The Obama administration wants to close 1,400 programs at for-profit colleges. Here's how.

The Obama administration is trying again to regulate for-profit colleges, the latest battle in a long fight.

New rules published Thursday will cut off federal aid to career training programs where the average graduate ends up spending more than 8 percent of their discretionary earnings, and 20 percent of their total earnings, on federal loan payments.

The regulation would affect around 1,400 career-training programs, virtually all at for-profit colleges, with about about 800,000 students enrolled.

The Obama administration wants to ensure that students coming out of for-profit colleges earn enough after graduation to pay back the debt they've taken on. The average student who takes out loans for a bachelor's degree at a for-profit college leaves with about $40,000 in debt.

But consumer advocates say the rule, changed from an earlier version, is too watered down to make a difference. And whether it's enforced at all could depend on who wins the White House in 2016

What the new regulation would do, and why

Students at for-profit colleges are much more likely to default on student loans than students enrolled elsewhere. Those students take out about 11 percent of all student loans, but represent 44 percent of student loan defaults.

The average graduate of a for-profit college owes more than students at public or nonprofit colleges. About 19 percent of for-profit college students will default on their loans in the first three years of paying them back.

the regulations please almost no one

The regulations are meant to shut down the worst offenders on debt and default by holding programs accountable for how much their graduates earn after graduation. (For-profit colleges usually contain multiple career training programs. So students studying HVAC repair, for example, are separate from students studying for a nursing license, and one program at a college could be shut down while the college itself remains open.)

But the regulations please almost no one. For-profit colleges say the Education Department is unfairly singling them out using a bad way to measure the value of a degree. They argue that all colleges, not just for-profits, should be held to the same standard, and plan to file a lawsuit.

Students and consumer advocates say the regulations are too watered down to make a difference. Their biggest criticism is that the Education Department's data will only include students who graduate from for-profit colleges. Between one-third and one-half of students at for-profit colleges drop out before they finish.

Those dropouts often still have debt and, like dropouts from other colleges, are far more likely to struggle to pay that debt back. An earlier version of the rule would have looked at programs' loan default rates, which would have included dropouts. But that measure was left out of the final version, which also means no community colleges will be penalized under the new regulation.

"This rule lets drop-out factories off the hook at the expense of students and their financial security," said Rory O'Sullivan, deputy director of Young Invincibles, an advocacy group.

The for-profit college world looks a lot different than it did in 2009

California Attorney General Kamala Harris at a news conference announcing a lawsuit against Corinthian Colleges, a for-profit college chain. (Justin Sullivan/Getty Images)

Even without the new regulations, the for-profit college sector is faltering. Enrollments boomed in the first decade of the 2000s. The share of all college students studying at for-profit colleges tripled.

Now, though, enrollments at four-year for-profit colleges are down 17 percent since 2011. One publicly traded for-profit college chain, Corinthian Colleges, essentially went out of business earlier this year. Another, Education Management Corporation, which owns the Art Institutes chain as well as other colleges, just announced it will return to being privately held. And for-profit Grand Canyon University, also publicly traded, is exploring a move to nonprofit status.

The Obama administration's attempts to regulate the colleges probably contributed to the decline. Even though an earlier version of the regulation was never enforced, colleges cut back their enrollments and changed some of their admissions policy.

But the sector is also feeling the effects of an improving economy, which has sent fewer people back to college to gain new skills or wait out the recession.

How the midterms and the 2016 election will affect the regulation

Would a Hillary Clinton administration enforce the regulation? (Bryan Thomas/Getty Images)

The biggest question about the regulation is whether it will actually be enforced. It takes effect in July. But programs have to miss the Education Department's benchmarks for two out of three years in order to lose access to financial aid, meaning the earliest a program would be shut down is 2017.

In the meantime, there are other hurdles, starting with the lawsuit from the for-profit college association.

Even if the regulation survives a legal challenge, Congressional Republicans, as well as some Democrats, have opposed the Obama administration's attempt to crack down on for-profit colleges. If Republicans take the Senate, they could try to block the regulation from being enforced at all.

And if the rule makes it past a Republican Congress, its ultimate fate rests with the next president. A Republican president would almost certainly not enforce it, and it's not clear that a Democratic president necessarily would either.

Correction: An earlier version of this article misstated the cohort default rate for for-profit colleges.

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