For-profit college regulation softer than anticipated

The Obama administration Thursday released its highly anticipated regulation for tougher oversight of private, for-profit colleges, saying the new rules were needed to protect students who were running up big tuition bills but getting few practical job skills.

The so-called “gainful employment” test immediately came under fire from a top congressional Republican and from minority groups, but share prices for some for-profit colleges jumped as investors concluded that the final rule was not nearly as punitive as some had feared.

The rule would impose three tests on for-profit institutions, which critics say have enrolled huge numbers of students receiving federal aid without delivering real results. Repeated failures to meet the tests would mean a college could no longer accept students paying with federal money, a restriction that could force some nontraditional institutions to close their doors.

A for-profit program will be considered to lead to gainful employment if the estimated loan payment of a typical graduate does not exceed 30 percent of discretionary income; or if the estimated loan payment of an average graduate does not exceed 12 percent of total earnings.