Colleges Scramble to Avoid Violating Federal-Aid Limit - Administration - The Chronicle... - 0 views
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George Mehaffy on 05 Apr 11"April 2, 2011 Colleges Scramble to Avoid Violating Federal-Aid Limit For-profits' tactics to comply with 90/10 rule raise questions By Goldie Blumenstyk Corinthian Colleges Inc.'s decision this winter to raise tuition at dozens of its Everest, Heald, and WyoTech campuses by an average of 12 percent, knowing that most of its students would have to go even further into debt, had nothing to do with rising costs or any improvements it was making in the curricula. With many of its students already receiving the maximum in federal grants and loans, the company said it was raising its prices to create a financial gap that students would have to cover with private loans or other funds besides those from the federal student-aid programs. Corinthian's move is just one of the latest-and some say one of the most cynical-strategies that some for-profit colleges are using to avoid violating the so-called 90/10 rule, so they can remain eligible for the billions of dollars in federal student aid that have fueled their growth. The rule requires them to receive at least 10 percent of their revenue from other sources. "They are making loans, just like the subprime lenders did, that they know their students will not be able to repay," said Pauline Abernathy, vice president of the Institute for College Access & Success. Corinthian's decision to comply with the 90/10 rule in this manner, said Ms. Abernathy, even as it acknowledges that the company-sponsored loan program most of its students will use has a default rate of more than 50 percent, is "the height of cynicism." The 90/10 rule is also driving activities at other college companies. In recent months, Education Management Corporation, parent company of the Art Institutes, South University, and Brown Mackie College, announced it would increase its recruiting of foreign students. Kaplan University and the University of Phoenix created new colleges of "professional studies" so they could count more of their nontraditional-e