Ideally, colleges would be well-run. They would try hard to look out for students who take on debt to be able to go to school. But we don't live in an ideal world.
U.S. Secretary of Education Miguel Cardona acknowledged the problems in a press release issued on Tuesday. He stated: "Too many students have been abandoned by shady colleges that close their doors and leave borrowers with unaffordable debt and little hope of completing their educational journeys and embarking on rewarding careers."
However, Cardona unveiled final rules that go into effect on July 1, 2024, that he said will make progress toward "fixing a broken system." The Biden administration just announced four new regulation changes to help protect student loan borrowers.
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1. Increasing financial responsibility for colleges
The Department of Education has run into problems in the past with colleges that were on shaky financial ground. Between 2013 and 2022, it attempted to get more than $1.6 billion from financially troubled institutions, but only collected $344 million.
One key component of the new final regulatory rules intends to increase the financial responsibility of colleges. The rules establish warning indicators that will make it easier for the Department of Education to secure upfront financial protection from colleges, such as letters of credit. These early warning signs include colleges that demonstrate financial risk associated with paying debts, lawsuits filed by federal or state agencies, and high default rates that put the schools in danger of losing access to federal student aid.
2. Ensuring colleges have adequate administrative capability
Administering federal student aid programs isn't an easy task. Some colleges aren't able to effectively do what it takes. To address this issue, the final rules announced by the Biden administration implement changes to help ensure colleges have adequate administrative capability. In particular, the regulations will add new requirements for colleges, including the following:
- Providing clearer financial aid information to students, such as differentiating between scholarships and loans
- Preventing colleges from withholding transcripts related to federally funded courses
- Ensuring that colleges provide adequate career services to students
- Limiting colleges from employing people with track records of risky management of federal student aid programs
3. Establishing more stringent certification procedures
Colleges already must agree to certification procedures to be able to participate in federal student aid programs. The Biden administration will make this certification more stringent going forward.
The new certification procedures will enable the Department of Education to place additional conditions on schools that show warning signs. For example, the colleges might be kept from adding new programs and locations. The procedures will prevent student aid from being given for programs that are longer than state requirements for certification or licensure. They will also make sure that schools offering remote learning adhere to all applicable state laws related to postsecondary institutions.
4. Establishing clearer processes for access to federal aid for students without a high school diploma
The fourth new regulation from the Biden administration will help increase access to college and other postsecondary institutions for students who don't have a high school diploma. This final rule establishes clearer processes to allow these students to receive federal student aid.
Part of a broader plan to help students
These four changes are only one part of a broader plan from the Biden administration to help students. The Department of Education has approved $127 billion in relief for borrowers with federal student loans. President Biden has pushed for the largest Pell Grant increase in years, with a goal of doubling the maximum amount awarded by 2029. In addition, the administration has proposed free tuition for community colleges and more student aid for historically black colleges and universities.
