WASHINGTON, April 12 (Reuters) - The recent U.S. budget agreement rejected efforts by for-profit schools to prevent the Education Department from finalizing a new rule aimed at ensuring students get decent-paying jobs and can repay student loans, according to a senior Democratic leadership aide.
School supporters had pressed for the budget to include a measure that barred the Education Department from finalizing its so-called 'gainful employment' rule. The rule would refuse loans to students in programs if former students fail to pay back loans.
But negotiations for a budget covering the rest of the 2011 fiscal year, which ends Sept. 30, ended with that measure excluded from the final bill, said the aide, who could not be named since staffers are not authorized to speak on the record.
The proposed regulation would make a school program ineligible to accept students paying with federal loans if fewer than 35 percent of former students are paying back loans after three years. The rule is slated to take effect in mid-2012.
Losing access to the loans would put some schools out of business.
Fully 25 percent of students who either graduated or dropped out of for-profit schools in 2008 defaulted on their loans within three years, compared with 10.8 percent of public schools and 7.6 percent of private schools, according to the Education Department.
The department has finalized a rule to ban the practice of basing recruiters' pay on how many students they enroll.
Other new rules require disclosure of graduation rates and job placement rates to new students and strengthen the department's hand in taking action against schools that fail to advertise honestly.
Schools are responding to the proposed rules by tightening enrollment, which is hurting their bottom line.
Apollo Group, the biggest company in the sector and owner of Phoenix brand schools, saw a 45 drop in new enrollments in its fiscal second quarter that ended Feb. 28. New enrollments at Apollo have dropped by an average of 32 percent over the last three quarters.
The Everest brand of schools, owned by Corinthian Colleges , had just over 20 schools whose students defaulted at a rate of 30 percent or higher, Education Department data showed.
The S&P education services index lost 1.9 percent on Tuesday, underperforming the S&P 500's 0.8 percent decline.
(Reporting by Andy Sullivan and Diane Bartz; Editing by Tim Dobbyn) Keywords: USA BUDGET/FOR PROFITEDUCATION (diane.bartz@thomsonreuters.com; + 1 202 898 8313; Reuters Messaging: diane.bartz.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
School supporters had pressed for the budget to include a measure that barred the Education Department from finalizing its so-called 'gainful employment' rule. The rule would refuse loans to students in programs if former students fail to pay back loans.
But negotiations for a budget covering the rest of the 2011 fiscal year, which ends Sept. 30, ended with that measure excluded from the final bill, said the aide, who could not be named since staffers are not authorized to speak on the record.
The proposed regulation would make a school program ineligible to accept students paying with federal loans if fewer than 35 percent of former students are paying back loans after three years. The rule is slated to take effect in mid-2012.
Losing access to the loans would put some schools out of business.
Fully 25 percent of students who either graduated or dropped out of for-profit schools in 2008 defaulted on their loans within three years, compared with 10.8 percent of public schools and 7.6 percent of private schools, according to the Education Department.
The department has finalized a rule to ban the practice of basing recruiters' pay on how many students they enroll.
Other new rules require disclosure of graduation rates and job placement rates to new students and strengthen the department's hand in taking action against schools that fail to advertise honestly.
Schools are responding to the proposed rules by tightening enrollment, which is hurting their bottom line.
Apollo Group, the biggest company in the sector and owner of Phoenix brand schools, saw a 45 drop in new enrollments in its fiscal second quarter that ended Feb. 28. New enrollments at Apollo have dropped by an average of 32 percent over the last three quarters.
The Everest brand of schools, owned by Corinthian Colleges , had just over 20 schools whose students defaulted at a rate of 30 percent or higher, Education Department data showed.
The S&P education services index lost 1.9 percent on Tuesday, underperforming the S&P 500's 0.8 percent decline.
(Reporting by Andy Sullivan and Diane Bartz; Editing by Tim Dobbyn) Keywords: USA BUDGET/FOR PROFITEDUCATION (diane.bartz@thomsonreuters.com; + 1 202 898 8313; Reuters Messaging: diane.bartz.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.