RENEE MONTAGNE, HOST:
Only a small percentage of the nation's college students attend for-profit schools, but those students are responsible for about half of all the student loan defaults in the U.S. Soon, those colleges will face a strict new regulation, and some education experts are using words like collapse and implosion to describe the state of the industry. We ask NPR's education blogger Anya Kamenetz to explain the new crackdown.
ANYA KAMENETZ, BYLINE: This new Department of Education rule, gainful employment, it really is meant to impose a new level of rigor on these for-profit colleges. It says that colleges that leave students unable to pay back their loans after they leave are really not going to be able to continue to get a lot of federal government student aid money, which they're so dependent on. And, you know, hand-in-hand with the Department of Ed has been a lot of action from the Consumer Financial Protection Bureau.
MONTAGNE: In a way, what's being measured here is how successful have these for-profits been in actually educating and getting jobs for things they promised their students.
KAMENETZ: That's exactly right. So, you know, there's still hundreds of thousands of current and former for-profit college students who say that their degrees are of dubious value and they're not succeeding in the job market. And so what a rule like gainful employment is meant to do is impose a little bit of accountability to say, you know, if you can't pay back your loans and your degree is not really worth a lot in the job market, then the college shouldn't be allowed to keep operating.
MONTAGNE: And you mention the Consumer Financial Protection Bureau. How did it get involved?
KAMENETZ: So the CFPB, befitting its mission, it's taken a real interest in student loans. So they sued Corinthian Colleges, which shut down last year, and they alleged that the Colleges were practicing predatory lending and illegal debt collection tactics. And they've also arranged for $480 million in private student loans from Corinthian students to be forgiven.
MONTAGNE: Also now, students are organizing to get their federal loans forgiven, even get the money back that they've paid off. Tell us about that.
KAMENETZ: Right. So one of the new factors in the current outlook for for-profit colleges is that there's a group of students organizing to say that they want their federal loans forgiven. This group called Strike Debt, out of the Occupy Wall Street movement, has signed on many, many students to say that they want the federal government to write off the loans that they've borrowed as a result of enrolling in Corinthian Colleges and alleging that these schools were fraudulent.
MONTAGNE: And Anya, is government enforcement the only reason that these colleges are having problems? I don't think so, right?
KAMENETZ: No, no. That's a very good point. I think part of this is simply market forces, too. You know, in the '90s and early 2000s, if you were a working adult who needed flexibility, a for-profit college might be your best or even your only option for an online degree. And enrollment then peaked in 2010 at two million students, almost one in nine college students. But today, they've got more and more public universities and nonprofit universities - Arizona State, Western Governors - and they're all expanding their online offerings into the tens of thousands of students, even 100,000 students, and they're marketing them nationwide.
MONTAGNE: The words collapse and implosion are pretty strong words when applied to these for-profit colleges, but how much are they true?
KAMENETZ: There is whole lot of factors that are lining up against for-profit colleges and you're seeing household names shutting down, going bankrupt. And the University of Phoenix, once the biggest name in the business, has lost half its students. So, you know, there's a lot of negative indicators on the horizon, and I think that we're going to be seeing a very different conversation going forward about the value of a degree program and how colleges should be expected to prove it.
MONTAGNE: NPR's Anya Kamanetz from NPR's Ed team, thanks very much.
KAMENETZ: Thank you, Renee.
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