WASHINGTON May 27 Nearly half of students
attending for-profit colleges in the
United States could lose federal aid if the Obama
administration implements a new rule on public disclosure of the
schools' performance and earnings, according to a report
prepared for the colleges and released on Tuesday.
The "gainful employment" rule unfairly targets for-profit
institutions and would disproportionately affect poor students,
said the report prepared by the Association of Private Sector
Colleges and Universities, a trade group representing the
The U.S. Education Department rule would require for-profit
institutions to publicly disclose information including cost of
attendance, student loan default rates, and student completion
For their students to continue receiving federal financial
aid, the institutions must show that the estimated annual loan
payment of their typical graduates does not exceed 20 percent of
their discretionary income or 8 percent of their total earnings,
and that the default rate for former students does not exceed 30
Tuesday was the last day for public comment on the rule.
The APSCU report, prepared by Northwestern University
economist Jonathan Guryan and Matthew Thompson of the consulting
firm Charles River Associates, said nearly 7.5 million students
over a decade could be denied higher education if the rule goes
For-profit colleges have already spent millions of dollars
fighting the proposed rule since its earliest version was
released in 2010.
The debt-to-income ratio used in the rule to determine
continued eligibility for federal funding, APSCU said, could
unfairly cause certain schools or programs to fail because it
does not take into consideration that poor students typically
have to borrow more for college than their wealthier
For-profit institutions tend to serve larger numbers of
minorities, low-income students and non-traditional students
such as single parents and veterans than traditional colleges.
State and federal regulators have accused the institutions
for deceptive practices, including providing misleading
information and poor-quality education at excessive costs. They
have also criticized the institutions for having low completion
rates and graduates with high student loan default rates.
According to the U.S. Department of Education, students at
for-profit colleges represent 13 percent of the U.S. higher
education population but account for about 31 percent of all
student loans and nearly half of all loan defaults.
APSCU said the regulation runs contrary to President Barack
Obama's goal of increasing the number of college graduates.
About 21.8 percent of programs in for-profit colleges could fail
the rule's test, causing 44.2 percent of students in those
institutions to lose access to postsecondary education, the
"It's going to be discriminative," Guryan, one of the
reports co-authors, told Reuters.
(Reporting by Elvina Nawaguna; Editing by Jim Loney)