US House passes opposition amendment to key education rule

BANGALORE Feb 18 (Reuters) - The U.S. House of Representatives passed an amendment that would block the Department of Education from using funds to pursue the implementation of the proposed gainful employment rule that targets for-profit colleges.

The amendment was passed 289-136-1 in the House, controlled by the Republicans. Some Republicans have voiced support for the for-profit colleges despite allegations that many of the schools poorly educate students while saddling them with high levels of debt.

The S&P 1500 Education Services Sub-Industry index closed up 4.64 percent on Friday.

The proposed gainful employment rule effectively ties federal aid to colleges proving they are doing a better job of preparing students for work.

Programs that fail to offer good job opportunities would stand to lose federal funding -- the primary source of income for many colleges.

BMO Capital Markets analyst Jeff Silber said the passing of the amendment showed the broad support the industry and others have gained against the rule.

However, the schools face a tougher battle getting a break in the Senate, which is controlled by Democrats.

For-profit colleges have been lobbying heavily over the last few months to either get the rule scrapped or at least weaken it before a final version comes out.

The gainful employment proposal was delayed last year after it received a large number of comments calling for delaying the rule. It is now expected to be finalised in early 2011.

The gainful employment rule is part of a larger package of rules aimed at making for-profit colleges more accountable for the $145 billion federal funds they get for student aid.

For-profit colleges have been criticized by the Obama administration for overcharging students, burdening them with debt and not fully preparing them for the workplace. (Reporting by A. Ananthalakshmi in Bangalore; Editing by Roshni Menon)