Tag Archives: federal student aid

For-Profit Schools: New Proposal

On May 19, we discussed the new rule proposals for “For-Profit Schools” arising from concerns that the vocational or technical training they offer does not, in many cases, equip students to earn enough to pay off their school debt.

In our June 21 blog “Federal Student Aid Rules Rollout,” we explained that on June 16, the US Department of Education had issued a proposed rule on the first 13 of 14 issues concerning federal student aid, and that the 14th was being held for reconsideration.

Today, the results of that consideration have been announced.

The U.S. Department of Education today released a proposal that ties the eligibility for federal aid for students at for-profit schools such as University of Phoenix, ITT, and Corinthian Colleges, Inc., for example, to the rates of former students’ salaries and debt repayment.

In an article titled “Obama Cracks Down on For-Profit Colleges, Links Loans to Income,” Bloomberg reports that US Secretary of Education Arne Duncan stated in an interview yesterday that the new ruling would mean that 5 percent of all for-profit education programs would not qualify for any federal student aid whatsoever.

The proposed criteria are two-pronged. Either a for-profit has to demonstrate that a minimum of 45 percent of its former students are successfully paying off their student loans or it must show that graduates are paying less that 20% of their discretionary income or 8% of their total income on repayment of student loans.

A Signal Hill Capital Group analyst, Trace Urdan, suggested that high-priced programs that are intrinsically linked to low-paying jobs—such as criminal justice degrees—may be terminated to new students and eventually phased out, if the proposed rules go through.

Reaction from one of the for-profits cautioned about cutting off education access, while the associate executive direction of the American Association of Collegiate Registrars & Admissions Officers, Barmak Nassiarian, cautioned that standard that allows federal student aid may prove to be too low.

The Wall Street Journal in “U.S. to Scrutinize For-Profit Career Colleges” reports that for “many” for-profits 90 percent of their revenue is through federal aid. There is a 45-day period for comments on the proposal, which would not go into effect until the school year 2012–2013.

Federal Student Aid Rules Rollout

On June 16, the US Department of Education issues a Notice of Proposed Rule Making (NPRM) dealing with higher education. Thirteen of fourteen issues under consideration were announced, with the fourteenth being taken under advisement. These proposals are shaped by testimony and subject to public comment. Here’s a round-up of the proposed reforms:

Student Eligibility for Federal Funding

• In the face of an increasing number of high school “diploma mills” (organizations that grant diplomas that do not represent the legitimate of a legitimate secondary school course of study) Institutions of Higher Education (IHEs) and postsecondary vocational schools must find a way to validate diplomas that are in doubt.

• Students without a (valid) high school diploma would become eligible for federal student aid if and when they complete 6 credits of college credit.

• IHEs and postsecondary vocational schools must implement “satisfactory academic progress policies” (the policies that determine if—by the institution’s standards, students are eligible for financial aid; moreover, they must abide by them.

• The process for verification of information reported by students (and parents) on the Free Application for Federal Student Aid (FAFSA) will be streamlined, reducing—for some students—the amount of additional information they will have to supply.

Consumer Protection

• The USDOE’s authority to act against IHE’s and postsecondary vocational schools that deceive students in advertising, sales, and/or marketing is strengthened.

• Changes to the rules about admissions recruiters compensations intended to help discourage recruiting practices in which students were pushed towards programs were a bad fit for them, either because the financing was beyond their likely means to repay, they were not qualified for the program, or they were unlikely to succeed in it.

• States—some of which have not satisfactorily establish an approval and monitoring process for IHE’s and postsecondary vocational schools—must now do so.

Course Eligibility for Federal Funding

• A new definition of a credit hour, which has here-to-fore not been standardized, and new procedures for accrediting agencies to determine if IHEs and postsecondary vocational schools are using the assignment of credit hours appropriately.

• New regulations on the amount of a program in one IHE or postsecondary vocational schools that can be delivered by another institution, and eligibility requirements for all bodies involved.

• New rules for counting repeated coursework towards eligibility for full-time standing.

• Closing loopholes in the student withdrawal from studies process so that unused funds are properly returned to the USDOE.

• Changes in disbursement to rectify the situation in which students who need their federal funding before the start of school (e.g., to purchase books) will receive it earlier.

For Profits

• In the proposal that is being held, the USDOE is considering requiring for-profit IHEs and postsecondary vocational schools

a) to disclose the program’s graduation rate and job placement rate to prospective students;

b) to disclose information so that the USDOE can calculate student debt and income after completing programs.

The Wall Street Journal reports that the for-profit schools were very pleased that the final NPRM was held for reconsideration because according to industry lobbyists, it could have a profoundly negative effect on the for-profit schools

More Information

You can find more information about the process here.

You can find a Microsoft Word version of the complete NPRM in the small “Related Resources” section to the right of the first paragraph of the press release here.



Financial Aid – Student Loans

Most college students need some sort of assistance. Very few students go into college with all the cash needed to support the whole education process to the end result. Most students have to work during college and/or get financial aid of some sort. Here we will talk about the different types of aid that can be possible solutions.

Federal Aid Grants – These grants are determined by a number of factors. Grants are funds that you receive that you DO NOT have to pay back. These are much better than loans and should be the first resource that a student turns to just to keep their future debt load to a minimum if at all possible. Keep in mind that you can do an Internet search for non-federal aid and you may be surprised. There are many offers out there and many people/organizations willing to fund education. For federal aid (Pell Grant) here are a few of the qualifiers:
  • You must be a US Citizen
  • You must have a GED, high school diploma or take an exam approved by the the Federal Aid Office
  • If you are male, you must be registered with Selective Service
  • Have a valid Social Security card
  • Must be accepted to a college
  • Must not have had a drug conviction
  • Give financial documents to prove need and to see how much you qualify for
Student Loans – Many financial institutions offer student loans at low interest rates for the use of education. Student loan payments are usually deferred until the student is done taking classes. After you have been out of school for a certain length of time then the payment begin. The payment amount naturally depends on the loan amount. Most institutions also offer deferment plans if you find that you can’t make the payment for some reason. Ultimately though, you will end up paying it all back with interest.
Scholarships – Scholarships are like grants in that you do not have to pay them back. The difference is that scholarships have different requirements and each one is unique. There are scholarships based on academic status, some on sports activity, some on theatre, music, or other arts. Thousands of scholarships go unused each year so it is worth finding scholarships that you qualify for, even if they are small, every bit helps. You should not have to pay fees to apply for scholarships so don’t get caught up in a scam.