Government Funding For Schools
New Gainful Employment Rules Make Federal Aid More Difficult At All Of The For-profit Colleges
There was a report released by the Education Department last week. It showed that two thirds of students at for-profit schools have been avoiding their federal student loan payments. You will find supposedly going to be new “gainful employment” rules. This could determine whether or not financial aid is given. There is a common concern going around. College may not be an investment anymore for some. New gainful employment rules require for-profit colleges to prove that a graduate’s projected income makes student loan debt worthwhile.
Student loan repayment rates make gainful employment rules required
The Education Department has to write new rules about gainful employment because of the Federal student loan repayment rates. Its proposal cuts off federal aid to for-profit colleges where less than 45 percent of students repay their loans. In an article about the report, the Los Angeles Times said that the federal student loan repayment rate at for-profit colleges was only 36 percent in 2009. Private nonprofit schools had about a 56 percent repayment rate. At state colleges and universities, 54 percent repaid their loans. For-profit colleges would lose a lot if federal aid didn’t come through. Some rely on federal student loan funding for nearly 90 percent of their revenue.
Is it really worth it giving to for-profit schools?
Gainful employment rules also consider the total student loan debt and average earnings. The Center for College Affordability offers numbers on how the debt to income ratio has to be for students to get loans. Discretionary income has to be less than 20 percent while the total income has to be less than 8 percent. If the college fails these tests, it must disclose its graduates’ debt-to-earnings ratios to prospective students.
Government losing money to for-profit colleges
The amount of federal aid for-profit colleges get has soared. NPR reports that in 2000, $ 4 billion in federal student aid went to for-profit colleges. There is a lot more today. $ 27 billion worth is given. Marketing companies saying “college” make students confused. They take these classes they have to pay for. They then borrow cash to pay for them. Many pay too much for this degree. The degree isn’t worth hardly anything. They can’t get a job that would enable them to pay back the loan. The bill is paid by taxpayers.
Investing in college
Rising college costs are making Americans battered by the economic downturn wonder if student loan debt for college is worth it. MSNBC has Allison Lynn working for them who says that college is just another investment that needs to be cautiously looked at before making a decision. Future income won’t likely come from a degree in philosophy. Numerous individuals aren’t doing a good job of figuring out what cash they really need to take out in student loans. They are just living off of loans rather than savings or a job. Personal finance pundit Suze Orman recommends not taking on more in loans than one expects to make in their first year out of school.
Additional reading
Los Angeles Times
articles.latimes.com/2010/aug/16/business/la-fi-for-profit-colleges-20100816
NPR
npr.org/templates/story/story.php?storyId=129259157
MSNBC
msnbc.msn.com/id/38561562/ns/business-personal_finance/
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