The new rules have various objectives, including protecting students when their schools suddenly shut down and ensuring students are well-informed about their rights, ultimately reducing the likelihood of students facing difficulties in repaying their student loans after graduation.
The Biden administration unveiled a finalized plan on October 24 to enhance its oversight of higher education institutions and strengthen consumer protections for student loan borrowers.
“We are raising the bar for accountability and making sure that when students invest in higher education, they get a solid return on that investment and a greater shot at the American dream,” said US Secretary of Education Miguel Cardona.
The new rules have various objectives, including protecting students when their schools suddenly shut down and ensuring students are well-informed about their rights, ultimately reducing the likelihood of students facing difficulties in repaying their student loans after graduation.
According to a 2022 report from the Government Accountability Office, a staggering 91 percent of American colleges do not provide students with a comprehensive breakdown of costs.
The Government Accountability Office found that nearly half of the examined colleges misrepresented the net cost of attendance by excluding essential expenses such as living and books, with 41 percent of them failing to estimate costs at all. The report did not mention any specific colleges by name.
The revised Gainful Employment (GE) rule will safeguard around 700,000 students annually by addressing career training programs that result in graduates facing excessive loan payments or earnings no higher than those who did not pursue further education. This rule aims to protect students from financial hardship when enrolling in such programs.
The Financial Value Transparency (FVT) framework introduces comprehensive information on the net costs and financial outcomes of postsecondary programs, offering students unprecedented transparency. This framework aims to assist prospective students in making informed choices about their programs and to understand the potential financial risks.
Students enrolling in certificate or graduate programs associated with unaffordable debt levels will be required to acknowledge that they’ve reviewed this information before proceeding.
Starting on July 1, 2024, educational institutions that receive Title IV financial aid will be obligated to offer comprehensive financial aid counseling to students, covering details regarding the cost of attendance and different forms of financial aid.
Additionally, they must provide robust career services to support students in making informed decisions about their education and future career prospects.
Standardized financial aid award offers will be introduced, providing families with clearer information about college costs and distinctions between aid that is grant-based (which does not require repayment) and loan-based (which must be repaid). This will help students and families make more informed decisions about their financial commitments when pursuing higher education.
“It will reduce student loan debt by increasing awareness of true college costs,” said higher education expert Mark Kantrowitz.
The United States currently carries more than $1.7 trillion in outstanding education debt, surpassing both credit card and auto debt. The average student loan balance upon graduation has tripled since the 1990s, increasing from $10,000 to $30,000. These rising student loan debts have become a significant financial burden for many Americans.
The Biden administration’s plan includes measures to prevent colleges from withholding transcripts of students who face difficulties paying their bills. This policy change aims to ensure that students are not unduly burdened by financial obstacles when they need their academic transcripts for various purposes.
“Ending the ability of colleges to withhold academic transcripts will enable more students to transfer colleges and apply for jobs,” said Kantrowitz.
