The industry was on the defensive after a series of federal investigations portrayed it as rife with abuse. They found that recruiters would lure students -- often members of minorities, veterans, the homeless and low-income people -- with promises of quick degrees and post-graduation jobs but often leave them poorly prepared and burdened with staggering federal loans.
In response to the rising concerns, 18 months ago the Obama administration proposed its tough restrictions linking tens of billions of dollars in federal student aid to formulas measuring students' debt levels and income after graduation. Colleges whose students were not earning enough money to start paying back their loans would be in danger of losing federal aid altogether.
The proposal was aimed at ensuring that the for-profit schools were providing "gainful employment" in a wide range of vocational fields they taught, like medical testing, massage therapy, business management and cosmetology. The joke in Washington, however, was that the industry effort to defeat the plan mainly ensured "gainful employment" for the capital's Democratic lobbyists and political consultants.
The final standards leave a maximum of 5 percent of schools facing financial sanctions at the start; the original plan would have meant penalties against an estimated 16 percent.
The rules also pushed back the penalties to 2015 from 2012, while requiring schools to disclose more data about loans, defaults and job placement.
Schools also questioned the motives of a key witness at Mr. Harkin's hearings, the noted hedge-fund trader Steve Eisman, who blasted the colleges' sky-high profit margins and likened them to subprime mortgage lenders. After Mr. Eisman acknowledged he held financial positions in the industry, the colleges charged that he stood to make millions by battering their reputations and short-selling their stocks.
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