On Thursday Oct. 28, President Barack Obama and his administration released a broad set of regulations aimed at improving the integrity of the federal student aid program and ensuring appropriate use of taxpayer funds.
According to a press release from the Department of Education, these regulations, required by Congress, seek to “strengthen federal student aid programs at for-profit, nonprofit and public institutions by protecting students from aggressive or misleading recruiting practices, providing consumers with better information about the effectiveness of career college and training programs and ensuring that only eligible students or programs receive aid.”
In recent years, some students have complained and brought litigation against for-profit institutions of higher education in particular, saying that they were coerced into enrolling in these programs under the guise of deceptive and incomplete information about program cost and given unrealistic earnings expectations.
Negotiations between the Obama administration and the higher education community, which have spanned 18 months, are expected to resolve by the summer of 2011. The Department of Education has worked with stakeholders to develop these regulations, focusing on the improvement of specific issues that have been the source of problems in the past.
One of the planned regulations will require higher education institutions to provide prospective students with information regarding each program’s cost, graduation rate, job placement rate, debt level and average income after completion. The goal is that students will have a better understanding of what different programs entail and thus be better informed when choosing an education path.
Another issue that these regulations seek to address is the protection of prospective students from aggressive recruiting practices, which often involve misrepresentation and incentive compensation.
For example, while holding public hearings about financial aid regulations, the Department of Education heard multiple complaints from students regarding institutional misrepresentation. Many voiced that institutions did not make clear what was or was not offered in their programs. Another common criticism complained that institutions provided insufficient explanations of available payment options and expected post-completion job placement rates.
As a result of aggressive recruiting practices, many students reported feeling obliged and encouraged to take out student loans. In many cases, students chose loans they could not afford to repay after receiving the improper recommendation to do so. Some students have also been encouraged to enroll in programs with uncertain success rates. This issue may be attributed to the practice of some institutions to compensate recruiters for securing student enrollment. While there are laws in place now that disallow this behavior, provisions known as “safe harbors” have allowed the practice to continue in some instances. With the new regulations, all such “safe harbors” are removed.
In order to ensure that eligible students are the sole recipients of federal funds, rules to strengthen protections against fraud will be enacted. Assessing the validity of a student’s high school diploma and having students confirm the information on their Free Application for Federal Student Aid annually are practices that will be conducted more strictly to ensure that the aid given to students is appropriate.
“[The regulations] are all about consumerism,” said Archie Cureton, director of financial aid at Geneseo. “They’re about reinforcing what is out there … and having colleges disclose everything.”
The financial aid and student loan regulations published on Oct. 28 will go into effect on July 1, 2011.