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By Mark Kantrowitz
Publisher of FinAid.org and FastWeb.com
The Higher Education Act of 1965 requires for-profit colleges to provide “an eligible program of training to prepare students for gainful employment in a recognized occupation†but does not currently define gainful employment.
During negotiated rulemaking for Higher Education 2009-10, the US Department of Education proposed defining gainful employment by establishing an 8% debt-service-to-income threshold based on median student debt for recent college graduates with income based either on Bureau of Labor Statistics 25th percentile wage data or actual earnings of the college’s graduates. Loan payments would be based on the standard 10-year repayment plan for the unsubsidized Stafford loan program. For programs that failed to satisfy this standard, the US Department of Education proposed an alternative that requires a loan repayment rate for recent college graduates of 90%. The loan repayment rate measures the percentage of borrowers actively repaying their loans. It is a dual to the default rate, but includes borrowers who are delinquent, in an economic hardship deferment or in forbearance along with borrowers who are in default.
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