For-profit colleges are privately managed educational institutions that are run by businesses with the intention to seek profit. In 1992, a federal regulation called the 90-10 rule began to require for-profit colleges to amass no more than 90 percent of their total profit from students’ federal aid money. Still, this allows for-profit colleges to make up to 90 percent of profit directly from federal aid.

 

Recently, the Obama administration enacted the gainful employment rule, with the intention to help students avoid amassing unmanageable amounts of debt. The regulations warned for-profit colleges that federal aid would be cut off, unless they begin to establish more legitimate programs that will make it more likely for students to succeed. For-profit colleges that graduate students who end up being unable to pay off student loans will be targeted.

 

The lawsuit against the Department of Education claims that their recent regulations are unconstitutional and exceed authority. (tumblr.com)

The lawsuit against the Department of Education claims that their recent regulations are unconstitutional and exceed authority. (tumblr.com)

In response, the Association of Private Sector Colleges and Universities – a trade group that represents over 1,400 for-profit colleges – filed a lawsuit against the gainful employment rule. The colleges claim that the amount of money that students end up making after graduation is determined by other, nonrelated factors. The subjectivity of attempting to determine student struggle after graduation from particular institutions makes the lawsuit tricky.

 

The ongoing battle is relevant to students and taxpayers; press secretary of the Education Department Dorie Nolt is confident that the gainful employment rule was fully legal and will help to bring “more accountability and transparency to career training programs.” For-profit colleges fighting the federal movement, on the other hand, claim that the gainful employment rule will unfairly restrict students in their college options.

 

Do you think that the recent regulations to restrict the flow of federal aid toward for-profit colleges are warranted? Respond in the comments or on Twitter @ryanlawlessness