What if a school's federal aid was cut because members of the graduating classes were not making enough money? Students at over 1,000 for−profit colleges across the nation, including some here in Massachusetts, now have to ask themselves this question.
The U.S. Department of Education in June announced plans to limit aid to trade schools whose student loan repayment rates are particularly low — a widespread problem in the current economy, as graduates find themselves unable to land well−paying jobs with the training they received. Schools with rates below 45 percent would have their funding significantly reduced, while those with rates below 35 percent would potentially have their funding cut altogether.
In recent years, for−profit trade schools have become increasingly popular — but at a significant cost to taxpayers, as many for−profit schools rely on federal grants and loans for the majority of their revenue but cannot afford to pay them back.
And it's no surprise why: While roughly half of graduates from public and nonprofit colleges and universities begin repaying loans shortly after graduation, only about a third of graduates from for−profit schools in the past four years have started the repayment process.
The intended cuts are scheduled to be put into effect in 2012 and would likely impact several Massachusetts schools, including Lincoln Technical Institute in Somerville, Brockton and Lowell and the Everest Institute campuses in Brighton and Chelsea.
Peter Waller, Chief Executive Officer of Corinthian Colleges, Inc. (CCI), the parent company of a number of for−profit schools, including Everest Institute, WyoTech Technical School and Heald College, warned that the planned regulations will produce detrimental educational and economic results that the Department of Education is not even considering and could remove countless potential jobs from the market.
"The ... regulation is supposed to protect students, but in reality, it would cut off hundreds of thousands of students from promising careers that make America work," Waller wrote on the company's website. CCI declined to comment to the Daily directly on the matter.
In an effort to discourage the Department of Education to finalize the bill, CCI has organized a "My Career Counts!" campaign featuring the stories of successful graduates who have subsequently been hired by higher−paying employers because of their education.
"We are urging the Department to put the brakes on this proposal before its unintended consequences take a human toll. As currently written, this regulation would close the door to future career training for many people who need it urgently, particularly low−income and minority students. And at a time when our economy is struggling and unemployment is high, the regulation would eliminate jobs instead of creating them. Clearly, this is the wrong rule at the wrong time," Waler said on the website.
Tufts sophomore John Whelan, who interned this summer with SimpleTuition, a company that publishes education and finance information, explained that the federal government's decision on the matter was a difficult but ultimately pragmatic one.
"It's a real catch−22: People go to for−profit colleges [or] career schools because they can't afford to attend a more ‘legitimate' institution, and [they] take on debt to do so. They then wind up either not graduating and retaining debt or graduating and working a relatively low−income job with minimal upside because their degree is suspect — all while struggling to make minimum payments on their loans," Whelan said.
"The federal government isn't so keen on lending to people on such shaky financial footing, but without some form of aid, they can't afford education and, as it follows, improve their financial situation. Not to play devil's advocate entirely, but the federal government can't afford to give millions of dollars away to borrowers who are less than reliable," he said.
Whelan, however, thinks the regulations could actually benefit students seeking a high−quality education.
"[Because of the regulations,] the dodgier of the for−profit colleges won't be around much longer. If the federal government does reduce or eliminate student funding at these institutions, it'll only catalyze the decrease of sketchy for−profit schools, which would be a boon to students actually looking for a more quality education at a career school," he said.
While for−profit colleges have had trouble getting loans repaid, nonprofit colleges have been successful in recovering their student loans.
According to Director of Public Relations Kim Thurler, 99 percent of Tufts graduates are able to repay their loans.
"The federal government calculates the Cohort Default Rate for every college and university in the country," she said. "This is the percent of students in each graduating class who are not repaying their federal student loans. The national average default rate is 7 percent. The default rate at Tufts is 0.8 percent and is one of the lowest default rates in the country."
To ensure that this success continues, Tufts organizes several programs to advise students who take out loans before they graduate.
"During the senior year, every graduating student with a student loan is invited to attend in−person group sessions to hear about their repayment options. In addition, each student borrower is required to complete an online exit interview which reviews the terms and conditions of repaying their loans. We also have a staff member who is available to meet one−on−one with students about their repayment options," Thurler said.
