Why a Title IV School Can Be So Important For Your Future
One of the most common reasons lenders reject applicants is because they did not attend a Title IV-qualifying institution. Most student loans and refinancing options require a Title IV school to qualify. But what is a Title IV school?
A school designated as Title IV is a higher education institution that processes U.S. federal student aid. These schools can be public, private nonprofit and proprietary, and are guided by the rules and criteria set by the Higher Education Act (HEA).
It’s an important distinction that can have long-lasting implications for you. Let’s answer some key questions about Title IV and why it matters:
What is Title IV of the Higher Education Act?
President Lyndon B. Johnson signed the Higher Education Act of 1965 to create protections for college students and to make college more affordable. It also increased the number of government dollars allocated for federal loans, scholarships and more.
One of the most significant parts of the law is the Title IV section. It’s designed to ensure that a school provides quality instruction and can help students secure a good job after graduation.
Title IV schools are the only institutions where individuals are eligible for federal student aid. Attendees of these colleges can receive student loans, grants and enter a federal work-study program.
How do schools become Title IV universities?
The requirements for a school to become a Title IV college are rigorous. To be eligible, the state where the school is located must authorize it to offer postsecondary educational degrees.
An agency approved by the Secretary of Education must grant accreditation after reviewing the school’s curriculum and the university must only accept students who have a high school diploma or GED.
Public, private, for-profit and vocational schools can become Title IV educational facilities. In the case of vocational schools and private colleges, the school must have a license and offer the same postsecondary programs for at least two years before they apply. Schools also have to submit financial audits to prove they adhere to auditing standards.
If it’s a for-profit institution, the school cannot have applied for bankruptcy protection. The Department of Education requires schools to issue some sort of a degree, such as an associate’s or a bachelor’s.
In the case of vocational schools, the credential must be able to be used to get gainful employment. That means that most graduates must be able to provide for themselves and keep up with their debt payments with a job after graduation.
The application process can take years, and not all schools that apply get approved. Many schools in operation don’t fit into this classification, so it’s a serious factor to consider when evaluating your college options.
Why do lenders require schools to be Title IV?
If you’re looking to refinance your student loans, most lenders require that the school you used your student loans to attend is a Title IV institution.
That’s because this classification is a measure of your degree’s validity and value. When reviewing schools, the Department of Education looks to see if the college’s degree programs prepare students for gainful employment.
The Department of Education and refinancing companies look at the gainful employment rate to determine if graduates can reasonably repay their student loans. If their degree only leads to minimum wage work, graduates are unlikely to be able to repay their debt. That means they’re a less appealing candidate to lenders.
Most lenders require borrowers to graduate from a Title IV school as a safeguard, seeing these as more likely to lead to well-paying work. Of course, just because a school isn’t a Title IV college, it doesn’t mean that the education there is poor — but it may be worth doing a little extra research.
How to find out if your school is a Title IV institution
If you’d like to find out if your school is a Title IV institution or not, search for it on this list. Lenders like SoFi, LendKey and College Ave all require borrowers to graduate from a Title IV school.
Why your school’s accreditation matters
Since lenders can be rigid about their eligibility requirements, it’s important to know whether your prospective school is accredited under Title IV.
A Title IV classification can be seen as a vote of confidence in the value of a school’s degree, though not all Title IV institutions are necessarily top-notch. Likewise, some schools not included under Title IV might still have a lot to offer, but it’s worth doing some additional research into the outcomes for the school’s graduates. If the school lacks this accreditation, also know that you’ll likely have a harder time finding a student loan or refinancing that loan later on down the road.