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New rules proposed by the Department of Education would essentially require institutions of higher learning to keep student debt payments below 8 percent of students’ gross income. This makes some proprietary schools very unhappy. According to an article by Allison Sherry in the Denver Post:
For-profit officials say the proposed rules are too harsh and are meant to limit their prosperity — or push them out of business.
“I think maybe there is a hidden motivation here,” said Wallace Pond, president of Colorado Technical University, which has more than 30,000 students, mostly online, from across the country.
“I think they’re trying to push students into community colleges, and I don’t think that’s a bad idea. Community colleges are a godsend to many students in this country, but they are experiencing critical capacity issues,” he said.
Well yes, community colleges are certainly overburdened, particularly with the unemployed. But this conspiracy theory seems misguided. It seems odd that Pond isn’t interested in addressing whether or not having a debt load greater than eight percent of one’s income might actually be a problem, a problem he can solve.
As the Sherrry article points out, an associate’s degree from a Colorado community college costs about $6,000. A proprietary-school associate’s, in contrast, can set students back about $30,000.
For $30,000 one would hope to get a job that makes paying the loans back relatively easy. Some 96 percent of students attending for-profit schools, at least those who graduate with bachelor’s degrees, go into debt to do so.
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Daniel L. Bennett on March 26, 2010 12:27 PM:
The gainful employment 8% cap is a terribly flawed proposal. Financial aid expert Mark Kantrowitz put out a policy paper arguing that it is unrealistic and way too strict and that even traditional and professional schools (if subject to the same rule) would have a hard time complying with it.
I did an analysis on what the max debt that could be borrowed for 10 occupations that are expected to be among those with the greatest employment growth in the next 10 years, and coincidentally the career colleges train people in. For comparison, I computed the max debt that a law student could borrow...$44k (and that includes any undergraduate debt).
jeffreydj on March 26, 2010 8:10 PM:
I'm a little unclear on why the greed-driven online colleges are so frightened by such an idea. It's the federal government that holds the loan, and if I am not liable for more than 8% of my income for its repayment, it's my creditor, the gov't, who faces the lessened trickle of dough.
Now if the feds decide to lean on the Internet diploma mills for a reduction of the student's exposure, that would be simply too bad, wouldn't it?
Debt help on November 11, 2010 2:32 PM:
i am agreed with Wallace Pond, president of Colorado Technical University as he say
"I think they're trying to push students into community colleges, and I don't think that's a bad idea. Community colleges are a godsend to many students in this country, but they are experiencing critical capacity issues."