I’ll have to learn more about the Education Department’s effort to subject vocational education programs to tougher scrutiny. What I find interesting is that it has been billed as regulation of for-profits, as in the headline of Tamar Lewin’s article on the subject in yesterday’s New York Times.

In the last year, Senate hearings and news reports about abuses in the for-profit education industry have documented how millions of low-income students borrow heavily for training programs that often do not help them land good jobs. Students at for-profit colleges make up 12 percent of those in higher education, but almost half of those who default on student loans.

This definitely strikes me as cause for concern, yet I’d also want to know about the half of students at public and non-profit schools who default. Are they evenly distributed through the 88 percent of schools that fall into either category, or are they concentrated in a smaller number of poorly-performing public and non-profit schools?

Although the new rules are a particular threat to for-profit schools, which charge high tuition for vocational programs, they apply broadly to career education, including certificate programs at public and nonprofit colleges, which the Higher Education Act requires to “prepare students for gainful employment in a recognized occupation.”

The fact that the new rules apply to all institutions offering career education is encouraging, and it addresses one of my central concerns.

On Wednesday, department officials estimated that 5 percent of the 13,155 for-profit programs covered by the rules, and 1 percent of the 42,290 public and nonprofit programs, would lose their eligibility for student aid.

One assumes that there are other variables at play, e.g., what percent of programs that have been in existence for ten years of less would lose their eligibility? And what about the composition of the student body?

A program would lose eligibility for federal aid only if: fewer than 35 percent of its graduates are repaying principal on their student loans three years out, and, for the typical graduate, loan payments exceed 30 percent of discretionary income as well as 12 percent of total earnings.
“We’re asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective,” Mr. [Arne] Duncan said.
The new rules take a “three strikes and you’re out” approach. The first time a program failed to meet all three criteria, it would have to report by how much it missed the benchmarks, and outline what it would do to improve. The second time, it would have to warn students that they may not be able to repay their debt and that the program could lose its eligibility. Only a third strike in four years would result in curtailing student aid.

This all seems reasonable to me, given that taxpayer dollars are on the line, though I’d be interested in hearing informed critiques of these rules and how we might improve them.