New For-profit School Regulations at a Glance

The U.S. Department of Education has finalized terms of its “gainful employment” rule for higher education   programs. If graduates owe too much relative to their income, or too few former students are paying back their tuition loans in a timely manner, school programs will lose access to Pell grants and federal student loans.

Such a loss would seriously crimp schools’ revenue and ability to attract new students.

To maintain access to federal loan dollars, schools must ensure that they meet at least one of the following criteria: 

  • At least 35 percent of former students are paying down their tuition loans.
  • An average graduate’s annual loan payments are below 30 percent of his or her discretionary income, as determined by data collected from the Social Security Administration.
  • An average student’s annual loan payments total less than 12 percent of the salary that the government determines is typical for graduates in their chosen fields.

If a school fails all three measures, it must inform potential students.

If a school fails three times within four years, it loses access to federal student aid for at least three years.

Under the new rule, the soonest that a delinquent program would lose eligibility for federal student aid is 2015.