Every one agrees that student loan debt is out of control in the U.S., right?

Do you want to see student loan debt under control?  Here’s an idea! Stop allowing students to borrow amounts that FAR exceed their cost of attending college!!!

The Career College industry is being backed into the proverbial corner yet again. They have been continuously berated historically as being the heavy for the student loan debt issues that plague the country, while being literally powerless to control how much student’s can borrow over and above the cost of their education.

The way things have stood historically is that every Guaranteed Student Loan recipient is permitted to borrow up to the maximum loan amount available under the Federal Title IV loan program. Hence, students consistently borrow the maximum loan amount. This then increases student debt to levels significantly over and above the costs associated with their tuition and books. This unfettered access to Guaranteed Student Loan monies can and does create an untenable inequity between graduate earnings and loan payment amounts. Translation, graduates did not earn enough to repay their loans.

The result was that a large percentage of graduates were defaulting on their student loan payments. This phenomenon was followed by Federal legislation that punished Career Colleges when more than 25% of their graduate borrowers defaulted during any three consecutive award years. Hence, Career Colleges worked more diligently to educate students about being responsible borrowers and graduates about their rights regarding loan forbearance and deferment. The result was an overall reduction in graduate default rates across the board.

Now that this issue has subsided…there’s a new cannonball coming across the Bow of Career Colleges, Gainful Employment legislation.

Here, government regulators will be monitoring the amount of each graduate’s annual salary against the amount of each student’s annual student loan payment amount. Seems like a good idea, right?  After all, a student’s college debt should be equitably proportionate to their salary upon graduation. It just makes sense!

Indeed it would sense if the amount that the student borrowed reflected only the cost of their education!  Unfortunately, that is still not the case… Students are still allowed to borrow over and above the actual cost of their schooling…a continuation of the vicious circle of days gone by.

It’s simple…when credit card companies want to control a client’s debt, they simply limit the amount they are allowed to borrow, right?  Why can’t the Government follow the lead of the rest of the lending community? Perhaps the Government should stop blaming the Career Colleges for debt which the government allows?

Again, Cap Student borrowing to 10% over Cost of Attending College!!!

Just a thought…

About Raymond Nunziata