CFPB Puts Spotlight on For-Profit Colleges for Allowing Too Much Student Loan Debt: Five Things You Need to Know

On January 5, the Consumer Financial Protection Bureau turned a spotlight on for-profit colleges for the amount of student loan debt they are allowing students to accumulate with little ability to repay. The Obama administration defined affordability of student loan payments as no more than 20 percent of take home pay, or 8 percent of gross income. Government data shows more than 800 career-training programs across 296 schools produced graduates who recently left school with loan payments exceeding 30 percent of their annual discretionary income.

Of the 2,042 at-risk vocational programs, 95 percent are at for-profit colleges according to the Department of Education. Among these colleges is an Ivy League school, Harvard University, for its certificate in drama program. Unless these schools challenge the data, they will have to warn incoming prospective students that they are at risk of losing access to federal student loans within a few years.

If you are at a school in danger of losing federal funding, there are five things you need to know.

  1. You may need to find a different way to fund your schooling.  Students at schools without federal funding end up having to pay out of pocket or take on private loans.
  2. Without federal funding, your school may end up having to close down. Have a back-up plan so you can be prepared if this happens. You may need to find a school with a similar program to transfer to.
  3. If you are currently attending or interested in attending an at-risk school, you may not even know about it. Be sure to do your research. Check out their student loan default rates and check out the Department of Education’s College Scorecard.
  4. If your school closes, you may be eligible for federal student loan forgiveness. Repayment does not include money paid out-of-pocket or wasted time.
  5. Know where to go if you have questions. Many NFCC member agencies offer student loan counseling.  Find resources and get the answers and help you need at www.studentloanhelp.org!

Who is the NFCC?

Founded in 1951, the National Foundation for Credit Counseling® (NFCC®) is the nation's first and largest nonprofit dedicated to improving people's financial well-being.

NFCC members help millions of consumers like you through community-based offices located in all 50 states and Puerto Rico. Each NFCC member agency has earned our seal by adhering to high standards and ethical practices designed to help you achieve financial stability.

Member agencies are able to offer their services for nominal fees based on their current funding status. Funding for operations and services comes from an ever-changing combination of federal, state and local government grants, as well as donations from financial industry participants and private donors.

For more on the NFCC, visit www.NFCC.org

Thank you to our funders.

The Sharpen Your Financial Focus program is an initiative of the National Foundation for Credit Counseling (NFCC) in partnership with a broad cross-section of supporters. Together, we are committed to increasing the financial well-being of Americans. This initiative is partially funded by Bank of America, Chase, Synchrony Financial, Wells Fargo and other major financial institutions. We thank all funders and partners who make this program possible. For more information, visit www.SharpenToday.org.

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For NFCC Media Inquiries:
Bruce McClary
Vice President of Communications
Email: bmcclary@nfcc.org