As of July 1, for-profit schools and certificate programs will have to prove to the U.S. Education Department that graduates will be able to repay their student loans.
As the cost of traditional college continues to skyrocket, trade schools are often touted as a way for students to cheaply learn an employable skill set. But it turns out those students, too, are being burdened with lots of debt. Complaints that for-profit schools saddle students with this high debt and low salaries has led to new regulations.
Job training certificate programs, often also called career colleges or trade schools, allow students to become certified in such fields as dental assistance, auto mechanics, cosmetology, culinary arts and massage therapy. Corporations that run these schools and profit from giving students these certificates are being criticized by the Education Department.
In a statement about the regulations, U.S. Secretary of Education Arne Duncan wrote, "Far too often, so-called career colleges leave students burdened with debt they'll never be able to repay and stick taxpayers with the bill."
A study put out by the Brookings Institution last week shows how low salaries are for graduates of these programs.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at Brookings, studied graduates of cosmetology trade schools and found that most did not make much money.
"Looking across the country at 671 cosmetology programs, we found that average earnings at 60 percent of the programs fell between $10,000 and $15,000," according to Wessel's study. "Only six programs produced graduates whose earnings average more than $20,000 a year."
Wessel, a former economics editor at The Wall Street Journal, said the earnings were low given the time and tuition required to complete the programs.
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"While it's wrong to tar all for-profit colleges with the 'rip-off' brush, it's clear that some of these institutions really are taking advantage of students," Wessel said.
Some for-profit schools are "predatory," according to the Department of Education
"[Students] enrolled to become equipped for the workforce, but often they didn't get what they need," according to its website. "Instead, they found confusing or misleading information, excessive costs, poor quality, low completion rates and programs that provide training for low-wage occupations or, in some cases, where there simply are no jobs."
The Obama administration began proposing regulations around for-profit schools last year, which provoked two lawsuits from the Association of Private Sector Colleges and Universities.
The APSCU won the first suit, but on June 23, the U.S. District Court for the District of Columbia ruled that the Education Department has the right to require for-profit programs to prove their graduates will be prepared to get jobs that can actually pay off their loans.
Now, the Education Department will be able to withhold Title IX funding from schools that do not meet the criteria for student debt and salaries.
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"The metric measures your debt-to-earnings ratio within the first three years," said Noah Black, vice president of public affairs for the Association of Private Sector Colleges and Universities.
With the regulations going into effect on July 1, Black said he estimates an excess of 3 million students are going to lose access to the programs of their choosing over the next 10 years.
"This is not the 18-year-old coming out of school and looking for a degree," he said. "They could have a child of their own, they could have a full-time job, they are also often minorities. This group has been poorly served by the traditional higher education system. In the past 20 years it's become increasingly important to serve new traditional students."
Fred Freedman, president of Pima Medical Institute, a for-profit school where students can be certified for jobs in the medical field, said he sees its program's associates degrees as the most vulnerable, because the tuition is higher relative to earnings.
"There is considerable scrutiny," he said. "Some of these benchmarks are unreasonable and arbitrary."
Freedman said he wishes the regulations would apply across the board, not just targeting for-profit schools.
"If we're looking to raise the bar for accountability, the bar should be raised across the educational landscape, not just for-profit," he said. "Accountability is a good thing, and we have no problem with accountability as long as it's an even playing field."
Even in areas that have community colleges, which are generally much cheaper, Wessel said students still attend for-profit programs.
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"In some cases the for-profit schools have been better at marketing and reaching out to people," he said. "When you're in the business of certificates, you get in the business of luring people in."
Students at for-profit programs who graduated with an associate's degree had an average federal loan debt of $23,590, while the majority of students at community colleges did not borrow, according to the Education Department's 2014 data.
However, earnings were relatively similar for graduates of both, according to Wessel's study.
"Students who got certificates at some community colleges did better and paid less for their schooling, though they still didn't earn very much," according to the research.
Wessel said that while, in general, receiving more job training pays off, there is always financial risk. Through the regulations, the government is trying to help students "pick through the programs that do payoff and the ones that don't," he said.
"There's a certain ideology now that everybody should go to college," Wessel said. "The education department is just trying to distinguish that it matters what college you go to, what you major in and if you finish the program."