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For-Profit Colleges Face New Rules

The Department of Education released its final rules governing career education programs offered by for-profit colleges. The schools must show that students who earn degrees in these programs will make enough money to pay back their federal student loans. The schools have lobbied hard against the new regulations because they say many programs will be forced to shut down, and students, particularly minorities, will be hurt.

Transcript

MICHELE NORRIS, host:

The U.S. Education Department today cracked down on for-profit colleges. It released new regulations that will require them to make sure their students earn enough money after they graduate to pay back their loans. The rules are part of an effort to get tough on schools that rake in lots of money but leave students with crushing debt and poor job prospects.

As NPR's Claudio Sanchez reports, students aren't yet sure if the new rules will help.

CLAUDIO SANCHEZ: A handful of students in dark blue medical scrubs are taking a late afternoon break from classes at Everest College in Silver Spring, Maryland. They're all in their mid to late 20s, studying to become medical assistants. The seven-month course teaches them how to draw blood, take cultures and other tasks. The cost to students...

Mr. KERN SUTHERLAND(ph) (Student, Everest College): The whole tuition, $16,000.

SANCHEZ: Kern Sutherland, 25, is paying that $16,000 tuition with federal grants and loans, plus a private loan from Everest College, which is like a lender of last resort.

Mr. SUTHERLAND: I do think I'm getting my money's worth, but at the same time I'm worried that I'm not going to be able to get a job after everything's done.

SANCHEZ: Sutherland says a medical assistant's starting salary in the Washington D.C. area is between $29,000 to $35,000. But he says it's hard to find a job right now. Twenty-eight-year-old Kim Bailey(ph) knows that all too well. She graduated from Everest College eight months ago.

After you left here, did you get a job?

Ms. KIM BAILEY (Graduate, Everest College): No, I didn't.

SANCHEZ: Bailey came back to Everest College for a free refresher course. She's not sure she'll ever find a job as a medical assistant and now she wonders if picking this career was a good idea. Bailey is glad the U.S. Department of Education is scrutinizing for-profit schools like Everest.

Ms. BAILEY: The people in the office, to me they're like car salesmen because at the end of the day, they're going to get their money. So it's up to you, if you're going to stay or not or you're going to get out before you start getting billed and you start getting mail sent to you saying you got to owe this and owe that after the six months or whatever be the case may be.

SANCHEZ: As far as the U.S. Education Department is concerned, this is why it's tightening its regulation of for-profit colleges. Some are taking in billions of dollars through the federal student loan program and graduating students saddled with debt and degrees they cannot use. In a conference call with reporters yesterday, Education Secretary Arne Duncan called those schools bad actors that give all for-profit institutions a bad name.

Secretary ARNE DUNCAN (Education Department): This is not about gotcha. We're asking companies that get up to 90 percent of their profits and their revenue from taxpayer dollars to be at least 35 percent effective.

SANCHEZ: In other words, if by the year 2015, schools cannot show that roughly a third of the graduates are able to secure jobs that allow them to pay back their loans, they'll be banned from the federal student loan program.

Mr. KENT JENKINS (Corinthian College): There are some significant legal questions about whether the department has the authority to take this action at all.

SANCHEZ: Kent Jenkins, the spokesperson for Corinthian Colleges, Incorporated, which owns Everest College. Corinthian is one of the nation's biggest for-profit institutions. Jenkins says the new regulations will probably end up in court, but he agrees with Secretary Duncan.

Mr. JENKINS: Taxpayers should get their money's worth. Absolutely, our students should get their money's worth.

SANCHEZ: Jenkins says Corinthian schools have lowered their default rate from 21 to 12 percent and they're placing 70 percent of the graduates in jobs. Department of Education officials are betting that by the time the new regulations go into effect in July 2012, a majority of for-profit colleges will have followed Corinthian's lead.

Claudio Sanchez, NPR News Transcript provided by NPR, Copyright NPR.

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