Wise and necessary!

Education Department Takes Aim at For-Profits With Student-Debt Rule (Chronicle of Higher Education)

     After a five-week delay, the Education Department will release a rule Friday that would penalize for-profit colleges that saddle students with unmanageable amounts of debt.
     The proposed "gainful employment" rule, which has been anticipated by for-profit colleges and short-sellers alike, would cut off federal aid to programs whose students have the highest debt burdens and lowest loan-repayment rates, while limiting enrollment growth at hundreds of other programs. For-profit lobbyists are calling the rule "unwise and unnecessary."
     In a conference call with reporters, the Education Department said it was seeking to protect students and taxpayers from the high costs of student-loan defaults.
     "While career colleges play a vital role in training our work force to be globally competitive, some of them are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use," said Secretary of Education Arne Duncan in a written statement.
. . .
     The share of borrowers defaulting on their student loans in the first two years of repayment has climbed steadily in recent years, reaching a 10-year high of 7.2 percent this year, according to the Education Department.
     For-profit colleges, which educate less than 10 percent of students but receive close to a quarter of federal-student-loan dollars, account for a disproportionate share of those defaults. Two years into repayment, roughly 12 percent of borrowers who attended for-profit colleges have defaulted on their federal loans, compared with 6 percent of those who attended public colleges and 4 percent who attended private colleges.
     When the government is unable to collect on defaulted loans, taxpayers are on the hook for the losses. Borrowers, meanwhile, face damaged credit histories, are ineligible for additional federal aid, and may have their wages and tax refunds seized by the government.... (Continued)