Tighter Reins on For-Profit Colleges

Call it the college conundrum. As the job market swings back into gear, the number of jobs requiring some college education will outstrip the number of qualified grads, says a new study from the Georgetown University Center on Education and the Workforce. The deficit could average 300,000 students a year between 2008 and 2018.

For-profit colleges have stepped up to meet the demand for credentials in a big way. No longer just beauty schools and vocational culinary institutes, 25% of for-profits offer bachelor's degrees. Enrollment is up from 673,000 students in 2000 to 2.6 million students this year. As enrollment has grown, so have complaints that for-profits, while garnering 23% of federal student financial-aid dollars, are churning out students deep in debt, unable to earn enough to repay their loans.

Regulators are cracking down. The Department of Education wants to require disclosure of graduation stats and job-placement rates to prospective students. Proposed rules would also tighten prohibitions against compensating recruiters based on enrollment, to curb high-pressure sales practices. By November, the department could spell out an acceptable ratio of student debt service to income, and define "gainful employment."

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Congress may also introduce legislation this year to toughen accreditation rules so that a company would no longer be able to buy a financially struggling college, change its management and alter the character of its enrollment while maintaining its original accreditation.

Meanwhile, all students can take a cue from for-profits and fill out the Free Application for Federal Student Aid. Failing to do so risks leaving money on the table. For-profits are experts at walking students through the application.

Help is also available from the Federal Student Aid Information Center (800-433-3243), or visit www.collegegoalsundayusa.org to find local assistance.

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.