I've seen people come into the banks with loans from these predatory colleges before I started BanksLoveMe.com. I think it's mostly the commercial banks though, not the other banks we support.
By Araceli Cruz
By Tessa Stuart
By Anna Merlan
By Keegan Hamilton
By Albert Samaha
By Village Voice staff
By Tessa Stuart
By Albert Samaha
Barbarians in the Ivory Tower
Bobby Ruffin Jr. was only 14 when a recruiter from Ashford University called. The Birmingham, Michigan, boy thought he'd clicked on a link promising help finding money for college. It was actually just a lead generator for the for-profit, online school's sales staff.
At the time, Bobby was an A student. Hoping that homeschooling would deliver something better for their son, his parents had pulled him from the troubled Detroit schools. He told the recruiter that he wanted to be a doctor. She assured him that Ashford could be a stepping-stone to that dream.
Never mind that he was only in the eighth grade. "She said, 'You'll be working toward a degree as a medical doctor, so when you do graduate high school, you're almost there,'" Bobby says today. "I'm like: 'This is great. I'm going to talk to my mom.' And she's like: 'No, I wouldn't tell your parents because that would take away from the shock when it happens. If I were you, I'd complete the program, and when graduation comes around, let them know. Mom and Dad will be super excited.'"
Admission to Ashford requires a high school diploma or equivalency. So when it came time to fill out the financial-aid forms, the recruiter told Bobby to claim that he'd already graduated. He objected, but she insisted "the loan-processing company will go back and correct everything." Still, he left the graduation date blank. Someone filled it in, because Ashford was soon receiving federal-student-loan money on his behalf.
Of course, it's illegal for kids Bobby's age to receive financial aid. But for-profit colleges haven't always been scrupulous when it comes to raiding the federal treasury. Between student-aid and GI Bill programs, most schools receive 90 percent of their revenue from the American taxpayer. And the recruiters—often little more than salesmen paid largely by how many people they enroll—are driven mercilessly to keep those cash registers ringing.
Students don't get much in return. Although tuition rates can run as high as those at America's most esteemed universities, the education is generally substandard. In the end, most kids wind up walking away with a questionable degree bought at top dollar—and a mountain of debt to accompany it.
Bobby took online classes for almost a year. But when he wouldn't endorse Ashford's lying on his financial-aid forms, administrators miraculously discovered that he was under 18. Since this left him ineligible for federal aid, Ashford was forced to return his loan money to the feds.
The school wouldn't be eating those costs. Bobby would. Ashford, which declined interview requests for this story, sent him a bill for $13,000.
Last fall, Bobby was finally able to enroll at a real university, Eastern Michigan, where he was named a national collegiate scholar. Yet he still owes Ashford. Because that's a private debt, he isn't eligible for deferments while he's in school, and any future wages could be garnished.
Unfortunately, this isn't a scam that only targets the young and naive. The for-profit industry is so rife with deceit, it has been billed as the second coming of the mortgage-loan debacle. And the same people are behind it. Three-quarters of all for-profit students are enrolled at schools owned by Wall Street banks and private-equity firms.
All told, they soak $30 billion a year from American taxpayers. But even in the age of slash-and-burn government, Congress has shown no interest in stopping it.
"The problem with the subprime [housing] scam was that it got so big, it almost brought down the entire world's economy," says Barmak Nassirian, a former official with the American Association of Collegiate Registrars and Admissions Officers. "This one's wisely limited to $30 billion a year, which is highly sustainable. In the context of a multitrillion federal budget, that's not even a rounding error."
Consumer Fraud As a Business Model
You might not know it, but you're sitting on $117,000. That's basically how much every American is potentially worth in government student aid. Want to attend grad school? Throw in another $114,000.
And as for-profit colleges have discovered, an 18-year-old with 100 large makes for a very easy mark.
In order to get in on the gravy train, a school only needs accreditation from some supposedly neutral body. But Congress neglected to say who should do that accrediting, resulting in a system loaded with charlatans. Some agencies have built sturdy reputations over decades. Others are little more than rubber-stamp factories, more geared toward gobbling up members' dues than safeguarding kids.
"It never occurred to [Congress] that as billions of dollars get attached to the recognition process, the process would get corrupted," Nassirian says. "When you say yes, you gain membership dues. After all, you're living off these dues."
Yet even bargain-bin accreditation takes several years. So the titans of Wall Street found a way around this by purchasing small, failing schools to snatch up preowned accreditation.
Take Bridgepoint Education. Its majority stockholder is Warburg Pincus, a New York private-equity firm. When it needed accreditation for Ashford University, it bought the 87-year-old Franciscan University of the Prairies, a struggling, 300-student religious college in Clinton, Iowa. Overnight, it was transformed into the online powerhouse Ashford.
I've seen people come into the banks with loans from these predatory colleges before I started BanksLoveMe.com. I think it's mostly the commercial banks though, not the other banks we support.
There is an petition at whitehouse.gov entitled "Reform Predatory For-Profit Schools" that is currently open. Please, if this article annoyed, enraged, or appalled you, got o the site and sign it. It's the least we can do in the face of all of this corporate money being thrown at the legislative branch.
@cellardoor You know what the problem is with your response? First you're wrong, second your vague and making statements that can easily be taken the wrong way and out of context and third you really showed how little you know about Education, Title IV regulations and loans in general
First, Every college has an age requirement and it's reflective of the compulsory age of the state. In Michigan, the compulsory age is 16 and even then you need to be signed out and reported as a high school drop out. So from ages 6 to 16 you must be in attendance at a legitimate public high school or participating in an approved alternative program or home school. That's the law, end of discussion and should you violate this law the department of social services will step in and enforce truancy laws and every higher education professional who has been trained properly- knows that.
Second the FAFSA or Free Application for Federal Student Aid is just that an application. It takes your information and performs a series of tests that are associated with your name, age, citizenship status, social security number, income, assets and household size and performs a needs test to determine how much Federal Financial Aid you are eligible for. So that being said, please don't be the unfortuante person who thinks " FAFSA" is an actual entity giving you money, because it isn't. The FAFSA is the applicatio, the money comes from the government. But how could this student get the FAFSA done on his own? Several flags or C-codes would have been generated because he's too young to register for Selective Service.. he's not independant so his parents would have been required to complete the parent section of the FAFSA online, apply for a pin, and provide tax information. Did they? If so, don't you think maybe they should have stepped in for their 14 year old son? Tisk tisk no one wants to look at the overall picture they just want to blame one corrupt Admissions Rep who did something monumentally stupid. I'd like to listen to the call, because as you know all Admissions calls are recorded, whether you work at a for- profit or Harvard.
Third, it clearly states in this article that his loan money was returned to the Federal Government. I mean it says it so how can you say different? Hence why I pointed out that there was an error in the article and the moderator/author here needs to either confirm the facts ot correct himself. That kind of collection only happens on a Default from a federal student loan- period.
Fourth, even if you are correct that they kept a private loan from Sallie Mae, he's under 18 and when you are under 18 you cannot apply for a loan without a cosigner. So, who cosigned the loan? Why arent' they making a fuss? Hmm???? You pulled that information out of the sky and should really retract your statement because rumors are dangerous and make the job of every legitimate person working in for-profit that much harder.
Fifth, The maximum Pell grant is 5250.00 so even if you are applying to a non-profit university where the bill is just as high, that's not doing much for you. It doesn't matter if it's a for profit school. I mean how much is Northeastern? Harvard? Even Umass!!!
SIxth- Cash Rebates from lenders? Thank god!!! Your comment was vague and insulting to every person that worked hard to pay their loans on time and got a bonus in the form of a reduced interest rate for that. But just so we are clear, Sallie Mae is just a servicer for the Direct Loan program run by the government, they are heavily regulated and aren't handing out checks. I mean the suggestion of that is pretty ridiculous! If you did get a check from the school it's because you overborrowed as the consumer. Yes that's right OVERBORROWED. You took more money than you needed and recieved a reimbursement check for that. The school can only hold on to those funds for 14 days and then it has to be returned to the student with a reimbursement letter that says these are from your loan funds. Many students do that to cover cost of living expenses, regardless fo their lender. It's a personal choice and it's the right of every borrower.
Seventh, Schools get students to sign up with Sallie Mae? There's only one lender available and that's Direct Loans. Now if the government chooses to assign your loans to Sallie Mae as your servicer and you don't want that, perhaps you can take that up with them. Because that's the source of all the rules, not the schools. When all the loan programs closed, there were no more options. You have no choice now but to go through direct lending and neither does the school. You think that's better? There were many lenders that offered great programs to borrowers like Sallie Mae and ASA so if you were pushed in that direction it's because you had more options available to you with that program. God forbid someone try and save you some money though..
I'd like to take a moment as well to clarify something else in this article about 90% of funds being taken from Federal funding. This is 100% true. But does anyone know why? It's because that's the federal requirement. Every for-profit school is required to maintain a 90/10 ration of funding. That regulation states that only 90% of incoming revenue can come from Federal Funding and 10% has to come from other. So if the Federal Funding goes up... and you can't meet that ratio? What do you do? You raise tuition. It's really the only option possible. Non-profit schools don't have to meet that requirement.
If you want to reflect on the cost of education.. do an overall reflection... Larger universities come with a hefty price tag as well... People are leaving those universities with huge amounts of debt also but no one talks about how many students graduate from Umass and struggle and don't get a job.. that's because regionally accredited schools don't have to report their placement rates.. but all nationally accredited schools need to place 70% of graduates in field. Know the facts, be an educated consumer and for once and for all know that the decisions of one person doesn't reflect the tone of the entire industry. There are several people..thousands even that truly care about the students. I consider myself one of them.
Do some fact checking before you write or publish an article. Ashford University is a not-for-profit school established in 1908 in Clinton, Iowa. They also do not, nor ever have offered any medical courses for doctors. Also, Ashford requires a prospective student to print out their financial aid agreement, sign it, make a color photo copy of ID or Drivers License and mail it back to the school before enrollment. Everything this story is talking about could not have possibly happened. I have research to back me up.
This article is completely FALSE. I did some fact checking, plus, I am a graduate of Ashford University. This university has been in existence since 1908 in Clinton, Iowa and is a NOT-FOR-PROFIT school. Also, Ashford does not offer ANY medical courses. There are also many other flaws to this article. I believe this article is a complete hoax.
Geeze that kid needs a lawyer. Nobody under the age of 18, unless they are court ordered (or by operation of law, like getting married), has the capacity to make contracts.
There's an error in this article. If his student loan debt was returned and he owed the college then there would be no body to garnish his wages or deny him an in school deferment. It also appears that he was under the compulsory age for his state so he merely needs to contact the Department of Education and file a complaint against Ashford. That kind of collection effort with wage garnishment and deferment deinal only happens when you default on a federal student loan, not from a private party. How do I know? I've been a professional in Higher Education for the last 9 years.
Michelle Bachmann went to FLY BY NIGHT UNIV. She graduated before the newer laws; so she was able to dump her student loans through Bankruptcy. Later - as the Taliban Chasing Harpy/Harridan Rep. Michelle Bachmann she helped eliminate Student Loan Forgiveness and Student Loan Bankruptcy. How ver Christian of her.
Don't forget that one thing that's enabling this is that there is a huge oversupply of underemployed PhDs (such as myself) whose labor these companies are able to exploit cheaply.
Article excellent all over. Have to say though, Bobby Ruffin was a white kid in Birmingham, MI, which has excellent public schools in a totally different district than Detroit. Other than that, though...
The for-profit colleges account for only ~10% of college credits, ~25% of the student aid, but ~50% of the loan defaults!!!
As this article notes, these loan defaults are 'non-forgiveable'. So, once a person has these debts on their credit record, they will never again be able to get a loan... and that may mean their dream of a college education will never be fulfilled. And, that is simply inexcusable.
Reading this from the UK - where these vultures are circling around our once-proud state education system. I'd love to know which of our politicians they own (ours come cheaper than yours...)
prusin, how on earth do you come to that conclusion. This article is about private for profit schools. The government needs to be MORE involved with what you call interferance in education.
Another good reason to stop government interference in education at all levels. Thanks for the article VV. Great job, once again.
These schools should be closed down. I know all about. I worked for an EDMC school as an adjunct.
60% of the students were not ready for college. I had students with serious learning disabilities who were not capable of understanding the subject nor how to follow assignment directions.
The school has 10 week semesters and they design them so it's almost most fail and drop out.
The CEO of EDMC was awarded a $600,000 bonus while people are racking up debt.
It's a scam, nothing more nor less.
The faculty at the school I worked at were good, frustrated and very well aware that the management was full of it. EDMC is huge scam, it needs to be closed down.
@cmschar2 @cellardoor geez i still don't get the point of your rant. i never said the loan wasn't returned. geez i didn't say different. omg. get over yourself. the loan was returned, which is why the school sent the kid the bill. it's a bill for classes he has already taken, not a student loan, how can they and why would they defer that for him? yes, he could file a complaint, but what else can he do but pay it?
i understand how inconceivable it is that he got the federal loan in the first place, i can't believe it myself.
EDIT: i just realized you're probably responding to my first reply that i deleted a minute after posting. i forgot what i said, but as for sallie mae they do give cash bonuses to the school for every applicant they can get to sign up with sallie mae, i forgot the name of that program. it's legit and all but still shady. from my personal experience, the school financial aid department rep really did make it seem like the best loan out there when it was not.
Youre lying. Ashford is the alrgest holding of the for-profit company Bridgepoint Education.
@stkafferly It's very easy to verify Ashford and it's owner Bridgeport are for-profit. Their methods have been discussed in the NY Times as well;
Hmmn. Kafferly Education Systems partners with Ashford in Florida. stkafferly makes numerous posts defending Ashford. Coincidence?
@stkafferly geez, the kid said he wanted to be a doctor, the school rep said the school could be a stepping stone, a stepping stone. anyone can apply to medical school regardless of what they majored in.
@cmschar2 trhe article said the school 'could' garnish his wages, if they pulled enough strings i assume. also, they're not obligated to give him a deferment because it's not a student loan.
I could be wrong but I'm thinking he's saying the interference in the first place- the federal money going to the for-profit schools that is to be paid back by people who probably can't do it- is what got us here. But you are right, they NEED to interfere now. It's like they interfered too much early in the process, and now they aren't doing anything at all.
@mr.smith Sounds like the bulk of students at NYC community colleges, even NY state schools, who should definitely NOT be passing courses, but actually are receiving passing grades. Of course there are students who are doing good work and are smart people, yet the ideology of sending under-skilled kids through the education system to join a workforce that is already diminished is ludicrous and counterproductive.
@cellardoor Get over myself? Well don't make ridiculous claims.... and yes I replied to your first post that you must have deleted.. but you know that's not my fault However allow me to refresh your memory
@cmschar2 his student loan debt wasn't returned, what was returned were the grants the school got from fafsa. so the school, who probably does not have an age minimum can still charge him for the year of classes he did take with them. if it's an accredited school it will definitely put a hold on him for registering anywhere. when applying for a pell grant you have to not be on probation or be in default on any loans. im guessing in a for profit school, grant money is not going to cover the full over-priced tuition, and he had to take out a private loan as well, one notorious private lender that offers cash bonuses to for-profit schools to get the student to sign up with them is sallie mae.
So now you're retracting what you said and saying something different.. so really I don't have to "get over myself" since everything I said is true. Sallie Mae is a servicer for the department of education. There are no cash bonuses to the school. However in the past there were services offered to the school like a client manager to handle escalated issues, they had client parties that schools were invited to, but nothing was shady about that. It happens in every other area of business, people entertain clients. You can say what you want about it, but that's just how business is done, has been done and will continue to be done! Also every lender was doing it and at the end of the day.. the school regardless of perks or benefits recommended the lender that had the best benefits. Recieving actual cash from lenders was never allowed and now they are just a servicer so that's not even a consideration. The hard truth is, you're just upset that I actually work in the industry and know what I'm talking about and your posts are riddled with assumptions and misstatements. So I'm not going to tell you to "get over yourself" because in this country you and I can say whatever we want as long as it isn't offensive or you know untrue. So reply if you want but essentially, I'm just going to correct your horrid approach at commenting on something that you clearly have minimal knowledge about.
@Hitchhiker You have unmasked the Kafferly/Ashford troll! Cheers!
Like you said you're assuming. You're wrong and what strings, you sound ridiculous. Just get off your high horse and do some reading.
@mystermeat Bull. Under-prepared kids in community college don't pass. They fail out and owe a few hundred dollars.
@ cellardoor It really depends on what you want to do and what programs you are looking for and how much you want to invest. I would put a community college program for something technical first unless they don't have program available before any trade school if it was available and always.. always look for regional accreditation for anything academic or business based. Do you want an on ground program or online. It's hard to say which schools to avoid because individual situations like this make everything harder. If you want let me know what you are looking for and in what state and I'll make some suggestions. But other than that you just need to do thorough research and ask for the Gainful Employment statement of every school you apply for. It's like Carfax for colleges.
@cmschar2 @cellardoor i'll be 18 in less than 2 years. you may be young but you sound a lot older. all i wanted was clarification of what you said about deferment. and it was not until now that you added there is nothing to defer. i deleted what i said about sallie mae initially because i realized it was heresay, my older brother said these schools get kickbacks which i assumed were cash payouts or something along that line and it didn't seem implausible to me. i visited one or two of these technical schools and it seemed all good to me except for this sense of urgency i kept getting from the recruiters. i felt the article explained it somewhat.
not sure why you feel i need to know that federal financial aid comes from the government. i assumed anything 'federal' comes from the government. like when a friend says FAFSA money, i know they mean government money. we know it includes loans and grants and loans have to be paid back etc. schools always tell us this.
i know you're looking at things on the whole, but for me i need specifics like which schools to avoid, not because of how much they take from the government but on the quality of the education/degree vs the total amount of debt i'll have. and i felt that this article helped steer me away from these accelerated for-profit schools, which i think was good advice.
sorry if i offended you in anyway. i know now you're intentions were good.
@cellardoor The evil side of the debate? I'm sorry I didn't know the debate was "evil." Predatory lending? I didn't know that anyone in the Direct Loan program which is run by the government was seeking out students especially since completing the FAFSA is an application for Federal Student Aid and not just grant assistance, but loan assistance as well. The problem is you're right you don't work in the industry but you're making statements nonetheless. You still ignored what I said about the FAFSA being an applicaiton and have failed to learn that Federal Financial Aid comes from the government. I'm not attacking you, I'm trying to educate you. It's not synonymous, it's wrong, you're statements are wrong! It makes it that much harder to keep explaining things to you when you say things like " the evil side of the debate" Do you know that non profit colleges don't pay taxes and for-profit colleges do? How does that make you feel? I feel the need to make distinctions because you, as an individual are making statements that are innacurate and ridiculous.
I am a professional and I am young as well. But to say a specific situation when you don't even have all the facts... is a scam well that proves that you'll believe anything you read. Must be true if it's on the internet in an article right? You're right the article does state that wages could be garnished but in your statement you took what you read from an article and said something completely different and now you're trying to redirect because you figured well I deleted that comment anyways.. tisk tisk there's a record of everything on the internet.
This article isn't helping you, half of it isn't even correct but go ahead believe everything you read. But be certain that you will in fact have to borrow loans to go to college and fall under the same situations as everyone else that wants a college education regardless of where you go to school. I criticized the article itself because it's wrong and people like you, that think you are being helped just believe it and form opionions and make statements that feed in to the histeria. It's so obscene.. Laws change every year, that's a fact but the overall issue of collection of private debt would be a huge change that would affect the entire world not just education. If that was the case then anything from credit cards, to cell phones and even public universities could be garnishing your wages. The people wouldn't stand for it. You want to talk about lobbying Congress? Why don't you talk to the administrators at UMass or Harvard. I never said he couldn't be denied a deferment. There's nothing to defer!!!! His loans were returned as stated in this article, if he really was billed directly from Ashford, they would have tried to collect for 120 days and then sold his account off to a collection agency who would have worked the account and it wouldn't have been able to be reported to his credit report because he's under 18. So really they just wanted the write off, I'm not saying it's right and clearly they messed up big time and are on heightened monitoring status because of it and probably going to close soon. But this article addresses the for-profit industry as a whole, not just Ashford. I wonder which schools are lobbying to keep the negative attention in this sector? I mean I don't think Ashford was trying to advertise that. You know these things happen at every University, no one talks about it when it happens at a larger non profit school that are taking hundreds of millions of dollars in revenue. You think they aren't making money? They have a lot more money and power than the for profit sector ever will.
So to you I say this. Get the facts.. be an educated consumer and stop making assumptions based on article you read online. Every school is different regardless of their tax status.
@cmschar2 seriously? yes, im not on the evil side of this debate, i dont know the inner-workings of predatory lending. you're going to attack me for not using correct terms? go ahead. so i said student loan debt wasn't returned, i meant whatever cost he incurred would still be there, it's a debt nonetheless. so i said what was returned were the grants he got from fafsa, instead of from filing with fafsa, which is synonymous, at least from a student's perspective, with government money. but you felt the need to make the distinction, whatever.
yes, im not a professional like you, i'm young, i want to go to college next year, i'm trying to be careful and not get involved with scams like these i'm being alerted to when researching my options. you on the other hand felt the need to criticize an article helping people like me. why? because the article said Ashford 'could' garnish wages, from which you took that it would? how do you know laws couldn't change in the near future? after all don't for-profits have insane amounts of money to spend on lobbying congress to their benefit? i replied to you because you clearly stated that the kid couldn't be denied deferment which was confusing to me because as i understood it deferment is only offered on student loans.