How Much Debt Is Too Much?

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 Luzer

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