U.S. Dept. of Education sizes up colleges and programs with debt to earnings ratios

The data shows there are a significant number of career training programs that do not provide their graduates with a reasonable return on investment

YOUNGSTOWN, Ohio (WYTV) – The U.S. Department of Education today released the first debt-to-earnings (D/E) rates for career training programs.

The data is part of the department’s efforts to hold learning institutions accountable by setting standards for career training programs, including programs offered by for-profit institutions, to ensure they are serving students well.

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The data shows that while many postsecondary programs offer value to students, there are a significant number of career training programs—specifically for-profit programs—that do not provide their graduates with a reasonable return on investment.

A new template provides students with information about secondary programs and their job placement and debt ratio.

“When a student makes a personal and financial decisioattend college, the student must feel confident that it is a sound investment in his or her future, not a liability that will further defer his or her dreams,” said U.S. Secretary of Education John B. King Jr. “These rates shed a bright light on which career training programs are most likely to prepare students for repaying their student loan debt, and which programs might leave them worse off than when they started.”

Under federal guidelines, a program would be considered to lead to gainful employment—and passing—if the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings. Programs that exceed these levels would be at risk of losing their ability to participate in taxpayer-funded federal student aid programs.

The data indicate that over 800 programs, serving thousands of students, fail the Department’s accountability standards with an annual loan payment that is at least greater than 30 percent of discretionary income and greater than 12 percent of total earnings. Ninety-eight percent of these failing GE programs are offered by for-profit institutions.

The data suggests that community colleges offer a better deal than comparable programs at for-profit colleges with higher price tags. When student debt is taken into account, community colleges—where students borrow at lower rates and lower dollar amounts—perform particularly well when matched up against comparable for-profit programs.