College & Workforce Readiness

Five Percent of For-Profit Career-Training Programs Fail Early Test

By Caralee J. Adams — June 26, 2012 1 min read
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The U.S. Department of Education today released data that show 5 percent of career-training programs don’t meet any of the three requirements of the new federal gainful-employment rule.

The regulations that measure students’ ability to pay back loans and make money after graduation apply to all career-training programs at public, for-profit and non-profit schools. But the only ones that aren’t meeting the criteria are in the for-profit sector.

The data are only a warning at this point and are intended to give schools time to make improvements. Enforcement of gainful-employment regulations begins this fall. Under the provisions, no school could lose its federal student-aid funds until 2015.

To qualify for federal aid, the regulations require schools to meet one of the following measures in at least three out of four consecutive years:

•Loan Repayment Rate - At least 35 percent of the program’s former students are repaying their loans.

•Debt-to-Earnings Annual Ratio - The estimated annual loan payment of a typical graduate does not exceed 12 percent of his or her total earnings.

•Debt-to-Discretionary-Earnings Ratio - The estimated annual loan payment of a typical graduate does not exceed 30 percent of his or her discretionary income.

Of the 3,695 programs in 1,336 schools covered in the release today, the department reports that 35 percent are meeting all three metrics; 31 percent are meeting two of the three standards; 29 percent are meeting one of the three and the remaining 5 percent (which comprise 193 programs in 93 schools) did not meet any of the three metrics.

These early indications of compliance are in line with predictions by researchers last year that the rule would only have a minimal impact on institutions.

A version of this news article first appeared in the College Bound blog.