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Highlights in Higher Educa tion

On July 1st, 2015 a new rule by the US Department of Education (USDE) came into effect, the Gainful Employment Rule. Because of this new policy, colleges will now have 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.” (Associated Press) The rule is designed to make higher education institutions, especially those in the for-profit sector, more accountable for ensuring that students get “work that pays well enough to repay their student loans.” (NACAC) The goal of the rule’s implementation is to combat “abusive” practices of trade schools and career training programs. The abusive practices include how these schools use lending schemes that target students and are similar to the subprime loans that were a part of the housing crisis of 2008.

The Obama Administration stance on the new Gainful Employment Rule aligns with the sentiments of US Secretary of Education Arne Duncan. Both believe that, “There are too many [institutions that] have been morally unconscionable with what they’ve done…People have been taking out these big loans, ending up in a worse financial situation than when [they] started.” Duncan stated that “Nobody signs up for that.” (CNN Money) and the Obama Administration clearly agrees by expressing that for-profit colleges need to be monitored more closely since they have a tendency to “lure students with misleading promises, then saddle them with debts they can’t pay back despite their newly granted degrees.” The White House thus favors the new Gainful Employment Rule since it “requires colleges to track their graduates’ performance in the workforce and eventually will cut off funding for career training programs that fall short.” (Politico)

According to the US News and World Report this measure also receives support from both students and taxpayers. These groups of individuals agree that when someone enrolls in a higher education institution it is under the impression that they will better themselves and better their job prospects upon graduation so that institution in turn has the responsibility to give them the necessary resources to be successful. The article continues that in too many instances “career colleges leave students burdened with debt they’ll never be able to repay and stick taxpayers with the bill.” Those in favor of the new Gainful Employment Rule share the viewpoint that trade Schools, whom will be the most affected by this new policy, were meant to be a cheap alternative to college, a place where students could pay less to attain skills to get a better job. Along with the White House and the USDE, students and tax payers feel that trade and career training schools are not fulfilling their purpose and additionally claim that they are functioning under a false pretense that results in students getting the opposite of what they wanted “high debt and low salaries.” (CNBC)

Essentially the new Gainful Employment Rule will try to work against the for profit business model some trade and career training schools function under. For those schools that don’t meet the requirements, there will be financial consequences. The Gainful Employment Rule will make colleges more accountable by requiring them “to track their graduates’ debt and employment to prove that their programs don’t fall short of federal guidelines.” (CNN Money) According to the  Associated Press, if students who graduate can’t get a job that pays them enough to repay their student loans, the school they attended “risks losing access to financial aid.”

The other side of the story is told by the Association of Private Sector Colleges and Universities (APCU) who “will appeal a ruling that upholds the USDE gainful-employment rule” on the basis that rule is “arbitrary and capricious and in violation of federal law.” (Chronicle of Higher Education) The ruling they refer to is by the US District Court for the District of Columbia which finds that the US Education Department “has the right to demand that schools show their graduates make enough money to repay their student loans.” (Associated Press) Secretary of Education Arne Duncan also responded to the ruling by stating that “the courts continue to recognize both our legal authority and our reasonable approach in establishing these consumer protections.” (Politico Pro) The Hill agrees that these rules are in fact to “target for-profit colleges and universities that do not adequately prepare students for life after graduation” and claims that currently there are 1,400 colleges that do not conform to the new standards. While later on the article does bring up that those colleges will be allowed the opportunity to improve, a time frame and probation periods are not specified or detailed. Some schools that could be affected by the new rules bring up the point that these rules will limit the options and access to higher education institutions for students.

The TCU Financial Aid website states that “TCU is committed to enrolling talented, motivated students from diverse backgrounds. The University offers a full range of scholarships, financial aid, and financing options to families of all income levels.” While in an ideal world student debt would be nonexistent, at TCU the situation is improving. College Factual is a branch of Media Factual, a technology company that interprets data and statics. College Factual reports  that at TCU the default rate on Student Loans is decreasing. The report suggests that “Loan default rates can indicate how well TCU is helping students afford to attend college without undue reliance on loans, particularly unsubsidized loans. It can also indicate future earnings and career potential.” Throughout a 3 year study, the default rates at TCU were considerably lower than the national average. “This could be an indication that the college is working to meet the financial needs of students in such a way that reliance on student loans, particularly unsubsidized loans, is minimized for the majority of students.” (College Factual)

 Free Application for Federal Student Aid (FAFSA)

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Students are required to fill out the FAFSA form every year before receiving financial aid.”FAFSA is the application used by nearly all colleges and universities to determine eligibility for federal, state, and college-sponsored financial aid, including grants, educational loans, and work-study programs.” Although “all students are expected to contribute towards the cost of their college education,” FAFSA was created to determine how much a student is expected to realistically be  able to contribute. (Student Financial Aid Services Inc.) Through FAFSA, a student’s financial situation is reviewed and analyzed and financial aid is awarded depending on the student’s need.

Typically students fill out their first FAFSA in the spring semester of their senior year of high school. Part of the application process includes requiring students to report their parents earnings and taxes for the past year. Many have pointed out that this problematic because a student can’t submit their FAFSA form without their parents tax information and parents can’t file their taxes until January. (Inside Higher ED) The main issue is that this delays the application process; a student who files their FAFSA later on because of tax form requirements will also not find out how much financial aid they are receiving until later on. According to the National Association of Student Financial Aid Administrators, the “single most important factor in selecting a college is cost”. The combination of these scenarios results in students applying to colleges without a clear idea as to how much aid they are going to receive. In many cases this has led to students applying to a college and finding out later that they can’t afford to go there. These students are then left to work out another option at the end of their senior year, a time when ideally all that should already be figured out.

Higher education experts have a solution for this problem: Allowing students to use their household’s older tax information. Times reports that using older information when filling out the FAFSA form will give students an earlier idea of how much aid they qualify for and therefore can more precisely pick out which schools they can afford and how to pay for college. Concerns about allowing students to file their families older tax information have to do with ensuring that the aid each student receives is an accurate reflection of their financial need, older information wouldn’t be as representative of a students current situation.

The Urban Institute found another problem that the FAFSA process faces. A study they conducted shows that less than half of low income students enroll in college and 12% of those that do enroll “fail to apply for financial aid”. (US News & World Report) The article explains that most of those students qualify for enough aid to make college affordable. The report suggest creating more awareness about FAFSA by beginning to have conversations about financial aid with students at a younger age. This would be a simple but crucial way to begin to work against the mentality a lot of low income students have that college is inaccessible.