U.S. Tightens School Rules for Student Loans
Education Secretary Lauro F. Cavazos today unveiled strict new regulations designed to crack down on schools that are turning out large numbers of delinquent borrowers and contributing to a rising burden for taxpayers.
Under the rules, schools with default rates above 60% will be subject to limitation, suspension or termination from the government’s massive student loan program.
Schools with 40% to 60% of their students failing to pay back loans must reduce the figure by 5% a year or face the same penalties.
All vocational schools, regardless of their default rates, must provide information on completion and job placement rates to all prospective students.
Vocational schools are considered prime offenders in the default problem, which is expected to cost taxpayers $1.8 billion this year.
“We must weed out unethical schools and other program participants whose sole purpose is to profit at the expense of our students and taxpayers,” Cavazos said. “Today, we are taking decisive action against those who cheat our citizens, those who promise to educate but deliver only a debt.”
Cavazos said it was never intended that 37 cents out of every dollar spent on the student loan program would go to cover defaulted loans.
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