New Regulations for For-Profit Colleges Aim to Relieve Crushing Student Debt

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by Mary Ellen Flannery

Eric Schmitt, an Iowa father of two, can’t sleep at night.

His massive student-loan debt and “the magnitude of my mistake,” keep him awake, he told U.S. Senators this week.

That mistake? Choosing to attend a for-profit college that put him $50,000 in debt for a degree that potential employers scoff at. Two years after graduating, Schmitt has lost his house, his good credit, and his dreams. Instead of the white-collar career that he hoped for, he’s worked temporary stints as a flagman on road construction sites and as an assembly-line worker in a pesticide plant.

“You are not alone,” Senator Tom Harkin (D-Iowa) told Schmitt. There are tens of thousands of Americans in exactly the same position, victimized by some for-profit schools that take in millions of federal tax dollars but turn out graduates with mountains of debt and worthless degrees.

With all of them in mind, last week the U.S. Department of Education released long-awaited regulations that demand “career colleges” do a better job – or risk losing their Title IV funding. The modest rule, which ramps up over the next five years, requires specific repayment rates and debt-to-income ratios among their graduates.

“I just hope that this (Senate) committee and the Department of Education can make sure families like mine have a real chance at building their future with a real education,” Schmitt said Tuesday to members of the Senate Committee on Health, Education, Labor, and Pensions (HELP).

If you hope the same – that all Americans could access high-quality education without diving into an endless pit of debt — it’s important to call or email your Congressman and urge them to support the new regulations.

“We must promote the use of federal student aid for programs that give students hope a brighter future,” said NEA President Dennis Van Roekel, who praised the Department’s effort. “We don’t have to sacrifice convenience for quality,” he added.

Nearly 25 percent of for-profit students will default on their federal student loans within three years. And, even though for-profit students account for just 12 percent of all college students in America, they account for nearly half of all loan defaults. Students sign on the dotted line, Schmitt said, because school leaders sell them on dreams of well-paid jobs. And, with tuition at for-profit colleges as high as $46,000 a year, they don’t have another way to pay.

Meanwhile, these colleges are relying on taxpayer money to do their predatory business – about 25 percent of the schools get 80 percent of their funding from taxpayers.

“It’s not unfair to ask institutions that receive taxpayer money to be responsible with it,” noted Jim Rice, an English professor at Quinsigamond Community College in Massachusetts, and president of the National Council for Higher Education.

But some for-profit colleges have been anything but responsible. According to government reports, some campuses have aggressively deceived students and federal authorities about the value of their academic programs and the true costs of enrollment. Frequently, their victims are low-income students, women, students of color, and veterans.

The new regulations, which go into effect on July 1, 2012 and were based on three rounds of public hearings, more than 100 private meetings, and more than 90,000 written comments, represent a step forward but their measures are hardly draconian.

The way it would work is, if less than 35 percent of graduates are paying off their loans and graduates have a debt-to-income ratio greater than 12 percent of their total income and 30 percent of their discretionary income, the school would be ineligible for Title IV money – in 2015.

“We’re asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective,” said Secretary of Education Arne Duncan. “This is a perfectly reasonable bar and one that every for-profit program should be able to reach.”

Click here to email your members of congress on this important issue.

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