For-Profit Colleges to See Effect of Proposed Rules (Correct)
(Corrects quotation attributed to Argosy University official in the last paragraph of article published Aug. 12.)
The U.S. Department of Education will release data tomorrow showing how its proposed requirements for student-loan eligibility would affect for-profit colleges.
The department will provide information taken from a single U.S. state on former students’ earnings and a description of how the agency formulated its regulations, said David Bergeron, deputy assistant education secretary for policy, planning and innovation in the Office of Postsecondary Education, on a conference call with company officials and analysts. Figures showing the percentage of former students who are repaying their loans at individual for-profit colleges will also be released.
Apollo Group Inc., based in Phoenix, and Pittsburgh-based Education Management Corp. are among the for-profit colleges that received about $26.5 billion in U.S. government grants and loans in 2009. The department’s proposal is intended to optimize the use of taxpayer funds and ensure that students get maximum benefit from education programs, said James Kvaal, deputy undersecretary of education, said yesterday on the call.
The information will allow “careful analysts to arrive at the impact of the rule” on individual colleges, Bergeron said.
For-profit colleges came under fire after a government report showed their recruiters misled to students to boost enrollment. Senator Tom Harkin, an Iowa Democrat who has held two hearings on for-profit colleges, has said he plans to hold more before the end of the year, and has demanded information from 30 companies.
Shares Decline
Apollo Group fell 31 cents, or less than 1 percent, to $40.99 at 11:09 a.m. New York time in Nasdaq Stock Market composite trading. The company lost 38 percent in the 12 months before today. Education Management rose 25 cents, or 2 percent, to $13. Before today, the stock had dropped 29 percent since it began trading Oct. 2.
An index of 12 education company stocks declined 0.7 percent after falling 18 percent in the 12 months before today.
“Anything that provides more information is going to be helpful,” said Harris Miller, president and chief executive officer of the Career College Association, a Washington-based industry group, in a telephone interview. “Now at least we understand this will allow our members to get down to the nitty gritty and see the impact on their institutions and on their students.”
The department’s proposed rule would require for-profit colleges to show their programs improve graduates’ job prospects without saddling them with crushing debt in order to retain access to government aid. Companies can keep eligibility in a variety of ways. They can demonstrate that 45 percent of former students are repaying loans, or that former students’ debt for loans incurred in the school’s programs doesn’t exceed 8 percent of total income or 20 percent of “discretionary income.”
Checking Incomes
When the rule goes into effect, the department will work with the Social Security Administration to gather data on incomes among former students of the colleges, Bergeron said.
A government website that collects comments on agency proposals contains dozens of letters entries from students and officials at for-profit colleges saying that the Education Department’s regulations will limit opportunities.
The rule asks students to “put their dreams on hold to hope for a time when schooling is more progressive and affordable,” said Michael Falotico, campus president of Education Management’s Argosy University in Chicago, in a comment on the rule to the Education Department.
To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net.
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