After a number of high profile scandals involving for-profit colleges, the Obama administration is considering regulations that could cut their revenue by up to a third.  The regulations under consideration would disqualify a school from receiving federal aid if its graduates are unable to pay back loans and would restrict their ability to hike tuition. 

For-profit institutions like the University of Phoenix are receiving an increasing share of federal aid.   Since 2000, the schools have gone from receiving 4.6 billion to $26.5 billion in 2009.  At the same time, many are questioning their business practices.

In 2009, the Government Accountability Office found that students at for-profit institutions are more likely to leave college and more likely to default on their loans than peers at other colleges.  The schools have also been consistently hiking tuition by four to six percent per year with one school increasing it by $11,700 last year.  Bloomberg also recently found that a number of the colleges are targeting homeless shelters to find new recruits—saddling applicants with loans that they cannot afford. 

While the colleges are now claiming they will stop targeting homeless applicants, the Accrediting Council for Independent Colleges and Schools already opened an investigation into the practices at Drake College of Business.

Though the Obama Administration has not released the rules under consideration, the for-profit education industry is already working to stop them.  The Career College Association retained the powerful lobbying firm the Podesta Group and is working to get the Congressional Black Caucus to speak on their behalf.

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