New Federal Student Loans Challenge For-Profit Colleges

The Obama Administration points out that for-profit colleges receive billions of dollars from taxpayers through federal student loans. Although the administration does want the United States to be the number one producing nation of college graduates in the world, Obama is still cracking down on colleges that operate for profit.

The Obama Administration points out that for-profit colleges receive billions of dollars from taxpayers through federal student loans. Although the administration does want the United States to be the number one producing nation of college graduates in the world, Obama is still cracking down on colleges that operate for profit.

The Obama Administration wants to ensure that colleges are adhering to the strict rules placed upon them as far as federal student loans go. If the for-profit colleges are not educating students up to the proper standards so that graduates can go out and get "gainful employment" following graduation, then they are risking losing financial aid for their students.

The United States Education Department (DOE) says some for-profit colleges are not educating their students enough to seek gainful employment once they graduate. Students graduate with astronomical student loans to pay back, but since they cannot find jobs, they begin to default on their loans and get further and further into debt. This only shows that the for-profit college's educational system is not working. Obama's plan is to minimize this from occurring. No jobs, no more financial aid.

The Administration has proposed to tests to be given to the colleges to see if they are indeed preparing their students for "gainful employment in a recognized profession" under the law's definition. If the colleges are, they will continue to receive financial aid. If they are not, they will no longer be eligible to receive the financial aid. It's that simple.

Test one measures the relationship between debt loads and how much students earn after they complete a program. Test two measures the rate at which all students repay their loans, whether they complete the program or not.

If the for-profit colleges fail these tests, they will be cut off from receiving student financial aid in the form of federal student loans. For every one hundred graduates from for-profit colleges, eighteen fail to repay their federal student loans compared to five graduates of public colleges and universities. However, The Career College Association called the debt-to-earnings proposal "unwise, unnecessary, unproven and unlawful." They also debate that this kind of law could eliminate programs that cater to about three hundred thousand students, primarily females and minority students would are career college's greatest population. Others say, if the students are paying for college and not getting jobs when they graduate, what is the point of going to the colleges in the first place?