Law school debt: should student financial aid be based on a debt to potential earning ratio?

With so much discussion and debate lately about the value and changing economic viability of a law degree, we wonder if a proposed U.S. Department of Education regulation might, or should, be applied to graduate programs like law school.  For law school students, the issues are plain enough:   (1) we may be producing more law school graduates than there’s need; (2) students are racking up an average $92,000 in debt because of the implied promise of a high-paying job at the end of the line; and (3) a massive portion of law school applicants are extremely ill-informed about the career prospects resulting from a law degree.  For our various posts on this subject click here.

So along comes the Department of Education with an approach described as “ambitious” which is aimed at ensuring that vocational programs and most offerings at for-profit colleges do not take advantage of students. Under the draft regulation, a vocational degree program whose graduates’ annual debt repayment loads exceeded 8 percent of the average incomes in the field in question would risk losing eligibility to award federal financial aid.

There is also a ban on “incentive compensation” for admissions and aid officers, and a revision of the rules on “misrepresentation” of information that take aim at institutions that are perceived as misleading potential students and others on their employment opportunities after completing a certificate or degree.

But the real kicker is the language linking debt and income for all programs and institutions that are eligible for Title IV funds because they “prepare students for gainful employment in a recognized occupation.”

The point of the debt-to-income limit:  weed out (or at least cut tuition at) institutions that don’t yield their recent graduates in-field jobs that pay well enough for them to repay their student loan debt on a 10-year schedule.

For a good detailed overview of the proposals, see the Inside HigherEd blog by clicking here.  And check out the comments to the article which discuss demonstrating ROI, the elimination of the bankruptcy exemption for student debt, and income-based repayment of debt.

The article does not make clear that the regulation will be applied to graduate programs like law school.  But in a follow-up chat with an editor of the blog, plus some due diligence by a Posse List member who works at Education it appears that graduate programs are being considered.  If we are able to obtan more information, we will report it.