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Home Publications Blogs Beat the Press Federal Regulations Restrict the Use of Government Subsidized Student Loans, Not Private Colleges

Federal Regulations Restrict the Use of Government Subsidized Student Loans, Not Private Colleges

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Thursday, 02 June 2011 05:32

The Washington Post, which is part of a corporation whose primary income comes from for-profit colleges, told readers that new regulations on student loans would:

"effectively would shut down for-profit programs that repeatedly fail to show, through certain measures, that graduates are earning enough to pay down the loans taken out to attend those programs."

It is important to note that the rules being proposed don't restrict for-profit colleges in any way. They simply impose conditions that they must meet in order for their students to be eligible to receive student loans.

The rules are restrictions on students trying to get loans in the same way that prohibitions on using food stamps for junk food would a restriction on food stamp recipients, not restrictions on the junk food industry. In that case, the junk food industry would still be free to sell their product to whoever wanted to buy it, including people receiving food stamps. However, they would just be prohibited from buying the junk food with their food stamps.

In the same way, anyone who wants to would still be able to attend any for-profit college they chose. They could even borrow money to do so. They would just be unable to get a subsidized loan from the government for this purpose.

Comments (6)Add Comment
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written by rex, June 02, 2011 6:24
Of course, denying lousy for-profit colleges access to students who receive subsidized loans WOULD effectively shut them down. Few students can afford to attend such schools without the subsidy. The Post should have made this clear in its story: That some of the profits received by the Washington Post Co. are dependent on federal subsidies, which as the Post often reminds us, are the biggest danger to humanity.
Post Profits
written by Union Member, June 02, 2011 7:02
Can Students study Journalism and/or Economics at Washington Post for Profit U.?
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written by Philip, June 02, 2011 9:49
Reasonable rule. Should also apply to non-profit/public schools.
Shifts the problem.
written by LSTB, June 02, 2011 11:43
In the same way, anyone who wants to would still be able to attend any for-profit college they chose. They could even borrow money to do so.


True, but the 'undue hardship' exception to dischargeability of student debt in bankruptcy was completely extended to private student loans in 2005. Previously, private student loans could be discharged after seven years. Consequently, private lenders will profit on defaults because of the fees they can tack onto delinquent borrowers who have no negotiating power. Then again, I doubt the Gainful Employment rule will seriously hamper for-profit educators' access to federal student loans.

Instead of creating a cumbersome regulatory system, Congress should just kill all federal lending programs and restore all consumer bankruptcy protections to student debt. 17 million Americans are working jobs that don't require college degrees, so there really isn't much of a reason to subsidize higher ed. http://chronicle.com/blogs/inn...lege/27634
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written by John Q, June 02, 2011 12:35
It's not just student loans. These faux colleges suck up big chunks of the Pell grant money, reducing the amount available to students attending legitimate colleges.
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written by John Q, June 02, 2011 12:39
Back in the days when subprime mortgages were being pushed by unscrupulous brokers, every day I would get an email offer to finance or refinance.

These days, my computer screen gets a new popup at least once a day telling me I can get money to go to college.

(And we know where the push for subprime loans led ....)

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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