The Obama administration is preparing to crack down on some for-profit colleges, requiring them to do a better job of preparing students for work or risk losing access to federal student aid.
Newly proposed regulations expected from the Education Department on Friday are designed to stop the flow of federal funds to poor-performing colleges. Students at most for-profit colleges rely heavily on federal loans and grants, and few programs could survive if the flow of federal money were ended.
Under the new regulations, programs would have to meet accreditation requirements and state or federal license standards, agency officials said Thursday.
Colleges would have to show that most of their graduates are getting jobs and paying back their loans on a timely basis and make public more information about their own cost, debt and performance.
"We want to shine a spotlight on the career programs that are doing good work, while making sure that consumers are aware of those that are not," Education Secretary Arne Duncan told reporters.
The announcement is another of President Obama’s job and career-related initiatives this year. Like his other plans, this one relies on his administrative authority.
After Friday, the proposed regulations will go through a comment period. The Education Department hopes to complete the rules this year.
Although standards would apply to all colleges that hold out the promise of what the government's rules define as "gainful employment," the targets are for-profit institutions that promise specific job training and certification.
Students at those schools represent about 13% of the total student population, but they account for about 31% of all student loans and nearly half of all loan defaults, the Education Department said.
Recent data suggest that about 22% of student borrowers at for-profit colleges defaulted on their loans within three years, as opposed to 13% of those at public colleges, an administration statement says.
In 2012, a federal judge struck down an earlier attempt by the Obama administration to impose so-called gainful employment rules on for-profit colleges that officials believed were underperforming.
The judge found one of the regulations - requiring programs to show that at least 35% of their graduates are repaying their loans - to be arbitrary.
Under the revised regulations, programs with the worst outcomes, including high default rates on loans, would be disqualified from participating in federal student aid programs, according to a release from the Education Department.
The rules are meant to protect students from ending up saddled with debt, holding professional certificates that are worthless, Duncan said in previewing Friday’s announcement.
"The proposed regulations address growing concerns about unaffordable levels of loan debt for students enrolled in these programs by targeting the lowest-performing schools, while shining a light on best practices and giving all programs an opportunity to improve," he said.
The gainful employment requirement came under attack from Steve Gunderson, president and chief executive of the Assn. of Private Sector Colleges and Universities.
"The gainful employment regulation would deny millions of students the opportunity for higher earnings," he said in a statement. "The government should be in the business of protecting opportunity not restricting it."