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Spotlight on For-Profit Colleges Spurs Reaction

The federal government's investigation of deceptive practices at for-profit colleges and proposed rules to improve oversight are sparking reaction from companies and triggering debate.

Beginning tomorrow, the for-profit Westwood College, based in Denver, says it will pay recruiters a set salary, eliminating enrollment targets as part of their compensation. It is also adding measures to make sure employees comply with its code of conduct, raising admissions requirements, and improving its process for explaining costs and likely career outcomes to students, according to a written statement from officials.

The Apollo Group, Inc.'s University of Phoenix also announced plans to stop paying its recruiters based on how many students they enroll by Nov. 1.

The Washington Post Co.'s Kaplan Higher Education unit suspended enrollment at its campuses in Pembroke Pines, Fla., and Riverside, Calif., both of which were cited in the investigation by the Government Accountability Office, Congress' investigative arm.

Last month, in an effort to increase oversight of for-profit colleges through regulation, the Department of Education proposed new "gainful employment" rules. Programs would be monitored for the debt that students incur compared with their potential earnings, as well as graduates' repayment rates. Based on their performance, schools could be required to disclose this information to current and prospective students or federal aid to their students could be cut.

The increased scrutiny is already having an impact on the businesses. Earlier this week, shares of for-profit education companies, including Corinthian Colleges, Inc., and The Washington Post, fell after government data showed that a large percentage of their students aren't repaying their loans, which could put the schools at risk of losing federal financial aid access under the new proposed rules. Some are questioning the report. Capella Education Co. said Monday that a government report showing that the company has weak student loan repayment rates is inconsistent with its own data.

We are in the middle of the 45-day public comment period for the draft "gainful employment" regulations, which were published in the Federal Register July 26 .

The Washington Post's Michelle Singletary is the latest to suggest that the idea of expanding the new regulations to cover all universities, not just for-profits.

"Career counselors or financial aid personnel would show students data on the average starting salary for certain fields. Then the counselor would calculate—based on the total amount of money the student planned on borrowing—how much projected monthly income would be needed to service the student loans," Singletary wrote in the Post yesterday. "This process would be a reality check before any federal student loan check is cut."

Katherine Mangu-Ward, senior editor for Reason magazine, also challenged the administration as to why the scrutiny in the gainful employment rule proposal should be limited to for-profit colleges.

It will be interesting to listen to the banter over the next few weeks and see who chimes in with public comment. It may be a big and complex enough matter to reach agreement just on the issue of for-profit colleges. But with students and families taking on massive debt to get a college degree, perhaps more will be asking if college itself is worth the investment and will seek wider regulations.

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