By Dylan Deprey
The beauty school dropout working as a waitress. The certified mechanic stuck at a temp job. The industrial welder hustling on the streets to pay off college debt.
The scenario may look different for everyone, but in an era where post-secondary education is almost necessary for a sustainable career, student debt can loom overhead like an ominous cloud striking monthly for struggling students’ pockets.
“Hardworking students are graduating with certificates that have little-to-no value in the workplace, and then they are stuck with thousands of dollars in debt with no way to repay,” said U.S. Secretary of Education John B. King Jr. in a press conference call.
“Taking out student loans is not necessarily a bad thing. College is by far the best investment a person can make. Most good jobs today require post-secondary credentials, but quality matters,” King Jr. added.
In a response to alleviate debt and deceptive career information at poor-performing for-profit colleges, the U.S. Department of Education released the first debt-to-earnings (D/E) rates for career training programs as required by the 2014 Gainful Employment (GE) regulations, Monday Jan. 9, 2017.
“This is the first-time institutions will be held accountable for leaving students with debt that students cannot repay,” said U.S. Under Secretary of Education Ted Mitchell.
According to the Department of Education one-third of students who graduated from a for-profit institution earned less than a full-time minimum wage worker typically earns in a year.
Following the 2014 GE regulations, for programs to receive federal student aid the estimated annual loan payment must not exceed 20 percent of discretionary income or 8 percent of a graduates’ total earnings.
Debt-to-earnings rates were calculated using debt information from the Dept. of Education, and reported by institutions and earnings data obtained from the Social Security Administration.
Data released by the Department of Education noted that 800 programs serving hundreds of thousands of students failed the Department of Education’s accountability standards with a loan payment greater than 30 percent of discretionary income and 12 percent of total income.
Of that data, 98 percent was for-profit schools, the other 2 percent were non-degree programs at private universities.
“Too many for-profit colleges have misled students, leaving them unable to find jobs that earn enough to pay off their crushing debt,” said U.S. Senator Sherrod Brown.
Programs that fail twice within three consecutive years will lose federal aid. Institutions that fall into the failing category have thirty days to contact students to inform them the school is at risk of losing federal aid. The school will also have to provide credit transfer-ability information and refund eligibility to all students.
Another 1,239 programs fell into the “zone” rating, where programs were neither passing nor failing. For-profit programs accounted for 95 percent, while 5 percent were private universities. Institutions in this group have four years to improve.
“This serves to promote transparency to students and accountability to the taxpayers,” Mitchell said.
He added that schools would also have to provide prospecting students with the average graduate earnings, and what they would owe following graduation.
Although there was the question of the incoming Trump administration on Jan. 20, King stated that the Dept. of Education was confident that the rule reflected the best interest of students and taxpayers.
There were an estimated 39,000 GE programs when the law was enacted in 2014, as a result there is now around 29,000 programs with a focus on fixing existing programs.
“By making these debt-to-earning rates public, we are empowering students and their families with information to use and make better decisions,” King Jr. said.
“We are also giving career colleges an opportunity, and in some cases a warning, to support their graduates’ financial future or lose eligibility for federal funds.”