The department is cracking down on taxpayer dollars that fund for-profit schools. The "gainful employment" rule will ban schools, such as DeVry University or the University of Phoenix, from accessing federal aid dollars if too many of their graduates owe too much relative to their incomes or if too few of them are paying back their loan on time.
The Department of Education said students at for-profit schools, such as culinary or technical programs, account for 12 percent of higher education students, but they default on 46 percent of student loans.
To maintain access to federal loan dollars, schools must meet at least one of the following criteria:
- At least 35 percent of former students are paying down their tuition loans
- Average graduate's annual loan payments are below 30 percent of discretionary income
- Annual loan payments total less than 12 percent of salary typical for graduates in their chosen fields
The National Black Chamber of Commerce and the Hispanic Leadership Fund said the new rule could hurt minority and low-income students.
A spokesperson for the University of Phoenix said he has not seen the new funding regulations and has no comment.