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For-Profit Colleges Lose Effort to Block Proposed Rules

April 12 (Bloomberg) -- Congressional supporters of for-profit colleges failed to block further regulation of the industry in a budget deal struck by Congress and the Obama Administration, lawmakers said.

The agreement made last week to avoid a government shutdown doesn’t include an amendment that would have thwarted the regulations, known as “gainful employment,” according to a statement yesterday by Republican Representative John Kline of Minnesota, chairman of the House education committee, who sponsored the proposal.

The regulations would tie for-profit colleges’ eligibility for federal student aid to graduates’ incomes and loan repayment rates. The Education Department, which is developing the rules, said last year that it will release them in early 2011. Education Secretary Arne Duncan should acknowledge “bipartisan will” to defeat the proposed changes, Kline said in the statement.

“Instead of facing regulatory roadblocks laid down by the Department of Education, students should have every chance to get the skills and training they need to succeed in the workplace,” Kline said.

Congress and attorneys general in four states are investigating the $33 billion for-profit college industry for its recruiting practices and use of government funds. Students at for-profit colleges default on federal loans at twice the rate of those at nonprofit public universities and three times the rate at private nonprofit colleges.

The Bloomberg For-Profit Education Index of 13 companies fell 2.3 percent at the 4 p.m. New York time close of U.S. markets. Apollo Group Inc., operator of the University of Phoenix and the biggest U.S. for-profit college, dropped 90 cents, or 2.1 percent, to $41.11 in Nasdaq Stock Market composite trading.

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net

To contact the editor responsible for this story: Jonathan Kaufman at jkaufman17@bloomberg.net

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