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 Jared Chausow
By Katie Toth
By Elizabeth Flock
By Albert Samaha
By Anna Merlan
By Jon Campbell
By Jon Campbell
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.
Bridgepoint, which also owns the University of the Rockies, grew from just 12,623 students in 2007 to 77,892 in 2010. Its profits also exploded, going from just $4 million to more than $216 million annually. About 85 percent of its revenue comes directly from the federal treasury.
But if Bridgeport and Warburg Pincus are billing top dollar, they're unrepentant misers when it comes to educating kids. In 2009, Bridgepoint spent less than $700 per student on actual instruction. By comparison, the nearby University of Iowa spends 17 times that figure.
What Bridgeport doesn't short is its marketing, spending $2,714 per student to keep the turnstiles spinning. Overall, the 15 largest for-profit colleges spend nearly $13 billion a year on recruiting and marketing.
Needless to say, it's a terrific business if you don't have to worry about educating kids. Nearly 80 percent of students won't complete their program within six years—almost double the failure rate at traditional schools.
The tactics have become so brazen that even accreditors are taking notice. Last month, Ashford conceded that the Western Association of Schools & Colleges had denied its accreditation renewal, noting that the school had just 50 full-time faculty members to teach 90,000 online students. Within a week, Bridgepoint's stock price had plunged 50 percent.
"It's basically consumer fraud rendered to a business model," Nassirian says. "Overadvertise, oversell, overcharge, and underdeliver. They found a system where the pitch goes to one guy and the bill to someone else."
We’ve Got Your Money. Now Beat It.
Earning a master's in psychology from the College of William & Mary in Virginia, Mary had been a good student all her life. When the military transferred her husband to Tampa, she chose Argosy University, the only area school offering a psychology doctorate geared toward clinicians rather than researchers.
Mary, who doesn't want her real named disclosed, figured it was legit. Argosy was accredited by the American Psychological Association. She aced her studies with a 3.7 GPA. All she needed was an internship to graduate. That's where her problems began.
Argosy University, with 19 campuses, is owned by Education Management Corporation (EDMC), whose investors include Goldman Sachs and Providence Equity Partners, a Rhode Island private-equity firm. To wring out more profit, Argosy began taking on more students than it could handle, says Mary's lawyer, Florida state representative Rick Kriseman.
But Argosy didn't have the professional connections to supply enough internships. So like air-traffic controllers, it decided to place students into holding patterns.
Mary was asked to accept a practicum instead. It's like a lesser form of internship that wouldn't bring her any closer to her doctorate.
She was upset but went along and spent the next eight months volunteering at a mental-health facility. But by the time she was finished, Argosy still didn't have enough internships. Her instructors ordered her to take a second practicum.
She didn't have much choice. Mary had already invested four years and more than $100,000. She spent another five months volunteering. By then, her instructors had begun to question her intellectual rigor.
They not only flunked her out of the program, but also refused to let her defend her work before a board of teachers and peers, then denied her a chance to address administrators before they rejected her appeal. (EDMC refused repeated requests for comment.)
Mary was shocked. "I was an A student," she says. "It was baffling to me how this could happen at the last minute. You have to understand the shame of going to school and being an A student and becoming a flunked-out person. It's so foreign and confusing."
Yet Kriseman would discover a pattern at play when he found three more students who'd suffered a fate similar to Mary's. "When the school did not have those [internship] slots, they found reasons to either dismiss the students or to make it so uncomfortable for them that they left on their own accord," he says.
Argosy's problems seemed to be nationwide. Across the country, in the psychology program at Argosy Seattle, the school had assured its doctoral candidates that accreditation was moments away—because without certification, their degrees would be all but worthless. It wouldn't be till later that administrators confessed that their application had failed—and they were closing the entire program.
Failure At a Luxury Price
For-profit colleges like to place their alarming failure rates in charitable terms. They claim to disproportionately serve low-income students who struggle in school.
But if they're serving people of lesser means, why are they charging so much money?
On average, a four-year degree from a for-profit runs twice what in-state tuition costs at a public school. When it comes to two-year programs, the disparity widens: For-profits charge three to four times the rates of their public counterparts. Yet they've still managed to lull the political class into believing their competition is driving down tuition.
During the Republican primary, Mitt Romney praised a major donor and co-chairman of his Florida fundraising team—Bill Heavener, owner of Full Sail University—for helping to "hold down the cost of education." What Romney failed to mention is that a 21-month degree in video-game art at Full Sail costs more than $80,000. And that's not unusual.
A four-year bachelor's degree in business from Indiana-based ITT Tech costs almost $89,000. That's more than twice the in-state tuition at the more venerated Indiana University.
Worse, subprime degrees from places like ITT and Full Sail are typically held in such low regard that it's difficult for grads to find jobs that pay enough to cover their loans. Nearly one in four for-profit students default on their loans within three years of leaving school, more than double the rate of public-school students.
But there's nothing like advertising to paper over your shortcomings. So for-profits carpet bomb the airwaves to make earning a degree seem as easy as downloading an app. Who hasn't seen those late-night TV ads for "college in your PJ's," or the Education Connection commercial featuring that rapping, dancing waitress? These ads drive viewers to websites that generate leads for schools' sales staffs, prompting an unending stream of solicitations. And when those leads are exhausted, schools buy lists from companies like QuinStreet, which made its name providing leads to subprime-mortgage brokers.
Last month, QuinStreet reached a settlement with attorneys general from 20 states, who'd accused it of fraud for operating gibill.com. The website was made to look as if it were run by the government to help veterans but was actually just a lead generator for for-profit colleges.
"The thing that made those lists valuable was the foreknowledge that these were people in dire straits, who were in over their heads and financially desperate, and therefore much more susceptible to a pitch out of the blue," Nassirian says.
The idea is to prey on people's hopes and desires, offering that yellow brick road to the American dream: an education and a better job. Workers are trained to identify emotional weaknesses and exploit them. That's undoubtedly what made Suzanne Lawrence an attractive hire at EDMC. She had a master's in psychology when she went to work for Argosy's online division in Pittsburgh.
"It was really funny because they used a lot of the same skills I was trained to use in grad school as therapeutic skills—like empathy and reflective listening—on the sales floor," Lawrence says. "It was evil and slimy. Your big job was to create trust, make them think you were their friend. The main goal in your first conversation was to find something they called 'the confirmed need,' which was the hot button you were going to push if that person tried to back out on you. Like, 'My dad wasn't really proud of me,' and that's what you write down. You keep that on your file, so when you call them, and they say 'I don't want to go,' you say: 'What about your dad? Don't you care about what he thinks anymore?'"
Lawrence worked with more than 2,000 others in a sea of cubicles and an auto dialer making 500 calls a day. The leads were generally so stale most calls were no-answers, hang-ups, or people screaming, "Stop fucking calling me!" Dry-erase scoreboards kept track of everyone's application numbers, horse-race style. Those who sold were loved. Those who didn't were berated, cajoled, and threatened, Lawrence says. Managers monitored calls and circled the cubicle bays encouraging workers to "always be closing."
The harsh, boiler-room atmosphere prompted her to make references to Glengarry Glen Ross. No one got it. They were too preoccupied with keeping their jobs.
The pressure prompted all sorts of illicit shenanigans, including falsifying documents, Lawrence says. Salespeople were coached to evade questions about cost and repeat the lie that "99 percent of our students don't pay anything out of pocket to go to school."
She was even instructed to sell online courses to people who didn't own computers. "Tell them to go to the library," her managers would say.
Iraq-war veteran Chris Pantzke was discharged from the Army in 2006 after his convoy was hit by an IED. He suffered from a traumatic brain injury, along with post-traumatic stress disorder. The injuries left the former sergeant moody and anxious in closed spaces. Being in a classroom was out of the question.
But a saleswoman for the Art Institute of Pittsburgh, also owned by EDMC, convinced him that her school's online photography program was perfect for his situation.
He immediately struggled, getting migraines from staring at his computer. "There would be several days I'd get up at roughly 8 a.m. and wouldn't go to bed until 4 a.m.," Pantzke says. "That's how bad it was, because I was falling so far behind." He punched a hole in the wall next to his laptop and "dishes took flight."
In one online class, the teacher didn't have Internet access for more than a third of the course. Only after pestering three different advisers was he finally put in touch with the school's disability-services office. But despite the recruiters' original promise of specialized help, the Art Institute balked at his request for additional tutoring.
Then Pantzke appeared on PBS's Frontline for a story about for-profit colleges. Shortly before the Frontline piece aired, a vice president contacted Pantzke and asked him to sign a release saying "that I was doing fine and things were going great."
He refused but soon noticed a miraculous lift in his academic fortunes. Despite turning in one slapdash assignment he knew wasn't any good, he received an A. "Once I started making waves, I started passing my classes with A's and B's," he says. "I don't know if my grades were true, and it made me doubt my photography ability."
His tenure at the Art Institute came to an end on Easter when he was hurt in a serious car accident. Unable to type for six months, Pantzke decided he'd instead study photography on his own. In just 18 months at the Art Institute, he'd run up $26,000 in debt and burned through an additional $65,000 of his GI Bill benefits—with almost nothing to show for it.
Yet if Pantzke got away, there were plenty of other servicemen where he came from. A story by Bloomberg News caught a recruiter from Ashford University visiting a wounded-warrior barracks at Camp Lejeune in North Carolina. It seems that injured veterans—notably those with head injuries—are particularly receptive to the for-profit sales pitch. The story's opening line said it all: "U.S. Marine corporal James Long knows he's enrolled at Ashford University. He just can't remember what course he's taking."
Federal data shows that for-profits are increasingly targeting veterans. In 2009, they took in almost as much military money as public colleges—though they were educating just one-third of veteran students. Last year, eight of the top 10 educational institutions collecting GI Bill benefits were for-profit, taking in a stunning $626 million.
"I think sometimes the emphasis is on signing up the student as opposed to whether or not the student is really ready to be successful at that school," says Holly Petraeus, an official with the Consumer Financial Protection Bureau and wife of General David Petraeus. "The top 10 recipients of GI Bill aid, eight are for-profit schools, and they are very heavily engaged in marketing to the military—quite successfully, frankly."
It’s All About the Benjamins
The University of Phoenix will never be confused with Yale. According to one 2010 report, 90 percent of its students fail to graduate within six years.
Still, by pure monetary standards, former CEO Todd S. Nelson was a success. During his tenure, he tripled revenue for the school's parent company, the Apollo Group. Enrollment surged to more than 300,000.
Unfortunately, he accomplished this the old-fashioned way—by cheating. Since 1992, it has been illegal to pay recruiters based on how many students they bring through the door. Phoenix did it anyway until two recruiters blew the whistle, initiating a suit that would ultimately cost the school $88.3 million in settlements and fines.
Under pressure, Nelson was forced out in 2006, walking away with a generous $18 million severance. Founder John Sperling put a polite spin on the exit and said only that Nelson was "preoccupied" with the stock price to the detriment of the school's long-term health.
Yet if Nelson's profit motives were too lusty for Phoenix, they were a match made in corporate heaven for Goldman Sachs. The Wall Street bank had partnered with two private-equity firms to buy EDMC. Nelson was hired as the company's new CEO. Former Maine governor John McKernan Jr.—the husband of U.S. senator Olympia Snowe—was named chairman of the board. Over the next five years, the company's revenue would nearly triple, to $2.8 billion.
Last year, Nelson took home $13.1 million in salary and stock. By the standards of for-profit executive pay, he was working on the cheap.
Gregory Cappelli, his replacement at the University of Phoenix, received $25 million last year. CEO Robert Silberman of Strayer Education raked in an astounding $41.9 million in 2009. Yet even this pales next to Jonathan Grayer, the former CEO of Kaplan University, who walked away with a $76 million severance package, courtesy of Kaplan's parent company, The Washington Post.
By comparison, Harvard president Drew Faust collected a meager $875,331 in 2010.
Nelson's bad-boy practices have predictably caught up with him. Last year, the Justice Department and attorneys general from five states charged EDMC with fraud for paying recruiters based on the money they generated. Six more states have joined the suit.
EDMC claims its sales pay is not just based on bodies enrolled, but such things as business ethics, professionalism, and job knowledge. Kathleen Bittel would beg to differ. She was an EDMC recruiter when Nelson arrived and will readily attest to the change in atmosphere.
Over the next three years, the sales staff increased from 950 people to more than 2,600. "Once Goldman Sachs took over and they brought in [Nelson], everything changed," she says. "Everything became much more cutthroat. It was just more oppressive and very high pressure. . . . They were watching you constantly. We used to joke it was like being on the cotton plantation, and they were the overlords coming by on their horses. The only thing they were missing were the whips—but they had the whips verbally."
Like Lawrence, Bittel had studied psychology and proved adept at forging bonds. She'd gone back to school in her forties to support her family of four after her husband got cancer. She understood the difficulties of raising kids, working full-time, and going to college. She admits to "drinking the Kool-Aid" at first, believing Argosy's online program could help people like her.
But after six months on the job, she was allowed to take Argosy courses for free. That's when she discovered she'd aided a bait and switch. Many of the features she heralded to students were barely functional or didn't exist. The Worldwide Professionals Network, where students could find graduate mentors in their field, was nothing more than a bulletin board.
Worse, the classes themselves had less content than a political soundbite. "When I saw what they were passing off as college, I was appalled and mortified," Bittel says. "I'm a fabulous salesman if I believe in my product. But I was blown out of the water. I couldn't sell it anymore."
On the sales floor, she would soon go from golden child to problem student. Managers threatened to fire her. She protested that she'd excelled at EDMC's other barometers, like leadership, calls made, and conversations engaged. None of that mattered, they told her.
"Those are just put in there because the law says we're not allowed to pay you directly," she recalls her boss saying.
Bittel wasn't the only worker feeling the pressure. A man she carpooled with would cry on the way home.
"If you weren't unscrupulous, you struggled," she says. "Half the people I worked with, their previous job was in the mortgage industry. They targeted people in that industry. . . . They were the ones that did the best because they were so unscrupulous."
She eventually transferred to EDMC's career-placement department, where the same deceit wore a different outfit.
She was supposed to help Art Institute grads find jobs. But the school was churning out students with abysmal portfolios—if they had one at all.
She was also supposed to generate stats on how many of them found employment in their fields. The numbers were used not only to sell future students, but also by accreditors in maintaining a program's standing. So EDMC, she says, was prepared to rig these stats by any means necessary.
Bittel's boss liked to say that "every student is placeable. It's all a matter of technique." This "technique," she says, involved persuading people to sign affidavits saying they were employed in their field. She witnessed cases where someone with a degree in video-game design was counted as working in his field because he sold video games at Toys "R" Us.
Once, Bittel saw a co-worker lying on a form about a graduate's salary. The same employee showed her how to doctor e-mails so that students' replies favored the Art Institute. Both times she reported the scams to her boss. But instead of being fired, the co-worker soon received EDMC's North Star Award for exceptional performance.
EDMC is hardly alone in its transgressions. Two years ago, the feds conducted a sting on for-profit colleges, with investigators masquerading as prospective students. They tested the sales practices of 15 schools. Four encouraged outright fraud. They were all found to be deceptive.
Congress Sees No Evil
In the age of austerity, you'd think Congress would be anxious to root out waste, especially after allowing mortgage fraud to decimate the economy. But money talks loud enough to make any congressman hard of hearing. So despite a 20-year history of fraud and failure, for-profit colleges appear as bulletproof as ever.
Washington has been aware of the racket since U.S. Senator Sam Nunn (D-Georgia) held high-profile hearings in 1992, demonstrating how for-profits were recruiting students from welfare offices, housing projects, and homeless shelters. They were subsequently barred from paying salespeople based on enrollment.
It would take just a decade for Washington to eviscerate these protections. In 2002, President George W. Bush created a series of loopholes and announced that violators would no longer be punished.
Then Bush and Congressman John Boehner (R-Ohio) opened the door even wider in working to repeal a rule that required schools to educate at least 50 percent of their students on campus. It gave birth to an online gold rush, with for-profits flooding the Internet. Last year, 6 million students enrolled.
The industry had discovered the value of paying protection money to Congress. It spent $16 million on lobbying last year alone, buying a dream team of former officials that includes former House Majority Leader Dick Gephardt (D-Missouri) and no less than 14 former congressmen.
"I didn't know when I got into the issue of for-profit schools that it was the best way for me to have a reunion with every member of Congress as they parade through the door, all representing these schools," says U.S. Senator Dick Durbin (D-Illinois), who has held hearings investigating for-profits. "There is so much money on the table they can afford to hire everybody."
Needless to say, Durbin hasn't gotten far with his probe. He has found some support among fellow Democrats, but not a single Republican bothered to attend his hearings.
"I don't want to hear their sermons from the mount about wasting federal money when they won't even take a look at these obscenely subsidized for-profit schools," he says. "If they were talking about food stamps, they would cut people off in a second for this level of fraud. This is a wasteful expenditure of hard-earned consumer dollars to some of the wealthiest people in America, and that has to come to an end."
Congress's shrillest voices on waste refuse to even look at the industry. Despite sitting on the Senate committee examining for-profit fraud, Rand Paul (R-Kentucky) has expressed no curiosity about this money pit. Nor have fellow committee members Lamar Alexander (R-Tennessee) or deficit hawk John McCain (R-Arizona). Not one responded to repeated interview requests for this story.
President Obama has stepped into the breach, though with customary timidity. In July, the Department of Education made it once again unequivocally illegal to base salespeople's pay on enrollment. But other reforms were so watered down they were meaningless. Taxpayers should probably be thankful Obama did anything at all. At hearings last year, Senator Tom Harkin (D-Iowa) called it the most intense lobbying campaign he'd seen in his 32 years in Washington.
To truly appreciate how weak the final regulations were, consider this: The day they were revealed, for-profit stocks soared. The stock prices of EDMC and ITT Tech increased by 20 percent. In one day.
The government ignores the problem at the country's peril. Total student-loan debt, now more than $1 trillion, has surpassed credit card debt. These burdens will limit students' ability to contribute to our consumer economy for years to come. Worse, unlike an underwater mortgage, Congress has made it illegal for people to walk away from student loans they can't pay. The debt will follow them the rest of their lives.
"This is basically a parasitic industry that is preying upon not just some of the most vulnerable members of our society, but the best of these most vulnerable members, people who listen to the rhetoric we feed them and who are actually attempting to better themselves," Nassirian says. "This is an industry that takes people's hopes and dreams and cashes them out."
And these people won't stop until they've emptied the till.
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.