For-profit colleges warrant a watchful eye

For-profit colleges enroll about 10 percent of U.S. students seeking education beyond high school.

But their students receive nearly a fourth of federally subsidized grants and loans.

With that in mind, it’s reasonable for the U.S. Department of Education to keep a close eye on the effectiveness of these institutions in preparing students for the workplace.

It’s also good for the students.

Too many graduates of trade schools or “career colleges,” take on tens of thousands of dollars worth of debt only to discover they’re only prepared for relatively low-paying jobs.

The education department is expected soon to propose cutting off federal aid to for-profit colleges whose graduates routinely earn too little income to pay off loans.

A draft formula released in February would make the schools eligible for federal aid only if the median debt load of their graduates can be repaid over a 10-year span with 8 percent of their starting salary.

Not surprisingly, for-profit colleges are protesting vigorously. According to some estimates, graduates would have to make more than $50,000 a year to meet the proposed debt
service-to-income threshold.

But that’s because the median debt for someone graduating from a for-profit college is more than $32,000.

Too many of the colleges arrange loans for low-income students knowing they’ll probably not be repaid, but that government aid will cover at least part of the costs.

In fact, the typical for-profit college gets three-quarters of its revenues from federal grants and loans.

For-profit colleges are also pricey. In some cases, an associate’s degree at a career college can cost five or six times as much as a student would pay for the same credentials at a community college.

The for-profit college industry says the proposed new rules will put schools out of business. But this is a lucrative industry, and the schools are not without options.

They could stop encouraging students to take on huge loads of debt in order to enroll, for one thing.

And they could sacrifice some of their high profits for more reasonable tuition.