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For-Profit Colleges Will Be Held Accountable for Student Outcomes
Plus, the public will get access to student financial outcome information for all colleges that receive federal aid, under new Education Department rules.
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NerdWallet's content is fact-checked for accuracy, timeliness and relevance. It undergoes a thorough review process involving writers and editors to ensure the information is as clear and complete as possible.
Trea S. Branch is a former NerdWallet writer focused on student loan refinancing. She holds a degree in economics from the University of Michigan and a degree in business from the University of Notre Dame. Trea shared her own student loan payoff journey through a blog, which turned into a personal finance coaching business. Her goal has been to empower anyone overwhelmed by student debt.
Karen Gaudette Brewer leads the Core Personal Finance team at NerdWallet. Previously, she guided students and their families through the ins and outs of paying for college and managing student debt on the Higher Education team. Helping people navigate complex money decisions and feel more confident brings her great joy: as the daughter of an immigrant, from an early age she was the translator of financial documents and the person who called the credit card company to fix fraud.
She joined NerdWallet with 20 years of experience working in newsrooms and leading editorial teams, most recently as executive editor of HealthCentral. She launched her journalism career with The Associated Press and later worked for The (Riverside) Press-Enterprise, The Seattle Times, PCC Community Markets and Allrecipes.com.
She is a graduate of the 2022 Poynter Institute Leadership Academy for Women in Media. Her writing has been honored by the Society for Features Journalism and the Society of Professional Journalists. In addition, she’s the author of two books about the Pacific Northwest.
Eliza Haverstock is NerdWallet's higher education writer, where she covers all aspects of college affordability and student loans. Previously, she reported on billionaires and investing for Forbes in New York, and she also covered private markets for PitchBook in Seattle. Eliza got started at her college newspaper at the University of Virginia and interned for Bloomberg, where she spent a summer writing a feature story about plastic straws. She is based in Washington, D.C.
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Lead Writer
The government is beefing up its scrutiny of for-profit colleges and improving financial transparency for all higher education institutions.
On Sept. 27, the Department of Education announced it had finalized new oversight rules with two major provisions:
Gainful employment. The Education Department will analyze for-profit educational programs, like career training certificates, to determine if they are affordable and provide meaningful financial returns for students. Programs that fail to meet certain standards could be kicked out of the federal financial aid system.
Financial value transparency. The Education Department will collect and publish college- and program-level data about out-of-pocket costs and student financial outcomes for all educational institutions (public, private, for-profit). Borrowers who wish to access federal financial aid to attend low-performing institutions must review and acknowledge this data.
“These protections are about ensuring career college programs live up to higher education’s promise as a pathway to a better life,” Department of Education Under Secretary James Kvaal said in a September press release. “Students overwhelmingly say that they’re going to college to find a good job and build financial security, but too often their programs leave them no better off financially than those with no postsecondary education at all.”
For-profit institutions have been the focus of several lawsuits alleging the institutions misled and misrepresented their value — leaving borrowers with overwhelming debt without adequately preparing them for well-paying jobs. Billions of dollars in federal student loans have been forgiven through the borrower defense program in an attempt to recoup students' losses.
These new rules will go into effect on July 1, 2024, and the first official financial outcome rates will be published in early 2025. As a result, an estimated 700,000 students each year won’t enroll in one of nearly 1,700 low-performing programs that could lose access to the federal student aid system under the new rules, the Department of Education says.
Programs must achieve ‘gainful employment’ metrics to access federal financial aid
For-profit institutions, career training programs and public or private programs that don’t grant degrees are required to adequately prepare students for “gainful employment” to access federal financial aid, under the Higher Education Act, which is the law that governs the federal financial aid system.
Under the new rules, the Education Department will assess these types of schools on two key metrics in an attempt to decrease the number of students left with excessive debt compared to earnings. Low-performing institutions could lose access to federal financial aid.
The Department of Education will require institutions to meet performance standards in two areas:
Debt to earnings. The share of a graduate’s annual income needed to make their student debt payments cannot exceed 8%. For graduates on income-based repayment plans, their debt-to-earnings ratio must be less than 20% of their discretionary income — defined as income above the 150% federal poverty guideline (about $21,870 in 2023). This metric assesses student loan affordability.
Earnings compared to high school graduates. An institution must have at least half of its graduates earning more than the typical high school graduate with no postsecondary education. Graduate income is compared to the typical high school graduate aged 25 to 34 in the institution's state labor force.
Failing one metric will force the institution to alert students that the program may lose access to federal aid. If a program fails to achieve both metrics twice within three years, the program will completely lose access to federal aid.
The reporting requirement starts on July 1, 2024, and the first round of outcome rates will be published in early 2025. Programs that fail to meet the same metric in the first two years the rates are issued will be booted from the federal financial aid system as early as 2026.
Under the new rules, the Education Department demands greater consistency in reporting the cost and return of postsecondary education. This provision is called “Financial value transparency.”
By collecting more detailed data on the cost of attendance, potential earnings and typical debt, the federal government wants to equip students and families with information that can help them avoid difficult debt burdens.
New data collected will include the following:
Cost of tuition, fees, books and supplies.
Licensing requirements and exam passage rates (if applicable).
Nonfederal aid amounts per student.
Typical amount borrowed — for both federal and private loans — per student.
Typical earnings per student.
Information will be made public on a Department-run website. Students will have to acknowledge they’ve reviewed these data points before receiving federal financial aid from colleges or programs that don’t meet federal standards for earnings.
The reporting requirements will begin July 1, 2024; the website will launch afterwards, and acknowledgment requirements will start in 2026.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.19-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 6/30/2025. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Variable APR
4.24-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 6/30/2025. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.19-16.99%
Lowest rates shown include the auto debit discount. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 6/23/2025. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Variable APR
4.37-16.49%
Lowest rates shown include the auto debit discount. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 6/23/2025. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
A few additional provisions to protect student borrowers are still in the works, and the Education Department has not yet finalized them. Still in their draft form, these provisions could include:
Financial responsibility. Institutions must report behavior that could indicate a higher risk of closing suddenly — such as failing to make debt payments for more than 90 days. Certain financial triggers could lead the Department of Education to require a letter of credit from the institution to guarantee payment.
Administrative capability. There will be greater requirements for college administration programs, like career services and financial aid offices. Proposals would also include preventing administrators with previous misconduct around federal financial aid programs from being hired.
Certification procedures. The Department of Education would like to be able to more easily adjust its agreements with institutions receiving federal financial aid.
The regulations would also make adjustments to “Ability to Benefit” — a provision of the Higher Education Act that allows students without a high school diploma to access federal financial aid.
