The Department of Education issued new rules on student loans to curb Federal financial aid at schools where most students don`t pay back what they borrowed.
The New York Times said that the Obama government published regulations that would require for-profit colleges to have at least 45% of their former students paying the principal of their loans for the institution to be fully-eligible to receive student aid. Schools with less than 35% of former students paying down loans would not qualify for federal aid for new students.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT reported that the tighter controls come amid increasing concern that some profit schools issue expensive, but worthless degrees.
BARMAK NASSIRIAN, ASSOC. EXECUTIVE DIRECTOR, AACRAO said that it is a step towards the right direction and it will provide some measure of protection for students and taxpayers.
The Times reported that 8% of higher-education students currently attend for-profit colleges, but many graduates leave with punishing debt and are unable to earn enough money to repay their loans.
For-profit colleges, which enroll about 8 percent of post-secondary students, received nearly 25 percent of federal student aid in 2008-09 and 90 percent of students in some programs, receive federal education loans.
HARRIS MILLER, PRES., CAREER COLLEGE ASSOCIATION feels that it is a simplistic and wrong-headed way to approach the question of whether students are getting a good return on their investment and taxpayers are getting a good return on investment.
The U.S. Education Department estimated the rules would end loans to 5% of for-profit college programs and that 55% of for-profit schools would have to warn students they may have difficulty making enough to repay their loans.
Growth of for-profit colleges increased 25% from 1998 to 2008, while overall college enrollment rose 31%. The Times said the "gainful employment" rules could effectively end programs whose students have the most debt and least likelihood of finding a good job.
The final rules will be published in November.
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