Tighter Rules for Student Loans at For-Profit Colleges Hit a Roadblock

college costsConsumer advocates concerned about excessive debt loads among graduates of for-profit colleges will have to wait to find out whether the U.S. Education Department will take steps to protect students.

The New York Times reports that "the Education Department said Tuesday that it had split off and delayed a decision on the most controversial part of proposed new student-aid regulations -- the treatment of for-profit college programs whose graduates do not earn enough to repay their loans."

Lobbying Behind Delay?

One proposal that was being evaluated had suggested that for-profit colleges -- most of which derive the bulk of their funding from federal student loan programs -- lose eligibility for federal money if their graduates are unable to pay back their loans in 10 years with 8% of their income. The for-profit education industry has been lobbying heavily to fight the change, and that could be one factor behind the delay.

As I've written in the past, the idea of punishing schools that saddle students with unmanageable debt loads is a good one. But there's no valid reason to restrict the new regulations to for-profit colleges, given that surveys show most students at any college attend largely to better themselves financially. A school that sticks students with loans that leave them worse off than if they hadn't gone shouldn't be supported by the federal government.

The New York Times recently told the story of a student who graduated from New York University with nearly $100,000 in debt -- and no viable path for getting out of it.

Saddling students with excessive debt is immoral and predatory. And whether a college pays its profits to shareholders or to basketball coaches and researchers doesn't change that. The proposed rule should be amended to apply to every college in America that receives federal funding.

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