South By North Strategies, Ltd.

The American Prospect explains the new federal regulation pertaining to the use of federally-backed student loans at for-profit colleges and universities.

The rules, which apply to career and vocational programs at for-profit and non-profit colleges, are intended as a quality-control measure for the growing for-profit industry that draws billions from the federal government each year, yet has little accountability. While only about 12 percent of college students attend for-profit institutions, they receive 26 percent of Title IV funds …. and account for a staggering 47 percent of student-loan defaults. In the last decade, for-profit schemes have exploded — and largely on the government’s dime: Between 2000 and 2009, the amount of federal aid going to the for-profits quintupled, to $26.5 billion.
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But starting in 2012, schools will have to pass one of three quality-control measures to qualify for federal aid. Career colleges can either show that in a given year, at least 35 percent of their students are repaying some amount (even so much as a dollar) off their loans. Alternatively, they can satisfy federal requirements by showing their graduates’ debt-to-income ratio falls below a threshold or that their debt-to-discretionary-income — their total debt relative to their income spent on non-essentials — levels fall below a different threshold. If a college fails to meet at least one of the three metrics three times in four years, it will lose eligibility….