(Update) Kline fails to block gainful employment rule in budget deal

The federal “gainful employment” regulation targeting for-profit colleges could cut off financial aid from one in 10 programs in the state, a Minnesota Career College Association official said.

The rule has faced tough opposition from the for-profit industry for months. It aims to prevent federal student aid from going to for-profit programs that produce graduates who both have chronic problems paying loans, and whose debt-to-income ratios are high. For-profits get the bulk of their funding from such loans.

The Minnesota Career College Association’s legislative chairman Thomas Kosel said an amendment by Rep. John Kline, R-Minn., which threatened to hamper implementation of the regulation, “likely won’t be” included in the budget deal reached late last Friday by congressional leaders and the White House.

Even though the amendment was dropped from the deal, industry reps vowed over the weekend to continue lobbying Congress. But a spokesman for Senate Majority Leader Harry Reid of Nevada told Inside Higher Education it was dead.

(Update with a reaction from Kline: “It is unfortunate the bipartisan will of the House was overruled by a handful of vocal opponents in the Senate,” Klein said in an e-mailed statement to the news media. “The fight isn’t over. Secretary Duncan should work with Congress, and if he will not do so we will find other opportunities to defeat this harmful regulation. Instead of facing regulatory roadblocks laid down by the Department of Education, students should have every chance to get the skills and training they need to succeed in the workplace.”)

Kline’s amendment sought to cut off Education Department funding for the implementation of the gainful employment regulation, effectively delaying its roll-out until October — if not later.

Kosel said assessing the impact of the gainful employment rule is difficult. Details of the regulation are still unclear because the administration hasn’t revealed its final version. Nor does the association know exactly what factors the feds will assess, and it doesn’t have access to all the data to be used in their evaluations, he said.

But so far he figures that the new rule could hit 10 percent of the programs on offer in Minnesota.

Although colleges may offer the programs, students who want to take them could no longer pay for them with federal student loans. They’d have to turn instead to institutional scholarships, private loans or their own funds — a tough prospect for most students..

Programs hit by the regulation would tend to be those in fields offering low pay in the first  years out of college, whose graduates end up with high debt-to-income ratios.

Whereas “Minnesota schools are very strong” Kosel said, schools in other states could see up to 15 percent of their programs cut off from funding.

If the gainful-employment rule indeed goes through, “a million students (across the country) are not going to school,” Kosel said.

Neither Kline nor a representative from Minneapolis-based Capella University immediately returned calls requesting comment.

(Capella University spokesman Mike Buttry said his understanding was that Kline’s amendment was dead, but it was too soon to say what the effect of of the regulation would be. Capella specializes in graduate education and is not part of the Minnesota Career College Association.)