White House to Withhold Funding for For-Profit Colleges

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Facts

  • The US Dept. of Education announced a new rule Wednesday that will withhold federal funding from for-profit colleges and all non-degree programs that consistently leave graduates with low-pay or unaffordable loans. The measure, called a 'Gainful Employment' rule, will be officially published on Oct. 10.1
  • The policy, which will take effect on July 1, 2024, will require schools to prove that certain programs will be able to help graduates afford their student debt payments and make more money than an adult in their state who didn't go to college. If a school cannot do so, it must give a warning to prospective students.2
  • If a school or program fails both required metrics two years in a row, the institution could lose access to federal financial aid, the first penalties of which will begin in 2026. The agency estimates that about 400 graduate programs that enroll roughly 120K students would be subject to the new disclosure requirement.3
  • The Department also estimates that about 1.7K programs would currently fail to meet the thresholds set forth in the rule, adding that while many public and private nonprofit colleges offer non-degree programs, very few would fall short. Citing the opposite for traditional public and nonprofit colleges, the rule will not apply to bachelor's degrees and most graduate programs at those schools.2
  • In total, the Department says the rule will protect around 700K students per year who would otherwise enroll in one of the 1.7K underperforming programs. However, cosmetology programs argue two-thirds of their certificates could fail the requirement due to cosmetologists not reporting their full income to the IRS, and dental support services and massage therapists say it could affect one-third of their certificates.1
  • By redirecting students to higher-paying fields of study, The Century Foundation found that the new rule will raise the annual earnings of the typical financial aid recipient by $3.4K, with these figures being $5K in some states. With respect to students specifically transferring out of programs that fail the gainful employment test, their annual earnings will jump by 45%, from $21.6K to $31.5K.4

Sources: 1NBC, 2NPR Online News, 3Insidehighered and 4The century foundation.

Narratives

  • Narrative A, as provided by New america. Though it's taken far too long to materialize, this policy is a huge win for both students and taxpayers. Through false claims suggesting that the new rule would harm marginalized groups, the higher education lobby has for decades blocked federal attempts to guide vulnerable students through the expensive world of university studies. This lie will be exposed after students begin switching from dead-end industries to profitable ones.
  • Narrative B, as provided by Career. The debt-to-earnings formula cited by the government to push its gainful employment rule is flawed, including failing to include factors other than a school's quality that affect someone's earnings. Schools — even for-profit ones — want their students to succeed as much as anyone, and this rule will only hinder student success.