As of July 1, 2015, career and vocational programs are facing tougher regulations that have been years in the making. The new so-called “gainful employment” rule is meant to crack down on programs that load students up with debt for courses that don’t lead to decent jobs. The rules especially target for-profit colleges, which often make close to 90 percent of their revenue from taxpayer dollars.
A career education program could become ineligible for federal student aid if typical graduates have to spend more than 20 percent of their discretionary income paying off their loans, or more than 8 percent of their total income.
“It’s designed to ensure that taxpayer dollars don’t fund career education programs that consistently leave students with debts they can’t repay,” says Pauline Abernathy with the Institute for College Access and Success.
In anticipation of the new rules, Abernathy says some colleges already have cut failing programs, reduced tuition and improved job placement.
Some schools will also raise admissions standards, says Robert Kelchen, assistant professor of higher education at Seton Hall University. Earlier this week, the University of Phoenix, one of the largest for-profit colleges, announced it would introduce some academic requirements for its degree programs.
“If a student can barely get through the program and doesn’t seem to be a good bet to get employment, that’s the kind of person that the college might want to discourage enrolling,” Kelchen says.
Failing programs will have a chance to improve before the money gets cut off.
Here is a breakdown of how the numbers play-out: