Education Department Looks at Debt

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A proposal by the U.S. Department of Education aimed to prevent for-profit colleges from overcharging on tuition is running into trouble. From Inside Higher Ed:

Included in the department’s first draft of revised rules to guard against the abuse of federal financial aid funds, the proposal suggests two possible methods aimed at ensuring that students and taxpayers aren’t paying for programs that don’t lead to “gainful employment” or that impose too big a debt burden on students in relation to their expected earnings in the field for which the program is training them. But many on a federally appointed panel of college officials, consumer advocates, financial aid administrators and others tasked with providing input as the department revises the rules were vocal in their opposition to the department’s ideas.

The department has proposed several options to assess student debt in order for a vocational school to be approved. One option is to determine the value of the program based on the earnings difference between a high school graduate and a graduate of the program. Another option is to look at whether earnings are sufficient to pay off student debt.

It is probably about time a regulator looked at the relationship between debt assumed and the career a graduate gets, but the department’s proposals look very unattractive to the panel of college officials and financial aid administrators evaluating them. One panelist said the department was overstepping its authority and its proposals amounted to price controls.

Another panelist, Joan Zanders of Northern Virginia Community College, pointed out that the real problem was that it was simply very burdensome and inefficient to deal with the debt issue by merely adding a new step to the already cumbersome approval process.

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer