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As the for- profit college industry continues to grow faster, the Obama administration has created a set of proposed regulations to limit abuses in this industry. The initial draft warned institutions that turn out large number of graduates with enormous debts and smaller job prospects would face severe consequences. The draft also threatened that federal student aid money that occupies the vast majority of profits of these schools would be reduced significantly.

For-profit institutions like the University of Phoenix have been receiving a lot of money in the form of federal aid.  The amount of federal aid given to these colleges ranged from $4.6 billion in 2000 to $26.5 billion in 2009.

The Government Accountability Office conducted a research study in 2009, in which it was found out that students who completed their graduation at for-profit colleges are more likely to default on their loan than their counterparts in other colleges. For-profit schools have been raising tuition fees continuously by 4 to 6% every year. One of the schools increased fees by $11, 700 in 2009. Another study shows that these colleges target homeless applicants and burden them with loans they cannot afford.

The Department of Education delivered the final rules later, which govern career education programs offered by for-profit colleges. The schools must prove that students who earn degrees in these programs will make sufficient money to repay their federal student loans. These rules are part of an attempt to control schools that scrape up lots of money, but leave students with oversized debts and poor job prospects.

Many for-profit colleges have started to adopt a set of standards to regulate themselves. Most of these standards are based on existing state and federal rules, which help to improve transparency. About 17% of the for-profit colleges have decided to offer a free trial for students before they decide to take up a course.

For-profit education industry has adopted these new standards in an effort to redeem itself after Government scrutiny disclosed the fraudulent activities and high loan default rates by the students. The colleges have also assured to perk up training of their staffing, including financial aid personnel. They also have pledged to disclose the total cost of programs offered.

For-profit colleges will reveal completion and lean default rates of old students. In order to ensure compliance of these, auditing will be done by an independent audit firm. The weak job market and economic recession forced many students and adults to take higher education courses. The U.S government introduced new rules to control the for-profit education industry over the last one year.

The Corinthian colleges and colleges run by Apollo Group have tightened their admission policies since 2010, after the Government threatened to disqualify them from receiving federal aid. Federal aid is the major source of their revenue, so that have adopted self regulation standards. 

The Education Secretary Ame Duncan said that the rules released by the Department of Education are thoughtful and reasonable. They are designed to provide career colleges with an opportunity to reform themselves.