A penalty for college programs that trap students in debt

Cristiano Ronaldo

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For decades, the federal government has gone back and forth on the best way to solve the problem of workers who struggle to earn a living after graduating from the country’s for-profit colleges or career training programs. The Obama administration first laid out specific metrics requiring schools who want access to a lucrative stream of government funds to prove that its graduates are prepared for “gainful employment” and don’t end up with lots of student debt relative to their income. But Obama’s team never fully implemented its rules after lengthy legal fights. The Trump administration eventually scrapped the effort. Then Biden won office, and revived Obama’s plan — with a twist.

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The move

Starting in July 2024, career training programs could lose federal funding if their graduates leave with lots of student debt relative to their earnings — or if the typical graduate earns roughly less than $25,000. A similar concept would also apply to many colleges and universities that receive federal aid: Schools would have to warn students if they fail Biden’s new debt and earnings metrics — though only low-rated career programs would face a loss of funding.

The impact

The Education Department has estimated that nearly 1,700 programs would fail to meet the administration’s new standards. Another 400 graduate programs at nonprofit and public universities would also be forced to notify their students that they failed. More than 800,000 students are collectively enrolled in these programs. The department also estimates the policy will save federal taxpayers nearly $14 billion over the next decade by reducing defaults on federally backed student loans.

The upshot

Cosmetology schools, truck-driving programs and top-flight graduate institutions could soon be held publicly accountable for how their students fare in the workforce. But angry conservatives and for-profit colleges despise this looming Biden administration policy, and could launch a legal challenge to stop the rule from taking effect.