Financial Fitness


US places new student debt rules on for-profit colleges

Posted at 6:33 AM, Oct 31, 2014

The U.S. Department of Education on Thursday outlined new rules that could restrict the use of federal funds at for-profit colleges.

The rules aim to keep for-profit colleges from saddling students with loans that their degrees will not reasonably allow them to repay.

For-profit colleges now account for 11 percent of college enrollment, but 44 percent of student loan defaults, the department said.

To remain eligible for federal aid grants and loans, schools must now demonstrate that graduates of degree and certification programs spend no more than 8 percent of their total earnings, or 20 percent of their discretionary earnings, on loan repayments.

While the rules also apply to nondegree programs at public and nonprofit schools, the department said 99 percent of the estimated 840,000 students in programs that fall outside the standards go to for-profit colleges.

"Career colleges must be a steppingstone to the middle class, but too many hardworking students find themselves buried in debt with little to show for it," Secretary of Education Arne Duncan said in a statement. "That is simply unacceptable. These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes."

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