Aamer Madhani

USA TODAY

Nearly half of college loan defaults are from students enrolled in such programs.

Institutions must publicly disclose more information about program cost and debt.

Private-sector colleges group calls the rules discriminatory and punitive.

WASHINGTON — The Obama administration will release new regulations on Friday requiring most for-profit and career — or vocational — colleges to demonstrate that they are properly preparing students for careers after graduation or face being barred from federal student aid programs.

Students at for-profit colleges represent about 13% of the total higher education population, but a disproportionate number of federal student loans — about 31% of all loans --go to such schools, which are popular with adult students and veterans trying to launch careers. Nearly half of all college loan defaults are from students enrolled in such programs, according to Department of Education statistics.

"Too many of these programs fail to provide students with the training they need — at the taxpayers' expense and at the cost of these students' futures," Education Secretary Arne Duncan said in a call with reporters to preview the new rules. "That's why we are taking action to protect Americans from poor performing career programs that burden students with debt and leave them few opportunities to succeed."

President Obama said in his State of the Union Address in January that he would "work with Congress to see how we can help even more Americans who feel trapped by student loan debt." Underscoring Obama's concern about the problem of yawning debt facing many students who attend for-profits and career colleges, the White House invited a former student of DeVry University, one of the most prominent for-profits, who had $90,000 in education-loan debt to sit in the first lady's box for the president's speech.

Under the new requirements, the colleges will have to demonstrate that graduates' debt load on average does not exceed 20% of their discretionary earnings or 8% of their total earnings. Institutions must also demonstrate that former students' default rate does not exceed 30%.

A program becomes ineligible for student federal aid programs if it fails to hit the debt-to-earning standards any two out of three consecutive years, or the institution default rate exceeds 30% for three consecutive years. Colleges could also be disqualified if the institutions are at near failing rates for four consecutive years.

The Association of Private Sector Colleges and Universities called the new regulations "discriminatory" and "punitive."

"If the regulation were applied to all of higher education, programs like a bachelor's degree in journalism from Northwestern University, a law degree from George Washington University Law School and a bachelor's degree in social work from Virginia Commonwealth University, they would all be penalized," the group said in a statement.

The institutions will also be required to publicly disclose more detailed information about the program costs, debt, and performance of their alumni's gainful employment, according to the Education Department.

Obama made an attempt during his first term to impose similar rules on for-profits, but a federal judge in 2012 invalidated the rules. At the time, U.S. District Judge Rudolph Contreras called the requirements "arbitrary and capricious," because they weren't based on any economic studies.

Duncan said that the new debt-to-earnings ratio is based on expert research and mortgage industry standards for sustainable levels of debt.