October 30, 2014 / 4:05 AM / 5 years ago

U.S. education department gets tougher on for-profit colleges

Oct 30 (Reuters) - The U.S. Department of Education will introduce stricter regulations next year in its latest attempt to improve the job prospects of those graduating from for-profit colleges and universities.

Under new regulations unveiled on Thursday and effective July 1, for-profit colleges will be at risk of losing federal aid should a typical graduate’s annual loan repayments exceed 20 percent of discretionary income or 8 percent of total earnings.

This is lower than the current threshold of 30 percent of discretionary income and 12 percent of total earnings.

The U.S. for-profit education sector has faced tougher regulation ever since a series of government investigations in 2010 revealed high student debt, low graduation rates and poor job prospects for graduates.

For-profit institutions, including Apollo Education Group Inc, Corinthian Colleges Inc and DeVry Education Group Inc, have been struggling to attract new students.

“These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes,” U.S. Secretary of Education Arne Duncan said in a statement.

The department said it estimates about 1,400 programs serving 840,000 students, of whom 99 percent study at for-profit institutions, would not pass the new accountability standards.

“All programs will have the opportunity to make immediate changes that could help them avoid sanctions,” the department said in the statement, “but if these programs do not improve, they will ultimately become ineligible for federal student aid.” (Reporting by Ankit Ajmera and Sagarika Jaisinghani in Bangalore; Editing by Robin Paxton)

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