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Obama Takes on For-Profit Colleges Over Student Loans

New rules would be in place by 2016


After a previous student loans proposal defeat by a federal judge, the Obama administration is again trying to advance new rules to protect students from amassing sky-high levels of debt.

Obama student loans

The new rules would cut off federal student aid programs to for-profit colleges and other schools that fail to provide job training to students who graduate. The training would have to be enough for students to land a salary to help pay off their student loans.

“Career-training programs offer millions of Americans an opportunity they desperately need to further their education and reach the middle class,” Education Secretary Arne Duncan said in a statement. “Today, too many of these programs fail to provide students with the training that they need at taxpayers’ expense and the cost to these students’ futures.”

For-profit colleges are expected to push back against any such changes — which under the Obama administration’s timeline would go into effect by 2016 — and managed to convince a federal judge in 2012 that a similar change was illegal.

Some for-profit colleges receive up to 90% of their revenue from federal financial aid programs, and Duncan said some would close if blocked from participating.

“Some of these programs – whether public, private or for-profit – empower students to succeed by providing high-quality education and career training. But many of these programs, particularly those at for-profit colleges, are failing to do so,” the Education Department said in a fact sheet.

The proposed rules state that graduates should not pay more than 8% of their total income to student loans, a benchmark tailored to the federal judge’s previous ruling that said there was no stated benchmark and therefore too vague.

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