NAICU Washington Update

Department Pilot Program to Explore Ways to Limit Borrowing

June 14, 2011

In her June 9 testimony before the Senate Health, Education, Labor and Pensions Committee (see related story), Under Secretary of Education Martha Kantor announced that the Department will soon launch a pilot program allowing institutions to experiment with ways to limit student borrowing.  Institutions will have to apply to participate, and efforts to reduce students' debt will be carefully monitored for their effect on student access and success.

The Department sees the program as not just a way to reduce student debt burden. It also is expected to reduce the amount of federal student aid funds that for-profits receive for their students. This could help keep them from crossing the 90-percent threshold of revenues they can receive from Title IV.  Many for-profits are currently very near that limit.  It would also help the for-profits meet the student debt-to-income ratios required under gainful employment regulations.  Community colleges also have advocated for the ability to limit the borrowing of their students.

Kantor also announced, and the Department has published guidance on, a current practice of some for-profit schools:  providing a trial period for at-risk students.  The Dear Colleague Letter GEN-11-12 describes federal student aid eligibility for students enrolled for a trial period that leads to enrollment.

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