Education Department Sets Guidelines for For-Profit ‘Trial’ Admissions

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The recently announced gainful employment rules aren’t the only new projects the U.S. Education Department has in store for for-profit colleges.  Education Undersecretary Martha Kanter testified before the Senate Health, Education, Labor and Pension Committee this morning that the department is releasing guidelines for trial programs that allow new students to try out for-profit schools for short periods without incurring any debt and is also working on limiting the amount of money students can borrow to what they really need for school.

Education Secretary Arne Duncan was scheduled to testify at the fifth of Committee Chairman Tom Harkin’s series of hearings on for-profit colleges, but cancelled several appearances for this week because of illness.

Trial programs and debt limits have been hot-bottom topics during the year-long (and ongoing) battle over the implementation of the department’s gainful employment rules – which is supposed to insure that students get the education they pay for.  Critics of for-profit colleges have alleged that the schools have recruited students who clearly were not ready for or able to benefit from college courses, prompting them to drop out in their first weeks of classes, saddling them with college loan debts and no significant higher education.

Both the Apollo Group, which operates the largest for-profit group of colleges, mostly under the name University of Phoenix, and the Washington Post’s Kaplan Higher Education division have already initiated such trial programs as a way to deter criticism of recruiting practices.

This afternoon, the department issued a “guidance” letter spelling out how such conditional or trial programs would work.  Under the guidance, a student could attend a program for four weeks as a trial.  If the student dropped out during that period, he or she would not have incurred any debt.  At the end of the four-week period, the student would have to declare his or her intention to continue the program, the school would accept them as a regular student and they would become eligible – assuming he or she meets other criteria – to receive federal student financial aid.

If, after being accepted as a regular student and obtaining financial aid, the student decides to drop out, the amount that might be refunded would be figured under existing guidelines.  During the trial period, the school would have to make certain that the student had books and other tools and materials required for the course, for which the schools would be allowed to charge a small fee.

The department also announced that soon it would release similar guidance on a program to limit the amount of student loans.  Under current regulations, a student who qualifies for a student loan can borrow more than the amount needed for the actual college costs, such as for child care or transportation.

The for-profit education sector has complained that too many students borrow too much money, making it more difficult for the schools to remain within the 90/10 rule, which requires the school to obtain at least 10 percent of its revenue from other than federal student aid programs. Other critics say borrowing too much money is the real reason that students end up with so much student debt.

Wade Henderson, chief executive officer of the Leadership Council on Civil and Human Rights, told the Senate committee in prepared testimony that the way loans are described by students by for-profit colleges means many students don’t truly understand the amount of money that they are borrowing, so the terms.

“We are alarmed, however, about mounting evidence that the for-profit sector is engaging in predatory lending practices, overcharging for their product, failing to deliver on programs leading to ‘gainful employment,’ leaving large numbers of students saddled with enormous debt, and leaving taxpayers holding the bag,” Henderson said.  For-profit colleges are a viable option for many students who may not have very many other options, but that doesn’t give these businesses the right to exploit those they serve.

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