In January, 13 states issued subpoenas to four for-profit colleges, including Corinthian, over concerns about possible misrepresentations to students about financing, recruitment practices and graduates’ employment rates.
Also in January, Coakley’s office in Massachusetts held hearings on proposed regulations for for-profit colleges and occupational schools. The rules would require schools to disclose accurate information about tuition and fees along with placement statistics and graduation rates; prohibit them from using high-pressure sales tactics such as repeated phone calls and text messages; and bar them from calling recruitment personnel “counselors” or “advisers.”
In February, the new federal Consumer Financial Protection Bureau, created by the 2010 Dodd-Frank Act, filed suit against another for-profit college chain, ITT Educational Services, which operates about 150 institutions in nearly 40 states, alleging predatory student lending. The lawsuit was the bureau’s first public enforcement action against a for-profit college.
And last year, New York Attorney General Eric Schneiderman won a $10.25 million settlement with the for-profit Career Education Corporation over inflated job placement rates.
Previously, Conway led an effort involving attorneys general in 20 states, which resulted in a $2.5 million settlement in 2012 with QuinStreet, which operated a website, www.GIBill.com, that aimed to recruit veterans to attend for-profit colleges. The states alleged the website gave the false impression that it was affiliated with the federal government. QuinStreet settled, but denied wrongdoing. Under the settlement, the domain name was transferred to the U.S. Department of Veterans Affairs.
At the federal level, U.S. Sen. Dick Durbin of Illinois and Sen. Tom Harkin of Iowa, both Democrats, introduced legislation earlier this month designed to improve coordination among federal agencies overseeing for-profit colleges. Their proposal would establish a committee with representatives from federal entities including the Department of Education, Department of Justice, Securities and Exchange Commission and CFPB.
Student loan debt is now the largest form of consumer debt outside of mortgages, eclipsing car loans and credit cards, according to the Federal Reserve Bank of New York. Nationwide, about 38 million people owe nearly $1.2 trillion in student loans, more than double from $550 billion in late 2007. Of those, 7 million borrowers are in default.
Private student loans often lack the consumer protections of federal or federally-backed loans, such as flexible repayment plans and unemployment deferments, which means students can be left with overwhelming debt and, in some cases, little education to show for it. According to the Department of Education, 72 percent of for-profit college programs produced graduates who earned less, on average, than high school dropouts, compared to 32 percent of public non-profit programs.
In some cases, for-profit colleges provide subprime loans to students who are unlikely to be able to repay the debt. While students at for-profit colleges make up 13 percent of college students, they account for 31 percent of student loans and about half of loan defaults.
“Unfortunately, for many of these borrowers, they are unable to complete their educations or the school closes and they are left with no jobs and a mountain of debt that bankruptcy experts tell us is almost impossible to discharge,” Conway said in 2012 congressional testimony.
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