Leave it to the for-profit-school industry to follow the money

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A recent article in the Minneapolis Star Tribune reports that the Minnesota attorney general is investigating the aggressive recruiting tactics used by large for-profit colleges to woo returning veterans and other military personnel. The attorney general is looking into allegations that the schools’ deceptive marketing tactics targeted veterans with access to lucrative GI Bill benefits, misleading them about tuition costs, graduation rates and their likelihood of getting a job after graduation. From mid-2009 to January 2013, an eye-popping 53 percent of the $300 million in GI Bill benefits sent to the State have gone to for-profit schools.

The news out of Minnesota is just the latest salvo from the nation’s for-profit post-secondary schools, which make money from government-guaranteed student loans yet offer little to their students but crushing debt. New York City alone is home to approximately 300 for-profit schools, where enrollment has increased by over 200 percent in the last decade. They aggressively recruit students who did not graduate from high school, are under- or unemployed, and have had little or no exposure to higher education. The student population at for-profit schools is older, lower-income, and higher-borrowing than at non-profit or public schools.  A student at a for-profit school is more likely to be foreign-born, of color, and supporting dependents than a student at a non-profit or public school. Offering promises of well-paying jobs upon graduation, these schools use high-pressure sales pitches to enroll students, usually on the spot. More than half of students enrolled in for-profit colleges or trade schools drop out within four weeks of enrollment. Those who do graduate find that their resulting credentials, though costly in the form of student loans, are not marketable to employers.

NYLAG attorneys have spoken with a number of individuals who are having their federal income tax refunds seized and who are being hounded by debt collectors over student loans, yet are unable to find a job in the field in which they studied. Our clients, though they attended different schools, tell a similar story: recruiters promised them that they would be able to earn a high wage with their degree and that the school would guarantee them a job, and they signed up impulsively. Many clients did not even realize that they had taken out student loans because the recruiters characterized them as “grants” or “scholarships.” Many dropped out and were not told that the school would hold them liable for the full semester’s tuition, even if they had only attended for two weeks.

As part of our Consumer Protection Project, NYLAG attorneys assist individuals to resolve student loan issues. In talking to numerous clients who have attended for-profit schools, we are seeing patterns of illegal behavior. NYLAG’s Special Litigation Unit (SLU) is exploring ways to provide systemic relief from  student loan debts for this population, and to improve the oversight of for-profit schools.  SLU hopes to expose regulatory loopholes at the State and federal level that are being exploited by for-profit schools, and send a message to these schools that they will be held accountable for their deceptive and predatory tactics. Ultimately, this action would also benefit taxpayers, who are paying for the federal student loan programs that transfer money to these for-profit schools – money that does nothing to benefit students. The bottom line is that higher education should be about generating profits for students, not corporations.

SLU has set up a Career and Trade Schools Hotline for people experiencing problems with for-profit schools: (212) 946-0354.

Blog Post by Yisroel Schulman
President & Attorney-in-Charge

2 thoughts on “Leave it to the for-profit-school industry to follow the money

  1. I am a former for-profit employee in financial aid. The misleading/lying recruiting tactics are just the tip of the iceberg. Investigation needs to be done into the Federal Student aid fraud. Employees routinely fill out FAFSA forms for students (they can input info that make students eligible for more money)and often end up eigning documents as the students or parents (private loan applications, Master Promissory Notes)just to complete the file because of intense pressure (threats) to employees from managers and because a good number of for-profits still pay employees by the number of students they actually enroll and get financially packaged, even though it’s against the law (there’s no enforcement).

    Many other fraudulent practices going on in the for-profit sector, too many to list here. But by the very nature of their business models, they are accountable ONLY to shareholders – not students, employees, or even a reasonably basic education.

  2. Thank you for sharing your perspective as a former employee of a for-profit school. Voices like yours are very important, and I hope others will come forward to shine a light on the extent to which such schools don’t play by the rules.

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