For Profit Colleges: Selling You an Education? Or Just a Bunch of Debt?
By Consumers Union on Tuesday, December 3rd, 2013
Are for-profit “career colleges” in the business of providing a sound education or loading all of us with debt?
If recent news reports are to be believed, that question is now the subject of a formal investigation by the American consumer’s best friend in D.C- the Consumer Federal Protection Bureau (CFPB).
The CFPB just issued a “civil investigative demand” to Corinthian Colleges - a company that operates campuses under the names Herald, Everest, and WyoTech – and ITT Educational Services, Inc., to get documents and learn more about their business practices. The entire scope of the demand is not known but, according to the agency, the goal is to determine if these colleges “have engaged or are engaging in unlawful acts or practices relating to the advertising, marketing, or origination of private student loans.”
What’s considered unlawful? To back up a bit, the CFPB is a creation of Dodd-Frank- the Obama Administration’s primary legislation meant to regulate Wall Street as a result of the 2008 Financial Crisis. Among its many powers, it has the authority to outlaw any “unfair,” “deceptive” or “abusive” practices when it comes to financial products like private student loans which, unlike federal student loans, come with fewer consumer protections.
Thus, unlawful practices could include things like hyping job placement rates to encourage prospective students to enroll and/or taking out private loans rather than federal loans to finance their education or steering existing students into taking out in-house loans in order to meet new requirements of a degree program.
The news broke after Corinthian, a NASDAQ-listed company, disclosed the investigation in its latest filing with the SEC. The company denies all wrongdoing, saying that:
"The Company believes that its acts and practices relating to student loans are lawful and essential to preserving our students’ access to post-secondary education."
Sounds comforting, right? Well, digging a little deeper into Corinthian's filing reveals that a sizable chunk of the country is taking issue with this career-college behemoth. The Attorney Generals offices of Florida, Massachusetts, Georgia, Illinois, and New York have ALL requested information from Corinthian regarding its admissions, financial aid, and lending practices. This is on top of a pending case brought by the Attorney General in California- the state with the largest number of college students.
With two of the largest career colleges now in CFPB’s cross-hairs, the scale of this problem could be fairly deep which leads to the Defend Your Dollar Question(s) of the Week:
Do you have that sinking feeling in your bones that the for-profit college you attended did little more than put you in debt?
Share your answers in the comments section below.