Colleges Establish New Guidelines on Student Loans
Apply for a Loan
Secured with SHA-256 Encryption
UPDATED: Jun 3, 2011
Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.
Certain profit based Colleges, such as DeVry University are set to lose federal government assistance unless they meet new guidelines on student loans as indicated by the United States Department of Education. This excludes non profit colleges such as DePaul University.
Students at non profit colleges make up 88 percent of those in school, but only represent about 1/2 of the defaulted student loans; therefore, the other half pertains to defaults from for profit schools. This is the reason why the “gainful employment” talk within the government has been in recent discussions where if graduates owe too much relative to their income, or too few former students are paying back their student loans, colleges may lose grants and federal tuition loans.
In order to hold federal assistance, for profit schools will have to show that their previous attendees have not defaulted on more than 65 percent of the loans and that the student loan payments do not equate to one third of their total income, or twelve percent of their annual income. Estimates predict that close to 20 percent of such colleges will fail to reach those requirements and only about 95 percent will get to keep such federal government aid programs which may leave up to 5 percent closing down.
Arne Duncan, Education Secretary, said, “We’re asking companies that get up to 90 percent of their profits from taxpayer dollars to be at least 35 percent effective. “This is a perfectly reasonable bar and one that every for-profit program should be able to reach.”
This will all set into place July of 2012; however, schools may not be ruled ineligible until 2015, giving 3 years for readjustment. Talk continues as the requirements are proposed to become more lenient as stocks for profit based schools increased.