Feds To Cut Aid at For-Profit Colleges

| June 7, 2010

A recent article in the NY Times notes the federal Department of Education is on the verge of eliminating federal aid it gives to for-profit schools. The measure, aptly dubbed the “gainful employment” rule, is seen as punishment at for-profit schools whose graduates fail to repay their student loans as a result of lack of job opportunities or low paying jobs. The proposed measure will deny federal aid to any for-profit school whose graduates debt are too high to be repaid over a 10 year period with 8% of their starting salary.

The White House and Secretary of Education Arne Duncan have largely remained silent in the debate surrounding federal aid to for-profit colleges.

Steven Eisman, credited with anticipating the mortgage crisis before it started, recently compared for-profit colleges with mortgage lenders as they both “rested on proliferation of loans to low-income people who would not be able to repay them.” His sentiments were shared by Chris Lindstrom, higher education program director at the U.S. Public Interest Research Group, who claims “these programs [for-profit schools] overpromise, underdeliver and load vulnerable students up with way too much debt.”

The measure is still a long way from implementation as any final word will be decided by November 2010 and slated to take effect in July 2011 if it is passed.

Check out Erin’s previous blog post about a documentary focusing solely on for- profit schools and the debt its students incurs.