The government plans to release student loan repayment rates for for-profit schools on Friday, identifying institutions by name, as part of efforts to tighten scrutiny of federal student aid.
The step underscores how the Department of Education is trying to strengthen links between federal student aid and students' ability to repay loans after completing their education.
Federal student aid is a major source of income at for-profit colleges.
For-profit education companies, including bellwether Apollo Group Inc, DeVry Inc and Career Education Corp, are closely watching a debate over proposals that would require profit-generating schools to prove ex-students are capable of repaying loans.
The data to be released on Friday will provide the cumulative four-year repayment rates by institutions for all Title IV-eligible institutions, David Bergeron, acting deputy assistant secretary for policy, planning and innovation, told a briefing for industry representatives.
The payment rate data was derived from analysis conducted by the department using the national student loan data system, he said.
The department issued a proposed rule on July 22 that would require for-profit schools that receive federal student loans under Title IV of the 1965 Higher Education Act to show that former students are repaying their loans or are capable of doing so.
Under the gainful employment proposal, the government would no longer lend to programs if more than 65 percent of former students failed to pay the principal on federal loans, and if their graduates' debt was more than 30 percent of discretionary income and 12 percent of total income, the department said.
Education Secretary Arne Duncan has forecast that 5 percent of programs would lose those funds.
Student loans are a large source of revenue for many for-profit colleges. The University of Phoenix, the nation's largest for-profit college, generated 86 percent of its 2009 revenue from federal student loans. The University of Phoenix represented 95 percent of Apollo's 2009 net revenue, according to the company's financial statements.
For-profit institutions are ineligible for student loans if more than 90 percent of their revenue comes from federal student loans for two consecutive years.
According to industry figures, enrollment in for-profit colleges was 1.8 million students in 2008, or 9 percent of enrollment at all degree and non-degree institutions eligible to receive federal financial aid, up from 240,000 students in 1995.
(Reporting by Emma Ashburn; editing by John Wallace)