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.
- 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.
- 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.
- 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.
- 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.
- 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!