For-Profit Education Regulations

Here are apparently a couple of the new regs for-profit colleges are expecting:

One proposed rule, which is expected to be finalized this spring, will restrict students from using federal financial aid to pay for programs that rack up excessive loan debt but train students for occupations with relatively low entry-level salaries.

A second rule, which will go into effect this summer, will close loopholes that allowed admissions counselors to be compensated based on how many students they signed up

The first rule is particularly interesting to focus on, especially given that they do not apply to government-run schools.  This means that if you want to go to UCLA and run up loads of debt in economically dead-end majors like women's studies or art history, you are still free to do so.  But go forbid you want to study to be a nurse or a teacher at the University of Phoenix.  This from the CEO of Apollo, the parent company of University of Phoenix

some of the trade-school-type programs may be more vulnerable because of gainful employment (the anticipated federal rule about debt and entry-level salaries). . . . Gainful employment will cause programs, in areas such as nursing or teacher education or law enforcement, (for) for-profits not to be able to offer them . . . (because the federal formula) uses first-year salaries.

I can tell you my first-year salary for what I wanted to do wouldn't have qualified. It takes time.

Two things you can expect from any set of regulations.  1) Large companies will eventually benefit, because the compliance costs will weed out smaller companies and deter future startups.  2) Innovation will be reduced, as certain established business models and practices will become safe harbors under the rules, adding risk to anyone wishing to try an additional approach.


  1. smurfy:

    I had a friend who decided to go to Stanford for a Masters in education. At the time, it stood out to me as a poor educational investment given the notoriety of entry level teaching salaries and the notoriety of Stanford tuition, that is until she became principal of her Elementary school, at 33 years of age. Some people know they got it and it's damn hard to craft a formula to select good risks, like how my FICO currently says fuck all about my likely hood of defaulting on the mortgage.

    Still, hard to slam the government for finally making some sort of effort to make sound investments. Regarding the public vs private angle, it's somewhat generous of the government to loan money to students at private institutions at all considering they own the competition. If the U of Phoenix is so confident in the long term potential of their degrees, why aren't they fronting the loans*?

    *yes I realize my previous sentence answered that question

  2. Craig:

    If this rule applied to public schools, almost all law schools would be cut off.

  3. John David Galt:

    Just wait until ObamaCare fully kicks in. Studying medicine will be an even worse idea than studying law. But maybe it will be a boon to the air travel industry, as thousands of doctors relocate to poor countries so they can continue to charge profitable rates to Americans.