Debate rages on student loans and for-profit colleges

Recent news stories focusing on the plight of students who graduate from for-profit trade and technical colleges with debt burdens greater than they can handle, even if they land decent jobs, have prompted new Federal rules governing student loans and aid and renewed a debate on the role of for-profit colleges in training and educating the American workforce.

The terms of the debate are framed in a pair of editorials in today's USA Today. In the view of the paper's Editorial Board, the for-profit schools are behaving as scandalously as the subprime mortgage lenders were before the housing bubble popped, as reflected in the following statistics: While for-profit colleges enroll only 10 percent of the nation's college students, they account for 44 percent of the loan defaults. Since the loans are guaranteed by the Federal government, the schools don't suffer in case of default; the students and taxpayers do. If anything, the proposed Federal disclosure regulations and penalties for schools with high default rates are not tough enough, the editorial writers argue.

In the opposite corner is the head of the industry trade group, Career College Association President and CEO Harris N. Miller. In his editorial, Miller argues that the higher default rate merely reflects the fact that for-profit colleges enroll a disproportionate share of low-income students, who default at higher rates no matter where they enroll. While Miller agrees that more disclosure is needed about educational outcomes and the risks of borrowing heavily, and that the worst abuses need to be curbed, he disagrees that for-profit schools should be singled out for new regulations and penalties.

Tips for seeking colleges and student loans

In the middle of the debate are the students. The proposed Federal regulations should help them understand the consequences of heavy borrowing better and keep them away from the educational rip-offs, but will they help them find the best value for their money and improve their chances of career success?

Not necessarily. But these general tips should help students both find the best school for them and borrow wisely when seeking student loans.

Consider community and public colleges. These institutions are already subsidized by your fellow citizens, so they charge less than their for-profit siblings. Community college tuition averages $2500 a year, and tuition at a four-year public institution averages $7000, compared to the average $14,000 cost of attending a for-profit school. Unless you need an advanced degree on a flexible schedule -- an area in which the for-profit schools excel -- chances are that your local community or public college offers a degree or certificate program relevant to your field.

Consider what you will earn after you graduate.The whole premise behind student loans is that the increased earning power that comes with a college degree will enable you to pay off the loan out of your future income. If you are attending a program that charges a lot to train for a career that doesn't pay a lot, you may find yourself in trouble soon after graduation. Do some independent research on careers and schools before choosing a field or enrolling in a program.

More on Student Loans

No Federal Student Loans if No Gainful Jobs
New Federal Student Loans Challenge For-Profit Colleges