02/18/2011 04:47 pm ET Updated Dec 06, 2017

House Quashes Rules On Student Debt at For-Profit Colleges

A bipartisan House group voted on Friday to block the Obama administration from cracking down on career college programs that leave students with debt they can't repay.

The House budget amendment, proposed by Rep. John Kline, R-Minn., and approved 289-136, would prevent the Department of Education from publishing long-discussed consumer protection rules that would regulate for-profit colleges and some community college programs.

Known as the "gainful employment" rule, the hotly debated regulation would gauge whether students at such programs are able to repay their student loans and can attain salaries that don't bury them under unmanageable debts. Programs that fail to meet certain student debt targets could lose access to federal higher education grant and loan dollars -- revenue that is crucial to the survival of the for-profit college industry.

The measure is still far from becoming reality, as the House budget bill will face a major uphill battle in the Senate, and the threat of a veto from President Obama. But the vote is indicative of the growing political influence of the for-profit education industry on both sides of the aisle in Congress.

More than 50 Democrats in the House joined Republicans in opposing one of the Obama administration's key higher education reform proposals.

Industry representatives applauded the vote, saying the regulation would "cost in excess of 100,000 jobs and deny a pathway to employment for more than 1.5 million students, disproportionately affecting minorities and women," according to a statement from the Coalition for Educational Success, an industry group representing some of the largest publicly traded for-profit education companies.

Individual programs -- not entire schools -- could be subject to sanctions. The Department of Education estimates that if the rules go through, about 16 percent of for-profit programs could lose access to federal higher education dollars.

For-profit colleges are facing increased public scrutiny amid a bevy of data that shows students at such schools take on much more debt and default on federal student loans at much higher rates than other college students.

Average tuition at for-profit schools is nearly twice that of the in-state tuition at four-year public colleges, and more than five times the average tuition at community colleges, according to a Senate report released last year. And recently released data from the Department of Education show that a quarter of all students enrolled at for-profit schools defaulted on federal student loans within three years -- more than double the rate of students at non-profit institutions.

Debate on the gainful employment rule has often centered on access to higher education. Opponents of regulation say the rules would prevent mostly minority, low-income students from attending college. Supporters argue the regulations would simply target the worst actors in the industry, who seek profits from federal aid dollars with little regard for student outcomes once they enter the workforce.

The Department of Education has not yet released a final version of the rules, but a draft version would allow programs at for-profit colleges to remain fully eligible even if less than half of students are repaying the principal on federal student loans.

A spokesman for the Department of Education defended the regulations, and said the agency would "continue working with Congress and education stakeholders as we thoughtfully move forward on this important issue."

"Far too many students are being saddled with unmanageable debts in exchange for degrees and certificates that do nothing to improve their employment prospects," said the Department spokesman, Justin Hamilton.

Rep. George Miller, D-Calif., the ranking Democrat on the House Education and the Workforce Committee, who opposed the amendment, said the vote would "shut down work on protecting students from financial exploitation."

"When these institutions can make up to 90 percent of their revenue from federal student aid, we have an obligation to protect the taxpayer investment," Miller said.