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. There are supposedly going to be new “gainful employment” rules. This could determine whether or not financial aid is given. With rising college costs , the return on investment is being questioned. Loans won’t be given to anybody anymore with gainful employment rules. Students with degrees that will actually make money may be the only ones with loans. Article source – Gainful employment rules target federal aid at for-profit schools by Personal Money Store.
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. When students from for-profit schools have less than 45 percent of graduates repaying their loans, the schools will lose federal aid. For-profit colleges had bad rates in 2009 already, says the Los Angeles Times. The rate was around 36 percent. The student loan repayment rate at private nonprofit schools was 56 percent. 54 percent were paying their loans of those coming from state colleges. Without federal aid, for-profit schools would lose a lot. They might even have to shut down. 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 reports that eligible for-profit colleges must have graduates with a debt-to-earnings ratio of less than 20 percent of discretionary income or 8 percent of total income. Prospective students have to pick their debt to income ratios before entering the school if tests are failed.
For-profit colleges take advantage of the government
Federal aid has gone up. This is especially true of for-profit colleges. For-profit colleges received quite a chunk of money in just 2000. $ 4 billion was given in federal student aid, reports NPR. Now $ 27 billion is given. Marketing companies saying “college” make students confused. They pay a premium to take courses and borrow money to pay the bill. Upon graduation, often the degree isn’t really worth what they paid. They can’t pay back the loan. Taxpayers take over. It isn’t really very fair.
Making college a sound investment
Colleges are getting more costly and many are wondering if it is worth all the student loans to pay for it all. Allison Lynn who works at MSNBC thinks college is just another investment. Anybody who knows about investing knows you don’t make an investment without careful consideration first. Future income won’t likely come from a degree in philosophy. Many 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 instead of savings or a job. The income you make your first year out of school is likely to be a max point for the loans you take out. This comes from Suze Orman who works in finance.
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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