For-profit colleges gird for battle on student debt rules
WASHINGTON — As the Obama administration prepares to establish rules governing for-profit colleges this year, student advocates and the career college industry are waging a fierce battle to shape the coming regulations.
Stakeholders on both sides of the debate are ramping up their push on the administration just as the public comment period on a proposed “gainful employment” regulation is set to close May 26.
Under the proposal that the administration presented in March, colleges would have to demonstrate that graduates' debt load on average does not exceed 30 percent of their discretionary earnings or 12 percent of their total earnings.
The rules would put programs whose graduates have debt-to-income ratios of 8 to 12 percent or debt-to-discretionary-income ratios of 20 to 30 percent in a danger zone, which would require the schools to warn students that they might become ineligible for federal aid.
The administration pointed to the fact that students at for-profit colleges represent about 13 percent of the higher-education population but are responsible for nearly half of all college loan defaults.
Some are arguing that the proposal laid out by the administration does not go far enough.
Student advocates from groups such as Young Invincibles and CREDO Mobile are calling for the regulations to include financial relief for students at institutions that lose eligibility to federal aid, enrollment limits on poorly performing schools and stricter standards.
“I think the new rules would slow what's going on,” said Mike DiGiacomo, 33, of Randolph, Mass., who racked up more than $85,000 in debt and lent his story to a CREDO online petition that has garnered more than 100,000 signatures. “But they are really just putting a Band-Aid on the problem.”
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