Business

US Court Upholds Tough Rules on For-Profit College Loans

Published

11 years ago

June 24, 2015

The entrance to the DeVry University in Miramar, Fla. is seen in this Tuesday, Nov. 24, 2009. Many Pell grant recipients are using their money to attend for-profit schools. (AP Photo/J Pat Carter)

ANNE FLAHERTY, Associated Press

WASHINGTON (AP) — A federal court has ruled in favor of tough new regulations aimed at career training programs, dealing a major blow to the for-profit college industry.

In an opinion released Tuesday, the U.S. District Court for the District of Columbia ruled the Education Department has the right to demand that schools show their graduates make enough money to repay their student loans. The Education Department announced its plan last fall as a way of weeding out fraudulent colleges that were targeting low-income students because of their ability to receive federal student loans, grants and military benefits.

Under the new rules, which go into effect July 1, a program has to show that the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of total earnings. The administration said about 99 percent of the training programs that will be affected come from the for-profit sector, although affected career training programs can come from certificate programs elsewhere in higher education.

Programs that don’t pass the new “gainful employment” standards risk losing access to federal money.

The Association of Private Sector Colleges and Universities, a trade group representing 1,400 for-profit colleges, sued to stop the rules from taking effect on July 1. APSCU argued that the regulations were at odds with existing law, and that the administration had arbitrarily and unfairly devised them as a way to rein in for-profit colleges.

In his opinion, U.S. District Judge John Bates dismissed the industry group’s argument entirely, ruling that each piece of the regulation should remain intact.

“Of course, the association might not agree with the department’s explanations,” he wrote at one point in the 37-page ruling. “But that alone does not make them irrational, arbitrary, or capricious.”

APSCU General Counsel Sally Stroup said in a statement the trade group is disappointed in the court decision and considering its options.

“Indeed, as numerous commentators have observed, the primary impact of the regulation will be to deprive hundreds of thousands of students of access to higher education,” Stroup wrote. “That is inconsistent with the congressional plan under the Higher Education Act, unlawful and bad policy.”

Education Secretary Arne Duncan called the ruling a “win” for students and taxpayers, and urged lawmakers to stop fighting against the regulations.

“Every student who enrolls in college of any kind deserves a fair shot at a degree or credential that equips them for success,” he said in a statement. “We’ll continue to fight until that’s a reality.”

The for-profit industry has among the highest student loan default rates and lowest graduation rates in higher education, and now the government is looking at footing the bill in what has become a major consumer bailout. Earlier this month, Duncan said the government would make it easier for students who attended the now-defunct Corinthian Colleges to erase their debt.

About $3.6 billion in federal loans has been given to these students since 2010. That potentially puts the taxpayer on the hook for that amount, although officials say it’s unlikely that every loan will qualify for relief.

The latest rule was the administration’s second attempt at ensuring student loans go to programs that help people find jobs. The first rule was blocked by a judge in 2012 that said the regulations were too arbitrary.

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Financial Wellness and Mental Health: Managing Money Stress in College 

While everyone’s financial situation is unique, several common sources of stress have the potential to strain your financial health. These include financial and economic uncertainty, existing debts, unexpected expenses, and mental or physical health changes. Financial stress may differ from situation to situation, but understanding the factors contributing to yours may help you begin to craft a plan for your unique circumstances.

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As a college student, managing financial responsibilities can be stressful.

If you’ve found yourself staying up late thinking about your finances or just feeling anxious overall about your financial future, you’re not alone. In one survey, 78% of college students who reported financial stress had negative impacts on their mental health, and 59% considered dropping out. While finances can impact overall stress, taking steps to manage your finances can support your mental, emotional and physical well-being.

When it comes to money, the sources of stress may look different for each student, but identifying the underlying causes and setting goals accordingly may help you feel more confident about your financial future.

Consider these strategies to help improve your financial wellness and reduce stress.

Understand what causes financial stress

2. Determine your financial priorities

Start by reflecting on your financial priorities. For students this often includes paying for school or paying off student loans, studying abroad, saving for spring break, building an emergency fund, paying down credit card debt or buying a car. Name the milestones that are most important to you, and plan accordingly.

3. Create a plan and stick to it

While setting actionable goals starts you on the journey to better financial health, it’s essential to craft a plan to follow through. Identifying and committing to a savings plan may give you a greater sense of control over your finances, which may help reduce your stress. Creating and sticking to a budget allows you to better track where your money is going so you may spend less and save more.

4. Pay down debt

Many students have some form of debt and want to make progress toward reducing their debt obligations. One option is the debt avalanche method, which focuses on paying off your debt with the highest interest rate first, then moving on to the debt with the next-highest interest rate. Another is the debt snowball method, which builds momentum by paying off your smallest debt balance, and then working your way up to the largest amounts.

5. Build your financial resilience

Some financial stress may be inevitable, but building financial resilience may allow you to overcome obstacles more easily. The more you learn about managing your money, for instance, the more prepared you’ll feel if the unexpected happens. Growing your emergency savings also may increase resilience since you’ll be more financially prepared to cover unexpected expenses or pay your living expenses.

6. Seek help and support

Many colleges have resources to help students experiencing financial stress, like financial literacy courses or funds that provide some assistance for students in need. Talk to your admissions counselor or advisor about your concerns, and they can direct you to sources of support. Your school’s counseling center can also be a great resource for mental health assistance if you’re struggling with financial stress.

The bottom line

Financial stress can affect college students’ health and wellbeing, but it doesn’t have to derail your dreams. Setting smart financial goals and developing simple plans to achieve them may help ease your stress. Revisit and adjust your plan as needed to ensure it continues to work for you, and seek additional support on campus as needed to help keep you on track.

 JPMorgan Chase Bank, N.A. Member FDIC