, no more federal loans for you.
That could shut down many career programs, which get up to 90 percent of their revenue from federally-backed student loans. The industry has been screaming that this is unfair, so the administration compromised. They postponed the enforcement date. For-profit schools won't really feel the hammer come down until 2015, and they will get three strikes before they are out.
But Harris Miller of the Association of Private Sector Colleges and Universities says the department just doesn't have the authority to tell for-profit schools, you are too expensive.
Mr. HARRIS MILLER (Association of Private Sector Colleges and Universities): And that's a form of price fixing. It allows the Department of Education to tell a school, if you want to continue to receive Title Four funds, you have to lower your prices.
ABRAMSON: Title Four is a term for government loans.
Members of Congress helped fan this debate. They held hearings charging that the industry was exploiting students who borrow more than twice as much in loans as students at traditional schools.
Other members took the other side, saying the department was picking on schools that take the neediest students. The House actually voted earlier this year to block the rules, but the measure never received final approval. Now Congressman Rob Andrews, Democrat from New Jersey, is indicating it might be time to try again.
Representative ROB ANDREWS (Democrat, New Jersey): I have no opinion on whether the department has the authority. I'll leave that to the lawyers. But I do think Congress has the authority to define gainful employment, and we should exercise our legislative prerogative to do that.
ABRAMSON: If Congress does not step in, the for-profit industry has in the past threatened to go to court. For now, the industry says it wants to study the rules and see if it agrees with the administration's assessment that about 5 percent of for-profit programs could eventually lose access to federal loans.
If all the acts in this three-ring circus aren't entertaining enough for you, keep an eye on the stock market today. For-profit universities experienced huge increases in stock prices in recent years as students signed up in droves. More recently, prices plunged as the government threatened to crack down.
Will investors see these rules as a reason to run away? Or will they say that wasn't so bad, it's time to return for a second bite at these growth stocks? If you know the answer, you might be able to make a few bucks.
Larry Abramson, NPR News.
MONTAGNE: For more details on the Education Department's new rules, go to our website, NPR.org.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.